In the news - N26, Revolut.
Amazon, Netflix and Spotify-style machine learning-powered recommender systems powered by your data—now at a favourite digital bank near you:
From the FT today:
Coming soon: Netflix-style nudges that reward retail bank customers
Lenders take a lead from subscription services that make recommendations based on user behaviour
Banks are exploiting artificial intelligence to target individuals with products and third-party rewards based on their specific needs and tastes, as part of a broader effort to strengthen customer relationships by homing in on the “segment of one”.
Analysing customer data to set basic loan sizes and terms has become standard practice at most retail banks: they can dissect a user’s profile and recurring transactions to predict when they might want to take out an overdraft or insurance policy, for example. But some banks are starting to analyse customers’ ad hoc spending to offer discounts with retailers, restaurants and other partners that are tailored specifically to them.
As well as the cross-selling opportunities that analysing user data presents, banks also hope that personalised rewards via external partners will appeal to existing customers and help to attract new ones.
In July, Germany’s N26, a digital bank, relaunched its premium account to focus more on personalisation, and now includes discounts with third parties such as flexible workspace provider WeWork and online travel booking site GetYourGuide. These are being offered indiscriminately at first, but the aim is to tailor services to each individual once the bank has gleaned a clearer picture of take-up and the algorithm is refined.
Meanwhile rival Revolut is in the early stages of developing a machine learning product to help customers budget. At present, users must set their own monthly spending limit on individual accounts within the app. “It’s going to look at [your] spending over the last three to six months,” says Revolut’s head of marketing Chad West. “And it will be able to make projections on what you’ll be able to spend and save.”
Banks have always used predictive modelling in consumer strategies, says Accenture’s data monetisation lead, Craig Macdonald. But AI allows banks to “auto-learn from clients on how they react to different types of service and develop more advanced testing techniques,” he says.
The high value of such intricate customer data has not been overlooked by Revolut. When it rolls out its Perks cashback deals — which include discounts on coffee, restaurants and travel — to its 7m customers from December, the company will initially fund the offers itself. But it hopes the rewards package will become popular enough that third parties will foot the cost of partnerships in future. “We would hope to take our data to those companies and gain user discounts,” says Mr West.
The widespread adoption of AI in this context, however, will rely on customer trust that personal data will be handled responsibly and ethically.
Source - FT