Digital Shift Helps Banks Tailor Credit Offers to Consumers

For decades, consumer expectations around the convenience and always-on capabilities of their financial services could not be met. The typical Monday-through-Friday banking hours and 4 p.m. branch closings have made it difficult for consumers to decide when and how they bank.

That’s quickly changed.

Consumer expectations, technological advancements and shifting market dynamics are redefining what it means to be a bank. This backdrop has accelerated the ongoing shift toward consumer-centric banking, where individuals seek the freedom to bank when, where and how they want. Gone are the days of being tethered to branch hours; instead, consumers demand seamless digital experiences that transcend traditional banking channels.

“We are seeing an erosion of physical accounts into virtual ones that not only reduce the total cost of ownership for the bank, but also allow the unleashing of data and analytics that help personalize pricing, credit decision and marketing offers, and all kinds of recommendations,” Michael Haney, head of product strategy at Galileo Financial Technologies, told PYMNTS for the series “What’s Next in Payments: What is a Bank? The Changing Landscape of Banking and Financial Services.”

For customers, the benefits are clear: more convenient and faster services, personalized financial advice and enhanced security. Banks, for their part, are seeing improvements in operational efficiency, reduced costs and the ability to reach new customer segments. Digital technologies are also enabling banks to develop new revenue streams through financial products and services.

He highlighted three key trends: the desire for flexibility in when customers can connect with their bank, the expectation of banking accessibility across various platforms and the demand for personalized services tailored to individual needs.

From Branches to Embedded Solutions

The push for banking digital transformation has caused a shift in how and when customers engage with financial providers. Instead of interacting with bank-branded channels on “their own turf,” customers can now engage with digital banking services on their terms.

“With embedded banking, I can now engage with my bank over non-banking channels,” Haney said. “Banking where I want to want to and not being forced to go to where my bank is, but have my bank come to where I am. Then there’s banking how I want to. It’s no longer that cookie-cutter approach that banks try to silo their customers into. …Largely due to the innovation in banking technology, mainly from FinTechs, we start to see a breakdown of the payments, lending and deposits silo, like with buy now, pay later.”

Advances in technology have allowed for banking experiences to be integrated into everyday activities, all in the palm of users’ hands. And while the pandemic rapidly accelerated online and mobile banking, including a rise in digital wallet usage, Haney pointed out how customer adoption patterns underscore the importance of understanding and accommodating diverse consumer preferences across various touchpoints.

“We’ve known for a while that clients that engage with their bank through multiple channels tend to be the most productive, the most profitable, the most loyal,” Haney said.

Several key technologies are playing pivotal roles in supporting the banking sector’s digital transformation. Artificial intelligence (AI) and machine learning (ML) are being used to personalize customer experiences, improve risk management and detect fraud — even to tailor rewards and benefits based on customer profiles.

“This remains a very hot space in terms of rewarding loyal customers and trying to increase customer satisfaction” said Haney, noting that banks are taking pages from old industry playbooks to create or partner with a travel agency to offer their customers personalized white-glove services.

Unlocking Growth Lessons from Retail Commerce

By embracing a service model, banks can transition from transaction-centric to advisory-focused interactions, aligning with evolving consumer expectations in an increasingly omnichannel world. By leveraging insights borrowed from retail commerce tactics, banks can refine their offerings to deliver tailored rewards, discounts and concierge services that resonate with individual preferences.

It’s important to recognize early on the how customers want to be engaged to build a lifetime customer relationship, Haney said, noting that banks must understand how customers want to both start and finish their customer journey.

“Blending of channels is really a great place to start. As technology continues to lower the cost to serve to banks, we can start to bring down service offerings that were once reserved for ultra-high net worth, or high net worth individuals, down to mass affluent or emerging affluent, or even lower in some cases,” he said, adding that AI can help further democratize access to boutique banking services.

Looking ahead, Haney said the future of digital banking innovation is exciting and underscored that open banking, embedded finance and FinTech partnerships are poised to drive the next phase of transformation, fostering greater accessibility, personalization and efficiency across the financial ecosystem.

By embracing digital innovation, prioritizing customer-centricity and navigating regulatory landscapes with prudence, banks can position themselves as trusted partners in their customers’ financial journeys.