Delivering what customers want before they even know they want it – How augmented core + data can help

It could be argued that the ‘secret’ to success in business is no secret at all. Just give your customers what they want, at a price they find attractive and at a cost that is profitable enough for your business. Seems simple, but the reality is far more complex. In a world where customer loyalty is fleeting and competition is fierce, perhaps the ability to anticipate customer needs—and deliver solutions before they're even explicitly requested—is the ultimate differentiator. After all, if you wait until after they say they need something, you run the risk of losing out to a fleeter-footed competitor. The key question for banks is how they can achieve this level of prescience without crossing the line into "creepy" territory. The answer lies in strategically leveraging a concept we call Augmented Core & Data.

Today: The Challenge of Meeting Evolving Customer Expectations

Traditional core banking systems are struggling to keep pace with rapidly evolving customer expectations. Today’s customers demand personalized, seamless, and real-time experiences across all channels. They expect banks to anticipate their needs, offer tailored advice, and provide effortless access to financial services. However, legacy systems, with their rigid architectures and siloed data, make it difficult for banks to deliver this level of service.

Fintechs and neo-banks, unencumbered by legacy systems, have set a new standard for customer experience. These agile players leverage data analytics and AI to offer innovative services, personalized recommendations, and frictionless interactions. As a result, traditional banks are under pressure to modernize their core systems and embrace new technologies to remain competitive. Over 60% of banks worldwide have integrated AI and ML technologies into their operations. [1]

As the pace of change increases, barriers to entry fall, and customer expectations rise, this problem is becoming ever more acute. Technology, often the cause of many headaches, can also be the solution.

Near Term: Implementing "Augmented Core & Data" for Enhanced Customer Experience

The "Augmented Core & Data" approach provides a pathway for banks to transform their core systems into intelligent, customer-centric platforms. By integrating advanced technologies such as AI, machine learning, and data analytics, banks can unlock valuable insights into customer behavior, preferences, and needs.

This approach enables banks to:

• Personalize Interactions: Use AI to analyze customer data and deliver tailored recommendations, offers, and advice. For example, a bank could proactively offer a low-interest loan to a customer who frequently overdraws their account or is consistently paying for their gasoline at the same station – making an assumption they drive and might need car insurance.
• Streamline Processes: Automate routine tasks, such as account opening and loan applications, to reduce friction and improve customer satisfaction. Leverage Agentic AI to deliver customer delight at scale.
• Provide Real-Time Insights: Offer customers real-time updates on their account balances, transactions, and spending habits through user-friendly mobile apps and online portals. In 2024, AI-powered chatbots were expected to handle 90% of customer interactions in digital banking. [2]

Striking the Right Balance: Data Privacy and Customer Trust

While the potential benefits of Augmented Core & Data are significant, banks must proceed with caution to avoid alienating customers. Consumers are increasingly concerned about data privacy and are wary of companies that collect and use their personal information without transparency or consent. Regulation is, of course, a major concern, but it could be argued that avoiding being seen as ‘creepy’ is more important. Not only is the line between anticipating needs and appearing to be invading privacy a fine line, but it is also highly personal. What one person considers a timely recommendation; another may see as spying.

To build and maintain customer trust, banks must adhere to the following principles:

• Transparency: Be upfront about what data is being collected and how it is being used. Provide clear explanations of the rationale behind personalized offers and recommendations.
• Control: Give customers granular control over their data and allow them to opt out of data collection or personalization at any time.
• Security: Implement robust security measures to protect customer data from unauthorized access and cyber threats
• Value Exchange: Ensure that customers receive tangible benefits in exchange for sharing their data, such as personalized offers, improved service, or enhanced security.
• Ethical AI: Implement AI systems that are fair, unbiased, and transparent. Regularly audit AI algorithms to identify and mitigate potential biases.

For example, instead of simply presenting a customer with unsolicited product recommendations, a bank could explain why it is making those recommendations based on the customer's past behavior and financial goals. Customers are more likely to accept personalized offers if they understand the value proposition and trust that the bank is acting in their best interest.

Leveraging Collective Intelligence: Empowering Every Interaction

One of the most powerful benefits of the Augmented Core & Data approach is the ability to bring the combined knowledge and experience of the entire bank to bear at every customer interaction. This means that whether a customer is interacting with a junior staff member, a seasoned relationship manager, or an automated AI chatbot, they should receive the same high level of service and expertise.

To achieve this, banks must:

• Create a Centralized Knowledge Repository: Build a comprehensive knowledge base that captures best practices, insights, and customer data from across the organization.
• Empower Staff with AI-Powered Tools: Equip staff with AI-powered tools that provide real-time access to customer information, product knowledge, and problem-solving guidance.
• Train Staff to Leverage Augmented Intelligence: Teach employees how to use AI tools effectively and combine them with their own human judgment and empathy to deliver superior customer service.

Efficiency and Effectiveness: Optimizing the Augmented Core

The Augmented Core & Data approach offers tremendous potential for banks to radically revamp efficiency and effectiveness. To tap into the potential, we recommend:

• Streamlined Processes: Automate routine tasks and eliminate unnecessary steps in customer journeys to reduce costs and improve speed.
• Data-Driven Decision Making: Use data analytics to identify areas for improvement and optimize customer experiences.
• Continuous Monitoring and Optimization: Regularly monitor key performance indicators (KPIs) to track the effectiveness of augmented core initiatives and adjust as needed.
• Agile Implementation: Adopt an agile approach to implementing augmented core solutions for rapid iteration and adaptation to changing customer needs, as the global digital banking platform market is projected to reach $8.12 billion in 2025. [1]

Future: Leveraging Augmented Core for Proactive Customer Engagement

In the future, Augmented Core & Data will enable banks to move beyond simply reacting to customer needs and start proactively anticipating them. By leveraging predictive analytics and machine learning, banks can identify emerging trends, anticipate customer life events, and offer tailored solutions before customers even realize they need them.

For example, a bank could:

• Proactively offer a mortgage pre-approval to a customer who has recently started searching for homes online, using AI to analyze browsing patterns and social media activity.
• Offer financial planning advice to a customer who is approaching retirement, utilizing virtual reality (VR) to create immersive retirement planning experiences that simulate different financial scenarios.
• Provide personalized investment recommendations based on a customer's risk tolerance and financial goals, enhanced by blockchain technology to ensure transparency and security in investment transactions.
• Utilize augmented reality (AR) to create interactive banking apps that provide customers with real-time financial insights and visualizations of their spending habits and investment portfolios.
• Implement biometric authentication for secure and seamless access to personalized financial services, ensuring that customers can interact with their bank effortlessly and securely.
  Augmented reality (AR) and virtual reality (VR) technologies could also play a role in enhancing customer experiences. For example, AR could be used to create interactive banking apps that provide customers with real-time financial insights, while VR could be used to create immersive financial education experiences.

Operational Implications and Challenges

Implementing Augmented Core & Data requires significant changes to a bank's technology infrastructure, processes, and culture. Senior leaders across operations, IT, and business must work together to address the following operational implications and challenges:

• Staff Training and Retraining: Invest in training programs to equip employees with the skills needed to manage and leverage augmented core systems.
• Customer Journey Mapping: Map customer journeys to identify pain points and opportunities for improvement.
• Change Management: Develop a comprehensive change management plan to ensure that employees and customers are prepared for the transformation.
• Data Governance: Establish clear data governance policies and procedures to ensure data quality, security, and compliance, as regulatory compliance remains a top concern for banks, with nearly 89% of community bankers rating it as “extremely important” or “very important,” according to a CSBS survey.

Conclusion

The "Augmented Core & Data" approach is not just about technology; it's about transforming the way banks interact with their customers. By leveraging data analytics, AI, and other advanced technologies, banks can anticipate customer needs, deliver personalized experiences, and build stronger relationships.

However, it is essential to proceed with caution and prioritize data privacy and customer trust. Banks must be transparent about their data practices, give customers control over their data, and ensure that customers receive tangible benefits in exchange for sharing their information.

By striking the right balance between personalization and privacy, banks can unlock the full potential of Augmented Core & Data and deliver what customers want before they even know they want it, creating a win-win scenario for both the bank and its customers. The future of retail banking lies in creating proactive, customer-centric experiences that are both innovative and ethical.