While consumer spending habits might once have been considered semi-predictable, the pandemic caused major shifts in spending behavior that left many financial institutions guessing about their customers’ needs.
Those that solely relied on traditional data sources, like branch experiences or transaction data, were suddenly in serious trouble as purchases became largely homogenous on the surface. Think about how many times Walmart and Amazon transactions appeared on card statements, revealing little to nothing about what was on those purchases.
Data has been important for years, but it is no longer a differentiator. It is now an imperative, especially as Big Tech companies are finding ways to expand their datasets to better understand consumer spending habits and behaviors. By transforming their customers’ data into actionable insights, banks can finally get personalization right.
The power to predict lies in consumer spend data, including SKU-level data and transactions. Banks paying close attention will have noticed that customer spend increased this summer, almost mirroring spend patterns of 2019 during the same period. And it appears that people are desperate for self-care: spending at salons and spas has been growing at a monthly rate of 45% and gym-related consumer spend has been increasing at an average monthly rate of 12%.
Movie-related expenses have been increasing at 29%.
The data also reveal that we’ve moved beyond the panic-purchase mindset. Let’s take toilet paper as an example, a top indicator for ‘crisis-purchase’ behavior. Consumers exhibited stockpiling behavior in spring 2020, and subsequent months saw this indicator drop. Now, the average consumer spend on toilet paper has stabilized and is expected to decline this quarter, while spending on masks, sanitizer and frozen food is expected to grow as consumers plan to spend more time away from their households.
Putting it together – what does it mean?
Paying attention to consumer spending trends is just half the battle. For this information to be meaningful, banks must determine what to do with these insights. For example, understanding that consumer spending on health and wellness is on the rise, a bank might proactively share recommendations around round-up savings, surface discounts for health-related products in the area and create more targeted loyalty programs with local gyms, spas or movie theaters. Or, armed with the knowledge that the panic-purchase mindset is behind us, a bank might resume marketing travel-related loyalty programs or start strategizing around partnerships with hotels and airline companies.
As many are eager to visit friends and family in person once again, banks have a strong opportunity to help consumers do so in the most cost-effective ways. It’s time for bankers to reevaluate the products, services and card benefits being offered and how they’re communicating with their customers to help guide them while supporting financial health in the post-pandemic atmosphere.
While such insights act as a solid starting point to re-engage customers and better understand their post-pandemic mindset, the most successful banks will take it a step further by determining how these trends resonate with individual customers. And that’s the $450-billion-dollar opportunity in banking from personalization at scale. These individuals – all of us – want modern, personalized experiences that enable them to be understood and treated like a segment of one.
And what’s the best way to know what is important to someone? Figure out where and how they spend their money. Macro consumer spending trends, combined with an individual’s personal spending patterns, can help banks know and understand their customer base better than ever before. Each customer has their own version of financial health and wellness based on their values, spending habits and behaviors. Banks need to have a full understanding of this individualized definition of wellness, then offer personalized tools, resources and education to help.
As consumers cope with the aftermath of the pandemic, banks have a real opportunity to solidify their relationships by delivering hyper-personalized experiences. These trends are a sign for banks, if they haven’t already, to rethink their interactions and restructure some of their offerings to support the next chapter in each individual’s story, whatever that means for that person. Community banks, especially, were built for this. Now it’s time they take their data and uncover trends that will help their customer base succeed.
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