Fintech startups received $44.1 billion from venture capital investors 2020, versus $1.1 billion in 2009. From blockchain, digital payments and artificial intelligence to predictive analytics, venture capital is hungry to put money behind the fintech revolution. For banks and credit unions which primarily did business in branches and whose biggest foray into digital has been the rollout of a basic app, this market shift can feel scary and foreign.
Tech Isn’t Everything:
All is not lost. Traditional institutions have something the fintechs don’t: historical credibility.
Their physical presence in our daily lives has undoubtedly had a subconscious effect on how consumers view and trust their brands. While this recognition alone isn’t enough to catapult banks and credit unions into the future, it provides a competitive advantage.
To get ahead of the curve, decision-makers at traditional institutions should watch several emerging fintech trends. These include Netflix-style banking, gamification and the rise of “super apps.”
The Rise of ‘Netflix-Style Banking’
Use of financial apps has exploded. But instead of meeting consumers’ need for guidance, many banks and credit unions reach out with tone-deaf sales messaging. They continue to inundate inboxes with promotional material, leaving consumers to wonder if the institutions’ marketing teams live in the same universe they do.
To complicate matters, life in lockdown created new habits and expectations. For example, Netflix can deliver — even suggest— content that is aligned with individual viewing behavior and past preferences. Why can’t banks adapt to individual needs and address personal issues in a similar fashion?
Banking Needs an Upgrade:
Enter the era of “Netflix-style banking” — and with it, increased pressure on organizations to become digital-first and customer-centric.
This shift to hyper personalized, on-demand banking highlighted one of the biggest pitfalls of financial marketing to date: designing products exclusively for traditional segments and lifestyles.
Setting them apart from many banks and credit unions, fintechs have begun to respond to the tough situations consumers encounter. For example, how do products adapt for customers who are divorced parents or who are co-parenting? What happens when customers serve as caretakers for others who have Covid-19 or other illnesses? And what about those people who are caring for an extended family of relatives who aren’t children, but rather siblings or other dependents?
The myriad of relationship combinations offers a multitude of opportunities for financial institutions to develop both a wealth of customer profiles and products to serve them.
A Netflix-style approach may take the form of a well-timed offer for consultation on joint college savings accounts or emergency funds for divorced or co-parenting individuals. For consumers who are caring for a loved one with a long-term illness, financial institutions could suggest a product to help manage the loved one’s financial accounts as a caregiver. By reaching out to people with tactful messaging, institutions can demonstrate a new level of empathy for their clients’ circumstances.
This is where fintech apps are getting ahead by being personal. Take for example Current, which competes on the promise to “create better financial outcomes for people and their unique lives.”
Adam Hadi, VP of Marketing at Current, says this value proposition is supported by marketing on the back-end that is “hyper-segmented, fed by algorithms and automation that decides which ad creative to show which customer.” That level of granularity creates the customer expectation that the product experience will be just as customized.
“You can’t dump people into a product and give them all the same experience,” Hadi continues. “This realization is real, and the mentality is changing, which is why you are seeing product and marketing teams working more closely together.”
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Adopting Gamification to Drive Financial Literacy and Engagement
What do mobile gaming and financial services have in common? Not much, but the confluence of the two industries poses huge benefits to financial institutions looking to differentiate themselves from the competition.
Gaming is Serious Business:
Consumers are increasingly married to mobile games and find them a relaxing departure from daily life. But what if financial institutions could tap into the same obsession spurred by Roblox or Candy Crush Saga?
Some fintech startups are already cashing in on this engagement goldmine by gamifying aspects of their applications to drive financial literacy.
Take for example Dhani, the app belonging to Indiabulls Group, one of India’s leading home finance companies. The app’s mission is to help consumers plan their financial wellness and increase the use of Indiabulls’ digital loan fulfillment platform. Launched in 2017, it offers consumers personal advice and loans on the fly, and boasts nearly 20 million users as of November 2020.
Along the way, Dhani introduced an in-app gaming experience called Spin the Wheel that allows end-users to win cash and other prizes. “We introduced games because we realized people had more time to spend in apps, and we adapted our strategy to the needs of the hour,” says Ankit Banga, Digital Marketing Lead at Dhani.
Banga estimates 90% of users play the Spin the Wheel game. The application recently introduced Dhani Cash, a loyalty points initiative that allows users to convert rewards into money. Users can then use the Dhani Cash to pay periodic loan installments or even purchase healthcare.
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The Emergence of the One-Stop Shop Super App
The ability of many big tech and fintech players to deliver experiences has created consumer appetite for customized services and personalized communications. Consumers like frequent relevant interaction and engagement, enabled by communications on the channels they prefer. Consider the emergence of the “super app.”
This marketplace of services, delivered by a combination of in-house technology and third-party integrations, aims to make it so the customer never has to leave the financial app to complete any other activity.
To put this into perspective, consider the Indian private lender Federal Bank and its mobile app, FedMobile. To stop customer churn before it starts, Federal Bank brings together partners, neobanks and merchants to streamline transactions all within its own app. “We aim to ensure that a customer doesn’t need to leave FedMobile to go to another application to make a payment,” says Jithesh P.V., V.P. and Head of Federal Bank’s Digital Centre of Excellence.
From water bills to topping up a mobile phone, partnerships with over 800 billers make it easier for FedMobile users to make speedy payments. Additionally, partnerships with neobanks and fintechs also extend the product offering to include mutual funds and instant personal loans.
“Being a super app requires you to be an all-in-one storefront for your customer,” Jithesh says. “More importantly, it demands the capabilities to understand what customers need and make those products simple to use and navigate.”
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Thinking Global, But Coming Off Local
In a globalized economy, competition is no longer defined by companies playing within the same geographical borders. All players in the financial revolution seek the same endpoint: a hyper-personalized, engaging, all-in-one application or platform to serve the full spectrum of their customer’s needs.
Ernst & Young calls this vision a “personal financial operating system.” E&Y describes this concept as a “dynamic, trusted and embedded digital experience that helps consumers improve their financial lives through constant, relevant, daily interaction and engagement.”
Much like your favorite fitness application, a personal financial operating system will guide, track and support a consumer’s financial wellbeing daily.
Gamification, “Netflix-style banking,” and the rise in super apps are all pieces of the personal financial operating system puzzle. While they aren’t the only pieces, they are proving to be some of the most key as banks and credit unions rush to modernize and maintain their relevance in this new financial era.