Personalization versus Privacy… the Banker’s Tightrope.

Is there a big push to monetize customer data and leverage that learning to better personalize the banking customer’s experience? You bet there is. Where, however, does this leave banks as they walk the tightrope between monetizing data, protecting their customer’s personal information and navigating a patchwork of regulations?

There is no doubt that personalization is a big deal in customer engagement. Having that deep understanding of each customer’s unique needs, driven by data and analytics and aided by machine learning, is every marketer’s dream. Knowing what a customer is thinking, feeling, and needing forms the very bedrock of any solid, strategic marketing effort.

According to the Boston Consulting Group, “a majority of people who are either open to or actively mulling changing banks would consider banking with a tech company—such as Amazon, Facebook, or Google—if they could. This is not surprising, because such companies have spurred a desire for more customized interactions and fostered a willingness to trade data for a better experience.”  BCG goes onto say: “Several consumer brands have shown the way forward. Netflix uses personalization techniques to make movie and series recommendations. Yet while many financial institutions are conceptually on board and heavily investing, the Netflix of banking has yet to emerge. The main reason is that true end-to-end personalization requires developing new muscles—such as strong cross-channel offerings, cross-enterprise collaboration, a single view of the customer, and a new technology ecosystem—all of which are difficult to build.”

Agreed… for the most part. Is receiving a “you might like this, too” recommendation from Amazon or Netflix the same as getting one from your bank? I’m not convinced. When Netflix tells me that I might be interested in a certain program because it somehow aligns with one I’d watched previously, I have no concerns about data sharing and privacy. The kind of personal data that a bank needs to personalize one’s digital experience is far different from the data that Netflix uses to recommend their latest docuseries.

I think it might have been one of those satirical commercials done by Saturday Night Live a while back, I’m not sure, but what I do remember was their lampooning of banks using personal data for marketing purposes. At one point in the faux commercial, which featured a young couple, the young man receives a series of SMS messages from their bank. The messages are fairly innocuous at the start but become progressively more disconcerting. The first text seems ordinary enough: “We hope you’re enjoying the new truck you purchased with one of our auto loans.” When it’s followed shortly afterward by, “we’ve noticed that you made a large purchase at the grocery store just the other day… having a party?”, the couple gets a bit concerned. The last message really creeps them out: “We have the loan you need when you’re ready to decorate that baby room. Congratulations.” The gag, of course, is that the couple doesn’t know they’re pregnant, yet their bank somehow does.

Granted, this is a bit of hyperbole, but it does point to the fact that monetizing consumer data can pretty quickly run afoul of the consumer’s desire for privacy. Consumers want the convenience of products and services being brought to their attention based on their “buyer journey” and purchasing habits, but they’re definitely conflicted about how much of their personal information they're willing to share in order to make that happen. “Despite consumers’ growing comfort with (and demand for) personalized interactions,” says BCG, “a significant percentage of consumers are still protective of their personal information.” Twenty-five percent of consumers see getting personalized offers as “creepy,” and 32% say that getting personalized experiences is not worth giving up their privacy. More than one-third (36%) feel that companies don’t do enough to protect their private information. Where does that leave data monetization, from a privacy standpoint? What if you received a text or email from your bank saying: “Your oldest daughter is nearly 28 years old. Shouldn’t she be getting married soon? Maybe you should consider one of our HELOCs for that reception.” Or, better still, “Is everything okay at home? Over the past two weeks, you’ve spent $187.50 at the liquor store.”

And then there’s the challenge of Congress, which isn’t helping the matter. In the ABA Banking Journal blog, “State Data Privacy Laws Pose New Headaches for Banks,” author Penny Crosman sums it up this way: “States are stepping up their efforts to protect the privacy of consumer data, and the trend is adding to banks' compliance challenges as stewards of vast amounts of personal information.” If you’re an institution that operates across, say 20 states, you may be looking at 20 different frameworks and bills applying to them and their accounts, some of which are potentially in a state of revision.

So, how will banks personalize their customer experience by monetizing data, while at the same time protecting their personal information and navigating a patchwork of regulations? Opinions vary from “proceed with caution” to “don’t worry, consumers will give you whatever you want if you give them what they need.” BCG estimates that for every $100 billion in assets that a bank has, it can achieve as much as $300 million in revenue growth by personalizing its customer interactions. Banks will certainly appreciate the $300 million in revenue growth… but they’re smart to take a thoughtful approach to trying to be the next “Netflix bank.” After all, isn’t personalization about listening to, understanding, and responding to the wants and needs of customers? Those who are listening are, in my opinion, being justifiably cautious.

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