How Banks Can Leverage AI to Expand Wallet Share on a Budget

Wallet share, also known as share of wallet, refers to the portion of a customer’s financial services spending that a bank captures. Increasing wallet share with existing customers is an attractive strategy for smaller banks because it is typically less costly than acquiring new customers. According to PwC research, banks can generate a 60 to 70% return on initiatives targeting existing customers compared to only 10% when targeting new customers.

Expanding a bank’s share of wallet is essential for long-term growth and profitability. By leveraging AI-powered data analytics tools, banks can achieve this goal. Let’s explore three essential steps through which banks can expand their share of wallets using AI.

Step #1: Ideal Customer Profiling

To increase wallet share, you need first to understand your customers. AI can play a pivotal role by helping banks create ideal customer profiles. These profiles are not merely demographic; they encompass comprehensive insights into customer behavior, preferences, channel usage, account transaction history, product affinity, and more.

Let’s say your bank wants to identify the most promising customer segments for credit card offerings. The AI system will use machine learning algorithms to identify patterns and characteristics that indicate a substantial likelihood of a customer needing a new credit card. For example, the system may find that customers who frequently carry a balance on their checking accounts, have a good credit history, and often use their debit cards for online purchases are prime candidates for credit card offers.

Step #2: Precision Targeting with Tailored Products

Once ideal customer profiles are established, the next step is to target higher-priority customers and segments with tailor-made financial products and services. AI can help banks determine which products will most likely resonate with specific customer groups, optimizing the chances of success.

For instance, with the ideal customer profiles in hand, the bank uses AI to create tailored credit card offerings. For customers who frequently use online shopping platforms, the bank designs a cashback credit card with rewards for online purchases. For those who travel often, they introduce a travel rewards credit card. By aligning the credit card offerings with each customer segment’s unique preferences and behaviors, the bank maximizes the chance of increasing their wallet share.

Step #3: Highly Targeted Campaigns with AI-Powered Insights

Banks must deploy highly targeted marketing campaigns to execute effective wallet share expansion strategies. AI-powered insights can make these campaigns incredibly precise and efficient. AI algorithms can analyze vast amounts of data to identify the best channels, messaging, and timing for each customer segment.

For example, suppose a customer has a history of making significant online purchases during the holiday season. In that case, the AI system schedules a credit card offer campaign a few weeks before major holidays.

Final Thoughts

Banks can significantly increase customer engagement and conversion rates by using AI to profile ideal customers and deliver highly personalized offers. Customers are more likely to apply for and use credit cards that align with their preferences and needs, resulting in a substantial boost in the bank’s wallet share. In summary, leveraging AI to expand wallet share is a strategic move for banks seeking to thrive in today’s financial landscape.

Posted on Oct-13-2023