Personalization of Banking Products (Services) using Digitalization

Technologies

VITALII RYSIN1, OLHA PROKOPENKO2, OLEKSII MURAVSKYI3, RUSLAN PECHENKO1,

NATALIІA HOLIACHUK4, ANDRII ZINCHENKO5

Lviv Polytechnic National University,

12 Stepan Bandera Street, 79000, Lviv,

UKRAINE

UKRAINE

Lutsk National Technical University,

75 Lvivska Street, 43000, Lutsk,

UKRAINE

technologies for the personalization of banking products. The methods of graphic modeling, and expert survey

were used in the research. The experience and specifics of using digital tools were analyzed, and the

appropriateness of their application in bank practice was determined using the example of a Ukrainian bank.

The potential of implementing specific technological solutions for the personalization of banking products

(services) in the practice of the analyzed bank is determined. The Markowitz Model was applied for the

allocation of the investment budget for the implementation of digital technologies with the purpose of

improving the personalization of banking products (services). It was shown how the practical implementation

of digital technologies and digitization tools will contribute to the growth of the competitiveness of this bank in

the highly competitive market of banking products through the personalization of the client experience.

Prospects for further research include the identification and structuring of digital tools that can be applied to

In the modern business environment, consumer

needs, preferences, and expectations are the basis

for building a compelling product and service policy

for banks, [1]. In this context, it is the personalized

customer experience in banking that is the problem

area that is increasingly focused on by academics

specifics, potential, and limitations of the banking

sector, particularly regulatory norms and the

possibilities of implementing modern technical and

technological solutions. It is also important to

identify leading innovative solutions in the

organization of activities that can be implemented to

solve the problem of personalization of the client

experience in the banking sector. At the same time,

the specified solutions may be implemented

unsystematically, ineffectively, and inconsistently if

of a specific banking institution. This allows us to

meet these needs and expectations more

systematically, consistently, fully, quickly, and

effectively, determining the limits of this article's

general scientific problem.

Given the rapid development of information

technologies, the system of digital technologies, as

well as products (services) and solutions based on it,

is an environment that is the most interesting from

the perspective of the availability of tools capable of

significant part of customers. Organizational and

methodical solutions aimed at improving

automation, optimization, and personalization of the

client experience are important components of the

system of tools aimed at meeting the needs and

expectations of consumers of banking services as an

important element of banks' product and service

policy. These decisions require scientific

development, justification, and implementation at

the level of banking institutions and have a

need for studying the issues of personalization of

banking products (services) using digitalization

technologies in this article.

This problem is especially relevant for

developing countries and transitive economies

because the activities of banks in such countries

– High competition in the market of banking

products and services, including digital solutions in

the banking and financial sector, which are

implemented at the international level;

– A relatively weak resource potential — reserves

and financial capabilities for maintaining the

stability of banks in such countries are much weaker

than in developed economies, therefore maintaining

market positions and often even survival of these

banks depends on their innovativeness and

personalization of interaction with clients in the

banking sector due to the implementation of specific

digital technologies is an important scientific

problem that should be considered in this scientific

article. This problem is especially relevant for

countries.

banking products (services) using digitalization

technologies and identify ways of the most effective

use of such technologies within the framework of

- Determining the development potential of

individual areas of digital activity in the analyzed

bank using the three-dimensional model proposed

by the author;

- Interpretation of the results of the potential

assessment and providing recommendations for the

implementation of digital technologies aimed at

personalizing banking products (services).

The hypothesis of this study is the possibility of

improving the personalized experience of bank

The concept of specifics plays an increasingly

important role in increasing business

competitiveness in the current conditions, [2], [3].

primarily through product universalization, remain

relevant but require a certain revision of the

methods of achievement.

In this context, digital technologies enable

businesses to scale quickly, providing interaction

with a significant number of customers through

online access, [4], [5], [6]. At the same time, such

technologies create conditions for taking into

account the requirements and needs of a specific

group of consumers due to the ability to quickly

[11]. This, in turn, affects the solution to the

problem of creating prerequisites for the

development of a modern bank in a highly

competitive environment of banking and financial

products, in particular, in developing countries, [12],

[13]. This opinion is relevant as the resource

potential of banks in these countries is quite limited,

especially in relation to financing small and

medium-sized businesses in these countries, [14],

[15].

personalized experience of customers and creating

personalized banking products (services) derive

from the growing role of digitalization as a factor in

the development of banking, [18]. First of all, such

transformations are conditioned by the prospects for

the development of mobile technologies on the

global market, [19], [20].

Authors considered the problems of the

formation and development of banks implementing

digital technologies, [12]. The results of the analysis

conditions for the successful operation of banks and

their achievement of competitiveness are worth

noting, [21].

It is also important to rely on the research on

works on the analysis and creation of models of the

So, current research on the issue of personalization

of banking products (services) using digitalization

technologies quite objectively represents both the

essence and the relevance of the implementation of

this process. At the same time, the impact of

digitalization tools on the behavior of a bank

customer through the offer of personalized banking

products (services) is a problem that still requires

significant understanding, structuring,

distinguishing specifics, and finding solutions in

to personalize the customer experience. This survey

was conducted by an independent research company

for approximately 3,000 U.S. consumers

differentiated by generation (Z: 18-23; Millennials:

24-39; X: 40-55; Boomers: 56-74, and the Quiet

generation: 75 years or older).

3.1 Research Methods

The work uses the method of graphic modeling to

assess the potential of implementing specific digital

of its blocks as variants of the bank’s strategic

behavior.

allocation of the budget for the implementation of

digital technologies to improve the personalization

of banking products (services), [22]. This model is

based on the assumption that the profitability

indicators of different assets of the investment

portfolio (in this case – combinations of digital

technologies planned for implementation) are

complex manner, contribute, with on the one hand -

the implementation of the bank's goals of obtaining

benefits from the implementation of more

personalized banking products and services,

minimization and proper compensation of activity

costs, on the other hand - the realization of the goals

of the consumer of banking services.

dimensional model based on the following criteria

to assess the potential of implementing a specific

flows thanks to the application of specific digital

technology for the personalization of banking

products (services);

c) the potential to improve the bank’s image through

the creation of a personalized service system

focused on meeting specific customer needs.

It is proposed to assess the potential of

implementing a specific digital technology by

conducting a survey of banking market experts. The

survey involves at least five experts — specialists in

depending on the results of the survey, which

indicate the potential of implementing a particular

digital technology to personalize banking products

or services (Figure 1, Table 1).

profitability of digital technologies for

personalization of customer experience:

, (7)

where GP is gross profit, I is investment in the

development and spread of digital technologies, that

contribute to the personalization of the customer

experience.

The calculated expected profitability of the ith

digital technology ROIі is equal to its average value

according to the profitability dynamics of the

weighted average of the expected profitability of the

tools included in it:

(9)

where is the share of digital technology in the

portfolio, which is calculated by the formula (6).

This model was tested in practice through a personal

survey of five experts holding managerial positions

(at least at the level of deputy head of department)

in the Ukrainian bank (Joint-Stock Pivdenny Bank

Public Joint Stock Company, hereinafter —

bank rankings (it ranks 11th in the overall ranking

of banks, which includes state banks and banks with

foreign capital), has performance indicators

allowing for its active development (Moody's A1.ua

ranking), and actively implements digital

technologies.

Pivdenny Bank) gave his/her consent to participate

in it and was informed about personal data privacy,

the procedure, and the subject of the research,

Table 2. Results of the assessment of the potential for the implementation of digital technology to personalize

banking products (services)

Pivdenny Bank (Ukraine) was tested in this article.

The testing gave the results in Table 2.

Figure 2 shows the correspondence of the tested

technologies to the blocks of the integrated three-

dimensional model for assessing the potential of

implementing digital technology to personalize

banking products (services).

The justification of the allocation of the budget

for the implementation of digital technologies to

improve the personalization of banking products

according to Formula (14). Next, an active strategy

— increasing profitability at a given calculated level

of risk — was used.

Fig. 2: Correspondence of the tested technologies to

the blocks of the integrated three-dimensional model

for assessing the potential for the implementation of

digital technology to personalize banking products

(services).

Source: Created by the author based on the results of an

help of chatbots based on artificial intelligence);

– customer assistance in the search and selection of

banking products (services); feedback as a request.

So, to personalize banking products (services), the

bank shall differentiate the customer experience and

create a unique sales offer that is attractive to the

target group(s), which combines a competitive

advantage and has value for the customer.

banking system in terms of the challenge of the new

digital economy, [30], [31].

account that the principle of “unity of the optimal

management solution” characteristic of the

traditional way of management is being replaced in

the modern business environment by the principle of

“multiplicity of possible solutions” (divergent

thinking). The reason is that a large number of

possible alternative management solutions are

possible in unbalanced, unstable, actively, and often

non-linearly developing systems, which is

characteristic of the modern banking sector. This

provides certain tactical and strategic advantages,

which are important to forecast with a certain

probability. This is especially relevant for transitive

In the author’s opinion, possible options for

management decisions regarding the

implementation of specific digital technologies to

personalize banking products and services in a

implementing a particular technology in the specific

conditions of the bank and comparing them with

possible losses of efficiency. The principle of “non-

linearity of management” is also urged in this

context. This is a typologically correctly organized

management action, implemented through a certain

model, which provides for the possibility of variable

actions given changes in the environment, which

may turn out to be more effective than a strong

management influence applied at the wrong time

market and implementing certain digital solutions

that contribute to this.

This article aims to emphasize the importance of

implementing a personalized approach in banking in

terms of digital transformation, which requires the

selection and structuring of particular digitalization

tools that improve interaction with customers

through increased personalization of banking

application of specific digital technology for

personalizing banking products (services); the

potential for the formation of new income flows by

applying specific digital technology for the

personalization of banking products (services); the

potential to improve the bank’s image through the

creation of a personalized service system focused on

meeting the specific customer needs. The author

improvement of personalization of banking products

(services). The potential and appropriateness of

implementing each of these technologies were

analyzed. The potential for increased profitability of

banking sector by theoretically summarizing and

structuring the issues of personalization of banking

products (services) using digitalization technologies,

as well as identifying ways of the most effective use

of such technologies within the strategy of digital

transformation of banks. At the same time, this

study relies on the need to ensure competitiveness as

a dominant factor in the development of a modern

bank in market conditions. This is especially

relevant for banks in developing countries or

well as the structure of the investment portfolio

proposed by the author in the implementation of

digital technologies aimed at personalizing banking

products, allows to form a systematized and justified

system of decision options under certain conditions

at the bank level. Such a scientific and practical

solutions and proposals for the development of

banking practice presented in this article implies the

possibility of using the three-dimensional model

proposed in the article to justify the appropriateness

of implementing digital technologies in a particular

bank, which should improve personalization of

banking products (services), as shown by testing of

this model.