Algorithmic vs. Rule-Based Recommendations: What Banks and Credit Card Issuers Need to Know


The digital transformation has revolutionized the financial industry, especially in the realm of personalized customer interactions. Banks and credit card issuers are faced with the challenge of presenting relevant offers and services to their clients at just the right moment. This is where algorithmic and rule-based recommendation systems come into play. But which approach is best suited?

Algorithmic Recommendations: Driven by Artificial Intelligence (AI) and Machine Learning, these systems analyze customer behavior and preferences to tailor product or service suggestions. For instance, based on a customer’s transaction history, banks might propose personalized savings plans or investment opportunities. Advantages:

  • Automated adaptation to customer behavior
  • Scalable for large customer bases
  • Dynamic responses to market changes

Rule-Based Recommendations: Here, experts establish specific criteria that, when met, lead to certain recommendations. A credit card issuer, for instance, might decide that customers who frequently dine out receive special cashback offers for dining establishments. Advantages:

  • Control over presented recommendations
  • Direct alignment with business objectives (e.g., promoting specific products)
  • Simplicity and predictability

Which Approach to Use When? In the financial sector, both algorithmic and rule-based recommendations can be effectively utilized, depending on the objectives and available data. By cleverly combining both methods, banks and credit card issuers can provide genuine added value to their clients and achieve their business goals more efficiently. For new clients, whose behaviors and preferences aren’t yet known, rule-based recommendations might be apt to present generic offers. For returning clients, whose data is already captured, algorithm-driven systems can make detailed and personalized suggestions.

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