Why personalization can help your community bank increase share of wallet in 2023

Personalization has been a hot topic in the banking industry for several years now — and with nearly 8 in 10 consumers saying they prefer financial institutions that know them on a personal level, it’s no wonder why.

Most banks are aware of the importance of personalization. Yet, many of them lack a standard protocol for the related technologies, leading to a failure to fulfill the personalization promise.

A lack of personalization proficiency among larger institutions has opened new opportunities for community banks to attract local clients with highly personalized services. When coupled with the convenience of localized support, community banks have a chance to leverage personalization to provide an exceptional customer experience, helping them vastly outperform their larger competitors.

But the hardest part is knowing where to begin. Here’s a few things community banks can do to increase their share of wallet in 2023:

Understanding the role of personalization

Community banks hold a unique connection with their clients, serving primarily small-to-medium businesses within a set geographic region. Traditionally, these banks have faced obstacles with client retention due to the more advanced technological capabilities of larger financial institutions.

But greater investment in technology doesn’t always equal better services.

A recent McKinsey report reveals that just 8% of banks have applied predictive insights gained from machine learning to their customer campaigns, despite making significant investments in the technology. In fact, the report shows that only 9% of banks have a full suite of machine learning that can provide personalized services at every customer touchpoint.

The acceleration of digital banking has equipped community banks to provide the superior, personalized services that clients demand. Meanwhile, partnerships with fintechs and banking platforms have helped these banks improve access to the key technologies needed to optimize personalization. That’s a powerful combination.

How personalization helps drive share of wallet

A community bank’s share of wallet is dependent on how much value it offers over its larger competitors. Large banks are focused on more affluent individual and corporate clients, providing these clients a wide array of services to choose from, including everything from personal lending to business banking. However, they don’t always operate with small-and-medium businesses in mind.

This is the main advantage that community banks have always held over their competitors — the ability to provide accessible financial services to small-and-medium businesses while also offering a more in-depth understanding of the local community and its financial needs. By placing special emphasis on personalization, community banks can ensure that these businesses always turn to them for their financial needs, rather than opting for the larger bank down the street.

Relationship banking is a key differentiator for community banks, and luckily this approach is growing in popularity. According to the CSBS 2022 National Survey of Community Banks, community bankers expect relationship-based lending to grow more than transaction-based lending in the coming years. As Texas Bank and Trust Company CEO Rogers Pope Jr. says, the future of banking “needs to be as much about ‘high tech’ as ‘high touch,’” and community banks are set to capitalize on this.

Utilizing a banking platform to enhance personalization

For community banks that wish to leverage the power of personalization, partnering with a trustworthy banking platform can be a major game changer. Large banks have much broader budgets to work within, allowing them to invest in costly technologies they can use to build in-house platforms. On the other hand, community banks may not have the necessary IT departments to achieve a robust in-house digital banking solution. That’s why it’s important for them to use a banking platform that can give them the technological capabilities they need while remaining affordable and scalable.

The best strategic platform solution will empower community banks to enhance the customer lifecycle through data-driven personalized services. That way, they can easily gain a unified view of customers on both a broad and individualistic level.

How Backbase can help enable your digital transformation

For community banks, it’s all about elevating the client experience. That’s why we’ve designed the Backbase Engagement Banking Platform to do just that. Our platform helps community banks collect data from multiple sources, allowing them to make highly informed decisions. Plus, it leverages the power of artificial intelligence to give meaningful insights and predictive analytics. It’s the perfect tool to help community banks capitalize on their strengths and future-proof themselves for the platform era.

Want to find out more about how we can help your community bank? Schedule a chat today to get things started.