Is Generative Artificial Intelligence the Key to Unlocking Personalization in Banking? Generative Artificial Intelligence. Read The Blog to Learn More

By Ermes Dajko, Senior Cloud Solutions Architect, Temenos

Introduction

In competitive banking, one elusive goal has persistently captivated industry leaders: personalization. This concept, however, extends far beyond simply aligning the right products with the right customers at opportune moments and prices. True personalization in banking means crafting experiences and solutions that resonate on a human level—not merely addressing abstract financial metrics like credit scores or cash flows but engaging with the genuine needs of individuals, such as financing a new vehicle and exploring the best ways to achieve it. Banks that excel in this form of personalization are often rewarded with enhanced customer loyalty, satisfaction, and, ultimately, greater profitability.

The Cosmological Constant of Customer Demand

Achieving deep personalization is akin to searching for the Holy Grail—a formidable challenge. Banks are pressured to rapidly adapt to the triumvirate of regulatory changes, technological advancements, and evolving customer demands. The nature of customer demand, intertwined with human behavior, oscillates with the ebb and flow of credit cycles largely influenced by fluctuating interest rates. Simply put, high-interest rates encourage savings, while low rates encourage spending, predominantly through credit. This dynamic has led banks to offer products that align with these credit cycles, resulting in tepid personalization efforts that typically involve minimal tailoring, like slight adjustments to pricing. When rates are high, for instance, everyone is bombarded with offers for savings accounts—hardly a personalized approach.

The Inescapable Adaptability Race

The past five years have marked some of the most disruptive shifts in the banking sector seen in decades. The emergence of Banking as a Service (BaaS) and embedded finance—spurred by low-interest rates—introduced new competitive pressures from fintech innovations such as “Buy Now, Pay Later” (BNPL) schemes. However, as interest rates began to soar at a pace not witnessed since the 1980s, the landscape shifted dramatically. Customer preferences quickly moved from credit-driven products to savings-oriented offerings, leaving slower-moving banks struggling to keep pace. This rapid shift highlighted a critical reality: banks are now perpetually racing to adapt to swift changes in market dynamics, often falling short in their pursuit of true personalization.

From Banks that Listen to Banks that Speak—Transformation Through GenAI

The advent of Generative Artificial Intelligence (GenAI) technologies heralds new possibilities for banks, paving the way for genuine personalization. This technology shifts the paradigm from banks that passively interpret customer data to proactive institutions that engage directly with customers through conversational AI. GenAI enables banks to understand and process customer needs expressed in natural language, fostering a more intuitive and personalized banking experience. This represents a fundamental change in how banks interact with their clients—moving from a reactive to a proactive stance in customer service.

Product Manufacturing with GenAI

GenAI is set to revolutionize product manufacturing. Traditional product design, which often takes weeks or even months, can be significantly accelerated through the use of advanced analytics and AI. With GenAI, banks can rapidly prototype and customize financial products in response to direct input from customers, treating products as flexible, code-driven entities that can be dynamically tailored to individual needs. This capability speeds up the product development cycle and enhances the bank’s ability to meet specific customer requirements with unprecedented precision.

Regulation with GenAI

The regulatory landscape is also ripe for transformation through GenAI. By implementing ‘Rules as Code’, banks can automate and streamline compliance processes, ensuring that new financial products are innovative and fully compliant with existing laws and regulations. This integration of GenAI in regulation profoundly simplifies the compliance burden, allowing banks to focus more on innovation and customer engagement.

Conclusion

With these advancements, the banking industry stands on the cusp of a new era where personalization is not just a marketing buzzword but a tangible reality powered by GenAI. Banks are now equipped to transform every customer interaction into a personalized experience, where products and services are tailored to each customer’s unique needs and aspirations. As banks harness the power of GenAI to synthesize customer input with sophisticated product design and compliant frameworks, they will be better positioned to capture the essence of personalization, thus achieving the once elusive Holy Grail of customer satisfaction and loyalty.