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Digital Digital Strategy
8 minute read

The Next Best Action for Banks

The best financial institutions and FinTechs are creating relevant and personalized experiences based on insights that deliver value and guide the customer to the next best action. Insights are simple opportunities based on a relationship grounded in data. Unfortunately, the insights are only as good as the data collected, relevancy and timeliness of the insights.

In This Article

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Consumers are growing accustomed to service via push notifications. When an alert appears at 3:00 PM, for instance, suggesting the usual coffee order, it is viewed as a helpful service. It also shows the coffee shop has enough information to tailor the offer to personal preferences, including time of day, style of beverage and pick-up location. The offer arrives via a preferred channel of communication and conveniently enables the consumer’s digital wallet to be reloaded with a single click.

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Shifting to a customer-centric paradigm

When it comes to receiving exceptional service, many consumers expect more from their coffee shops than their banks. This, however, is not because banks lack information. Banks are required to Know Their Customers more than companies in any other industry. They must understand the customer’s source of funds to prevent money laundering, monitor customer transactions for fraud, validate customer backgrounds to prevent terrorist financing and rate a customer’s ability to repay loans to prevent charge offs.  That same customer information can be used to proactively provide exceptional services that mitigate churn and build brand loyalty.

Given that banking industry leaders have large amounts of data, what is preventing them from employing it to drive value by providing exceptional services? First, they must acknowledge that doing so means shifting the paradigm from a product-centric focus to one that is customer-centric. This enables banks to prioritize the relevancy and effectiveness of customer communications and utilize data-driven Predictive Analytics tools, such as Next Best Action (NBA) to support these new priorities.

This article is the first in a series aimed at helping banking and financial services organizations better understand how they can leverage Data Science to become more customer-centric. This piece explores use cases and processes that utilize NBA tools to increase user interactions and enrich user experiences. By using NBA alerts to help customers optimize asset allocation, see recommendations for new products and services and avoid fees or other customer service issues, banks can accelerate the customer-centric paradigm shift and drive positive results.  

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Resolving PFM shortcomings

Personal banking and financial services tools have sought to help consumers make better financial decisions. But these platforms, referred to as Personal Finance Management (PFM), have failed to catch on, with adoption rates reaching only the single digits. This rather limited success is likely due to the fact that consumers need more than an accurate tracking of their finances in order to make better decisions. They need advice, insights and recommendations.  

Done correctly, NBA alerts can resolve a number of PFM’s shortcomings, enabling banks to deliver the best message, via the right channel, to their customers. Models that employ NBA tools may sound complicated but competing in the new world of FinTechs and Tech Giants demands leveraging AI to reduce the cognitive load placed on consumers. The next step involves understanding the techniques that banks can use to capture customer behaviors, consider potential actions and recommend messages tailored to the customers they know and understand.  

NBA capabilities create a foundation for consumers to see banks as their partners. This perspective delivers the benefits of the consumer-centric paradigm to both sides of the partnership. Consumers improve their financial decision-making and banks establish immediate relevance, leading to measurable engagement improvements, including expanded wallet share and reduced churn. According to Kehrer Bielan Research and Consulting ("Making Wealth Management Core in Credit Unions," February 2019), the correlation between engaged credit union members and the success of cross-sell efforts is strong. Engaged customers enable banks to realize a:

  • 35 percent increase in first mortgage and 100 percent increase in second mortgages
  • 50 percent increase in equity line of credit
  • 93 percent increase in auto loans
  • 21 percent increase in direct deposits

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Next best action use cases

NBA use cases should aim to build loyal relationships by increasing the relevance of customer engagements. Relevance is shaped when banks bridge the gap between behavior and insight in real time and establish the necessary automated nurturing capabilities. This enables financial insights to become differentiators. But these actions must be based on triggering events rather than predefined customer segments. For example,  

  • Using location services, a bank greeter can look up a customer’s name and review their needs assessment before they walk into the branch
  • A contact center representative or virtual agent can offer answers to a customer’s question before they ask, along with options for next steps
  • A customer can receive an alert via phone app, presenting options to avoid an overdraft
  • Following a large deposit that meets certain criteria, an invitation to open an interest-bearing account can be sent using text messaging
  • Loan pay-off options can be presented to customers based on credit score information

The recurring theme of these examples is a bank’s ability to lead with a “service event” that drives a potential sales opportunity. Leveraging NBA decisioning capabilities, banks can establish trust and purpose through empathetic offers that occur in real time. This enables them to compete on service and experience instead of rates.  

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Getting started

We've identified several critical steps needed to successfully navigate and prioritize the endless number of potential opportunities and technology solutions associated with NBA capabilities. The 5Ds process walks customers through a delivery process including Discover, Define, Design, Develop and Deploy phases. To avoid over engineering solutions, we recommend breaking the deliverables into ten-week deployments that are limited to two weeks per phase. The 10-week cadence may not always result in a production solution, but it will force scope prioritization and organizational alignment.  

Discover. Existing customer behaviors provide a wealth of information that can be used to predict future behaviors. Banks need to understand customer behaviors from start to finish on the public site, in the branch, during product enrollment, at service centers, during incident management, in online banking and on the mobile application. They must review chat sessions, server logs, or contact center recordings and embed service calls into platforms to capture behaviors that are not currently being tracked. Once desired behaviors are identified, banks must deploy data solutions that store this information for future analysis.    

Define. The define, design and development phases comprise an iterative process that increases clarity over time. In the Define phase, we look for trends, issues and opportunities to improve the customer experience, reduce cost or increase revenue. Working with business partners to align customer intents and business intents is the most important step in the process. The Define phase drives the prioritization of all future development and content strategies.

Design. With definition complete, it’s time to start evaluating various technical solutions, data requirements and content requirements. There are literally thousands of possible product configurations but understanding the existing environment can quickly narrow down potential options. We evaluate the solutions based on technical difficultly and works with business partners to understand each solution’s business value and how well it is prepared to support proposed solutions. Selecting vendor partnerships can be a contentious and time-consuming process. Customers also overlook the amount of time needed to build consensus internally.    

Develop. The development stage starts once the technical solutions and business requirements are clearly defined. Then the NBA possibilities are narrowed down into clear, actionable and impactful user stories with acceptance criteria. This marks the transition to the development phase. From here, there will undoubtedly need to be new data sources aggregated and new trigger events identified through algorithms. Developing new nurturing business logic and content creation can be done with the marketing team in parallel.  

Deploy. Prior to deployment, banks need to consider a number of channel optimizations and constraints to prevent negative customer interactions and regulatory actions. The new NBA campaigns must consider:

  • Maintaining compliance with CAN-SPAM regulations
  • Identifying the preferred communication channels of customers
  • Eliminating campaigns that attempt to sell customers products or services they already utilize
  • Measuring the most effective channels for each customer and optimizing the nurture campaigns accordingly
  • Establishing a budget and integration strategy for retargeting efforts or paid campaigns
  • Defining the ideal communication cadence
  • Prioritizing the campaigns in case multiple triggers are initiated at once

NBA campaigns are not sprints. Once deployed, organizers need to plan to continuously measure and refine the campaigns, even as they identify new NBA opportunities. This process is best viewed as a marathon, with numerous obstacles along the way. Banks must rally stakeholders across the organization around a north star vision and keep everyone moving in the same general direction. They must also identify champions across the organization to maintain forward progress and build consensus internally, continuing to work hard to identify quick wins and not allow scope to expand beyond predefined time or budget constraints.

The goal is to continue showing incremental progress that delivers value to the bank without overwhelming the team with change management concerns. Banks will need to operationalize the process and clearly identify the necessary roles and responsibilities needed to continuously optimize the triggers and campaigns.