FICO urges UK banks to boost personalisation amid switching

FICO has urged UK banks to adopt four measures to improve customer personalisation as current account switching in Britain rose sharply in the first quarter.

Data cited by the software group showed 319,529 current account switches between January and March, up 43% from a year earlier. It also highlighted broader changes in customer behaviour: nearly half of Britons now hold a digital-only bank account, rising from 40% last year to 49% this year.

These figures add to pressure on established lenders as digital-only rivals gain ground and customers show a greater willingness to move providers. Banks need to improve how they decide which products, services or interventions to offer individual customers if they want to reduce attrition and maintain trust, FICO argued.

It identified four areas that should underpin that approach: placing the customer at the centre of each decision, removing internal barriers to data sharing, using analytics that work continuously across different data sources, and shifting from fixed campaign management to event-driven automated decision-making.

Switching pressure

The increase in switching activity suggests customer loyalty in retail banking remains unsettled despite the sector's growing digital adoption. For incumbent banks, that creates both a commercial and an operational challenge, as retaining existing customers is often cheaper than acquiring new ones.

Current account switching has long been seen as a measure of competitive intensity in the UK banking market. An increase of this scale suggests consumers are becoming more willing to act on dissatisfaction or seek better digital experiences, pricing or service.

At the same time, the spread of digital-only accounts points to changing expectations around convenience and speed. Banks that still manage customers through separate product, channel or business-line systems may struggle to respond consistently when clients compare offers across the market.

Decision models

FICO's recommendations focus on what banks often describe as the next best action: deciding in real time which communication, offer or service response should be presented to a customer. That can range from a retention offer to a lending decision or a service message linked to a life event or behavioural trigger.

In practical terms, banks need a single view of customer behaviour and needs across all products and channels, the company said. It added that this objective should be balanced against each institution's risk appetite, to avoid offering unsuitable products or taking on exposures outside internal limits.

Another part of the framework addresses internal silos. Many large banks still operate separate systems for current accounts, cards, lending, savings and customer service, which can limit how quickly information is shared and acted on. Cloud-hosted decisioning systems can help connect fragmented customer data and insight, according to FICO.

The company also called for what it described as always-on analytics. In this model, customer decisions are updated continuously through artificial intelligence, machine learning and real-time data rather than through periodic campaign cycles. That includes the use of "just in time" information sources that may not have formed part of older lending or marketing systems.

The fourth element is a move towards event-driven orchestration. Instead of pre-set customer journeys, the model relies on automated systems to interpret signals such as life events, behaviour and business priorities, then determine the next step across different touchpoints.

Nikhil Behl, President of Software at FICO, linked those shifts to the competitive pressure facing traditional lenders. "The convergence of sustained switching volumes, rapid mobile adoption and rising expectations from digital-native challengers means that incumbent UK banks face a narrowing opportunity to differentiate," he said.

He said the approach is designed to work at the level of an individual customer interaction. "Successfully devising Next Best Actions means the customer receives an appropriate offer that meets their needs, and the financial institution retains the customer on terms that suit its risk appetite. But it hinges on a much deeper understanding of each customer, based on a combination of sophisticated analytics, automation, optimisation and ongoing two-way digital dialogue," Behl said.