Featured Article from Bankmagazin: The Revolution Begins

Customer Financial Needs Are Becoming Increasingly Predictable Through Data

Today, banks can derive customers’ financial and retirement needs more accurately than ever by analyzing their data. With the help of data analytics and artificial intelligence, banks can identify specific triggers for outreach. As a result, retail banking is shifting from a primarily inbound-driven environment toward a truly proactive outbound sales model.

A closer look at key developments in German retail banking shows that—alongside the ongoing challenge of energizing the sales force—digitalization and omnichannel strategies remain the most defining areas of focus.

On the one hand, banks are increasingly trying to handle more customer interactions through fully digital front-end processes. Customers of banks and savings institutions are now, at least in theory, able to complete not only service transactions but also parts of advisory journeys through self-service channels.

In practice, however, simply offering digital service processes does not automatically mean that customers will find, use, or fully engage with them in a truly self-directed way.

And even though some industry voices are once again proclaiming the “renaissance of the branch,” insiders and frontline practitioners know that this trend is mainly about the return of in-person service delivery—not a comeback of the traditional branch model as such. It’s a double-edged renaissance, especially given that previous attempts to convert service interactions into successful sales conversions have met with only modest success.

At the same time, there is growing recognition that banks need greater channel pluralism in their customer engagement strategies. In many cases, the previously ambitious promise of “every service, for every customer, anytime, via any channel” has quietly been abandoned.

That promise was rarely realistic in the first place—and hardly economically viable in the already tight-margin environment of retail banking. Still, few would argue today that traditional branch-centric institutions can afford not to offer advisory and closing capabilities across multiple channels.

What continues to become clear is that, despite the increasing number of available channels, customers primarily prefer processes that are conclusive—that is, transactions they can complete in one go. Channel switching within a single interaction, on the other hand, plays a surprisingly minor role from the customer's perspective.

Contact Initiation Is Evolving

As a result, new ways have been established for customers to approach their bank — and equally, for banks to initiate contact with their customers. Insights from ongoing research by Horn & Company, which surveys over 2,000 consumers multiple times per year as part of its Customer Insights Survey, clearly illustrate how channel usage in the bank-customer relationship is set to evolve.

An analysis of channel affinity (see chart) underscores this shift: looking ahead over the next five years, customers are expected to further increase their use of digital channels. Among these, video calls and chat are projected to experience the most significant growth in relevance.

Equally important, however, is the question of which channels banks themselves intend to use to proactively engage customers — with the goal of offering timely, tailored information about relevant products and solutions that match individual needs.

Using New Channels for Customer Engagement

Ambitious banks and banking groups have already taken steps to not only adopt new communication channels, but also to rethink their entire approach to customer engagement. With the help of comprehensive customer data—and subject to consent—these institutions systematically assess individual customer affinities across product categories and demand clusters.

Data-Driven Engagement Topics and Contact Triggers

Based on these qualified assessments, banks can identify ideal engagement topics and translate them into concrete contact triggers using data analytics. When combined with information on the cost of outreach (broken down by channel), likelihood of conversion, and the expected revenue potential of a successful transaction over time, banks are able to make objective, data-based decisions about which channel should be used to address which trigger and customer.

These practices are already proving superior in real-world use cases. While not every data-driven trigger results in a conversion, the success rates of analytically derived engagement opportunities consistently outperform those of traditional expert-driven methods. This is especially noteworthy given that current algorithms are still relatively early in their training phase and have not yet realized their full potential.

Next-Level Algorithm Development

The next generation of algorithms is already on the horizon. So far, engagement decisions have been based on present-moment affinity—a kind of real-time snapshot. As a result, current models lack a longer-term perspective, such as factoring in customer lifetime value.

But this gap is already being addressed. Horn & Company is currently working with banks and savings institutions to develop forward-looking models that incorporate long-term aspects into trigger selection and prioritization. It’s only a matter of time before engagement strategies evolve from reactive snapshots to truly strategic, value-based interactions.

Advisors Are Taking On a New Responsibility

As contact triggers increasingly stem from technology rather than being identified and analyzed by the advisor, this shift will fundamentally change the role profiles of employees in bank sales organizations. Perhaps the most important change is this: outbound communication—meaning outreach initiated by the bank or savings institution—is gaining significance.

Customer surveys conducted by Horn & Company confirm this trend: many customers already consider qualified, proactive engagement by their advisor to be a key driver of satisfaction. In fact, it is rated more highly than having a personal, familiar point of contact at the bank. Advisors are expected to provide clear, tangible added value.

Preparing for the Outbound World

Sales organizations must be prepared for this outbound future, as the framework and priorities in sales are undergoing a fundamental transformation. One notable shift is that traditional customer segmentation may lose its relevance in the long term—or will need to be completely reimagined.

Legacy segmentation models, in which advisors are assigned a portfolio of customer groups to manage at their own discretion, will no longer suffice. Instead, segmentation will become truly dynamic. It will evolve beyond simply sorting incoming customer requests to incorporate analyzed affinity data as a core element of the segmentation itself.

In the future, the number of actionable triggers—not the number of assigned customers—will define an advisor's task load. This marks a significant shift in how sales activities are structured and managed.

Changing Core Responsibilities for Bank Advisors

The role of advisors is undergoing a fundamental transformation. Their primary task is no longer to identify sales opportunities themselves, but to refine and elevate the data-driven triggers that are delivered to them. These triggers already imply a legitimate reason for outreach. The real challenge lies in translating that legitimacy into a meaningful customer experience—one that closes a need gap and leads the customer to a successful product decision through trusted, value-adding advice.

New Technologies, New Expectations

Those who view these technological advancements as a threat to the value of sales work are misguided. In fact, the opposite is more likely true. Sales performance will become more transparent, measurable, and predictable—not only in terms of volume but also in terms of quality. As a result, sales tasks will be easier to quantify, and success will be easier to benchmark.

Sales management will also gain more direct control over outcomes, depending on the quality and precision of the affinity-based triggers provided to the salesforce. Sales capacity will no longer be defined solely by volume metrics but increasingly by qualitative inputs—many of which can be determined externally.

In this scenario, sales becomes a calculable equation—one that can be optimized.

But let’s be honest: it won’t go that far, at least not yet. Because the quality of data analytics is only as good as the data it relies on. In many institutions, there is still a long way to go. That’s why a growing number of banks and savings institutions are working with consulting firms to systematically professionalize the scope and quality of their data foundations.

The announced revolution in retail sales may be arriving more gradually than expected—but it is coming. That much is certain.

Published in Bankmagazin 6/2024