Labels are lazy. The brain only runs on about 12 watts of energy, so humans are constantly looking for ways to save energy. One such energy-efficient method is labeling. It’s far easier to label your neighbor as nosey or your office mate as passive aggressive than to engage with them each day to reassess who they are at that moment. But for all the effort to apply time-saving labels, people hate when labels are applied to them.
Labels box you in. They minimize your complexity, and can make you feel like your growth is stunted. So if labels are limiting, why are categories important?
The fewer categories your aggregator offers, the more generic your customer understanding will be. There’s a significant difference between identifying a restaurant transaction and distinguishing which users choose vegan restaurants or regularly frequent fast food locations. In fact, the more detail you gain, the more nuanced your identification of an individual or household becomes.
Gathering category detail is the first step, but it’s not enough to simply have these categories. You need to put the categorization to work for you. With the right implementation, categories can build a richer understanding of your users and their financial needs.
Detailed categories help you move from labeling customers to learning about them. Users vote with their wallets, and when you identify what’s important to them, you gain a greater depth of understanding about what they value.
There’s a big difference between recreation spending in scuba diving, amusement parks, art galleries, and sporting events. Imagine the benefit from knowing your user is paying for travel insurance, as opposed to life insurance. Or if you could distinguish between driver’s ed and college tuition. What if you could discern credit card payments from child support payments? How could you improve your offers if you knew user charitable donations were specifically made to environmental organizations?
Building user personas moves your user knowledge from two-dimensional to a detailed full-color, three dimensional view.
Eats out, spends a lot on recreation, purchases insurance from multiple providers, has a new education purchase, several large recurring monthly payments, and makes monthly charitable donations.
Having this level of detail about your customer’s preferences and values allows you to create a genuinely personalized experience.
Detail improves your marketing. By targeting your marketing approach, you’re not squandering your user’s goodwill. Customer’s have limited tolerance for monthly marketing offers. Rather than sending generic product offers to your entire customer base, you can send them relevant offers only.
Consider targeted offers for the user above:
All three offers are far more likely to be opened than the generic offer for a mortgage or to upgrade to premier checking that have been filling their inbox for the last few months.
Consider a few recent studies:
As customer tolerance of bank fees wanes, it’s clear that customer demand and CFPB oversight are cutting into fee-based revenue. The newest metrics indicate that personally relevant and tailored financial advice is key for retention.
A 2019 Accenture study indicated that nearly half of all consumers want customized financial advice tied to their spending habits. Categorization can help users dial in to where they’re overspending. Current FI feedback is generic and ineffective. Consider these real-life examples of budget feedback:
While this feedback is easy to generate, it’s seldom helpful to your users. And it definitely falls short of “completely meeting customer needs.” Imagine the difference that category-informed suggestions could provide:
Improved categorization is the first step in providing a truly personalized banking experience. Categorization lays the groundwork for better financial advice and offers opportunities for better marketing. If you’re interested in learning more, contact FinGoal about building user personas.