FinTech startups in India are having a bit of a moment currently and are continuing to grow exponentially. And the staggering numbers from a recent study conducted by KPMG which suggest that the market for Fintech startups is slated to touch US $2.4 bn in India and US $45 bn globally by 2020, seem to be in complete agreement.
What fuels such an unprecedented growth? The answer is quite simple. This exceptional growth story is the result of Fintech companies studying the behavior patterns of the extremely tech-savvy millennials (who like all solutions at their fingertips) and using AI and Machine learning with the sole aim of providing them with an exceptional customer experience.
How Customers Are Choosing Banks Today
The nuances of the Banking and Finance industry are tough to understand for an average customer. Which is why it isn’t easy for them to tell the products and services offered by different institutions, apart. They just tend to get drawn to institutions that offer them the most convenience as well as safety in their banking transactions. In this aspect, since they do most of their banking transactions online, the reasons behind their choice of bank almost mirror their reasons for choosing an online product or service or an e-commerce platform.
A recent study by Ernst and Young seems to confirm this and reveals that customers flock to online FinTech or Banking solutions that are easy to understand, give them a wide variety of products to choose from, have an easy registration process and offer good customer service.
The FinTech Mantra
FinTech companies like any other digital company rely on a robust branding strategy and reach out to their target customer base of millennials through avenues they frequent the most i.e. social media platforms. They develop a digital media campaign in which their messaging is consistent, easy to understand and offer attractive solutions to their customers that are perfectly aligned with their needs.
And social media platforms have provided a perfect platform for these organizations to reach out to customers directly and interact with them. Also, by sharing relevant content, they attract customer views and comments which can prove to be a veritable source of prospective customer data.
The use of friendly automated chat bots to help customers is another big way to gauge customer behavior. These bots help a user perform an action like managing their budgets, or setting payment reminders. They respond to queries, help the customer navigate the website towards a solution that they are interested in or in some cases even connect them with a human. Each of these activities that the customer engages in, on this platform, becomes a data point for the company. This data is then processed using machine learning tools and AI to generate insights and predict customer behavior and these insights are then used to build consumercentric products and solutions.
The chatbot Cleo which is used by Facebook Messenger, for instance, uses advanced analytics to make in-depth reports outlining the users’ spending behavior and helps them make reasonable budgets. The bot makes tailored recommendations on how to spend wisely and even cautions the users if they are overshooting their budget. The app notifications have an extremely friendly and conversational tone which enhances the customer experience further.
FinTechs also focus on providing excellent user interfaces through their websites. A good website experience plays a key role in getting a user drawn towards a company. If a website is easy-to-navigate and tastefully designed, it leaves a great impression on the customer who will hope to get similar vibes from the products and solutions on offer.
FinTechs are also trying to uncomplicate finance for customers and are focused on delivering products which are simple and easy to understand. Intuit Mint.com, a case in point here, offers a vivid graphic display of financial data of a customer making it very easy for them to understand and act upon.
FinTechs – Breaking Tradition
In a move to break with tradition and expand their target market, FinTechs, unlike traditional banks and financial Institutions, extend loans to individuals with poor or no credit scores, by using a different yardstick to measure the client’s ability and willingness to repay the loan.
FinTechs also facilitate peer-to-peer lending for customers with poor credit scores. Customers are offered loans at a fixed rate of interest by other customers in the peer-to-peer platform. The platform allows the lender to access the borrower’s profile and assess whether or not he’s worth the risk. The lender receives a return on investment at an interest rate greater than what they would receive from a savings account. The borrower in turn, pays an interest lower than that charged by traditional financial institutions.
FinTech companies are thus disrupting the entire financial ecosystem with their emphasis on an entirely customer-centric approach.
How Banks Are Responding To This Change
FinTechs today, with their relentless focus on customer experience are forcing the entire banking and finance industry to adopt a customer-focused approach.
Wells Fargo and JPMorgan Chase, for instance, in an effort to woo their customers have started to display a happy birthday message on their customers’ birthdays at their ATMs and on the customers’ internet banking page. Wells Fargo has even adapted their mobile app to let customers book appointments with bank officials online to avoid queues at the bank. In a similar attempt, BBVA Compass, to improve the experience for their drive-through patrons, has equipped their stations with video conferencing devices which allows customers to work with remote tellers and saves their time.
Even customers have been quick to appreciate the changes FinTechs have brought to the banking scenario. A survey conducted by Blumberg Capital shows that 80% Americans now believe that banks and financial institutions should be sensitive to the requirements of the average and lower income groups and not just pander to the rich and wealthy. 76% of the surveyed also believe that the adoption of fintech allows them greater control of their finances and gives them access to a wider variety of financial products and services.
The Way Forward
It isn’t a wonder that the refreshingly customer-focused approach followed by FinTechs poses a major threat to Banking and Finance Institutions with their operations rooted strongly in tradition. A recent survey by PWC showed that 73% of the executives working in traditional financial institutions believed that traditional banking is quite adversely affected by the rising success of FinTechs, while 76% banks themselves felt that FinTechs threaten a few sections of their business. In fact, 42% of the banks in the survey also seemed to be open to the idea of a partnership with FinTech companies.
Partnerships between banks and FinTechs which definitely seem to be on the cards, seems like a win-win for all parties involved. They will not just give customers more freedom to choose who they decide to bank with, give banks an opportunity to reconnect with their customers and form better bonds while FinTechs will receive finances from banks and become accepted in the mainstream finance ecosystem.
Focusing on customers in all industries, has borne companies rich dividends in this dynamic startup culture and as FinTechs continue to compete with one another, vying for the consumer’s attention and time, we can only expect for the technologies underpinning these ventures to grow more and more sophisticated and niche.