Introduction:
The Barclays Bank and Lloyds Bank were established in the 18th century in London; at that time, they were the most influential commercial banks. However, the UK banking industry faced upheavals and restructuring in the late 19th and early 20th centuries. The result of the chaos was the foundation of a central bank, which was the Bank of England. With the onset of technology, there has been constant upgradation and reformation in the UK banking sector to fulfil the increasing customer expectations in the modern banking system.
According to the Ideal Team Group’s report on The Top 5 Trends in the UK Financial Services Industry, the UK Financial Services sector is anticipated to grow at a 12.24% CAGR, attaining a market volume of $127.3 million by 2029.
The significance of Tailored Services in the UK’s Modern Banking Setup
1. From just transactions to personalization
Banking has evolved from a sector that was limited to savings, transactions, deposits, and withdrawals. We have entered into an era where tailored services, prompt actions, and digital adaptation have become a vital aspect of banking. UK banking customers today demand more than just usual transactions; they expect the experience to be valuable and relevant, which means that tailored services are no longer a sensation, but a vital planning aspect for the UK’s modern banking world.
2. The Transition: From Traditional Banking to Personalised
Previously, a standardised approach was followed by the banks in the UK. With just negligible deviations, a similar product or service was offered to every individual, irrespective of their economic or social standing.
Nevertheless, the fintech disruptors gave a jolt to this traditional approach. These financial services were digital-first banks. They functioned with features like real-time data, AI, and customer-centricity. The rise of these new disruptors prompted traditional banks to rethink their methods and explore personalization to thrive and enhance customer retention.
3. Personalisation promotes loyalty and retention
As per FintechMagazine’s article – Banking customers ‘want more personalised financial advice’ – Now 70% of customers want banks to offer personalized experiences. Thus, we can understand it as:
- Notifications regarding odd spending patterns
- Offering mortgage recommendations based on savings and credit practices
- Automated savings plans according to an individual’s income
Tailored assistance facilitates trust and association. When customers discern that a bank comprehends their requirements, they tend to secure their financial journey within a single organization.
4. Achieving Hyper-Personalisation
With UK Open Banking regulations, financial institutions can access data with consent and security. This enables segregating tailored services not just based on demography but by the patterns of financial behaviour.
- AI-driven budgeting tools
- Individual financial coaches
- Real-time credit score monitoring
By leveraging AI and tech-enabled methods banks can offer more intelligent recommendations and foresee customer requirements.
According to The Times’ article “First Direct: Inside the Firm That Gets Customer Service Right”, about 32% of customers switched banks, primarily due to better customer service.
5. Crucial advantage for SMEs and Entrepreneurs
A dynamic small business economy is found in the UK. Also, traditional banking has not fully served the requirements of the SMEs. For SMEs, tailored banking will incorporate:
- Flexible credit lines
- Automatic VAT accounting and invoicing tools
- Devoted relationship managers
6. Inclusivity and Financial Wellbeing
As mentioned above, the UK has a vibrant SME sector; it also has a vastly diverse demography. This demographic variation comprises people of various ages, income levels, cultural backgrounds, and occupational positions.
- Affordable credit offers for the population that is underbanked
- Financial products development for people with fluctuating revenue
- Offering multilingual assistance and guidance as per the community’s precise needs
This will enhance business possibilities, and at the same time, will help in achieving social responsibility goals.
7. Regulatory Compliance
A customer-centric strategy is highly facilitated by the UK’s Financial Conduct Authority (FCA). Introduced in 2023, regulations like the Consumer Duty Act, require financial institutions to act in the best interests of their customers. Tailored offerings inherently comply with this regulation. When a bank offers services and products that cater to a customer’s financial reality, it is not just about serving businesses but also adhering to compliance.
Security is considered the most critical factor in data collection by 94% of consumers in the UK financial sector.
The way ahead: Hurdles and Possibilities
No matter how many advantages it offers, enforcing tailored banking services has its own share of challenges:
- Data privacy and cybersecurity
- Legacy systems
- Customer awareness
However, the benefits outweigh the encumbrances. Banks embracing personalisation as a vital feature of their strategy are winning the game with a high retention rate, customer loyalty, and profits.
Closing Introspections
The new normal in the UK banking sector is being personal. The transformation of banking has taken place, and now it’s not only transactional but personal. Whether it’s assisting a budding entrepreneur to save for a new shop, helping a freelancer maintain stable finances, or providing customized monetary planning for a single mother, personalised banking is equally beneficial for both the organisation and the individual.
A one-size-fits-all approach will soon become obsolete with the growth in customer expectations. So now the banking sector has to start rethinking; today it’s not just limited to product planning but also planning with strong consideration for people.
Frequently Asked Questions
1. What does the term tailored banking services mean?
The tailored financial products or solutions that are devised to fulfil the particular requirements, spending patterns, or choices of customers are known as tailored banking.
2. In the modern UK banking system, why has personalisation become essential?
Personalisation is a vital element for the competitive UK financial market. It helps a bank stand out in the crowd. It enhances customer loyalty, retention, and satisfaction.
3. How do traditional and personalised banking differ?
In traditional banking, a comprehensive and generic product/service is offered to a large customer group. However, in personalised banking, insights and data are used to design products and services tailored to the needs and circumstances of each individual.
4. Do tailored services facilitate financial inclusion?
It is ensured in tailored services that the needs of every individual, from freelancers and people with low incomes to students, are addressed.
Sources :
the Ideal Team Group’s report on The Top 5 Trends in the UK Financial Services Industry
First Direct: inside the firm that gets customer service right
