There are hundreds of data touchpoints in every transaction made by consumers. Where they pay, how much they’ve paid, and what they’ve bought to name but a few. Outside of retail banking however, this data often lays dormant and unutilised by fintechs.
The majority of fintechs aren’t using the data they collect to their full potential, which is strange given its huge value. It can inform better, engaging communications strategies, lead to new development of products and services, as well as add greater personalisation and understanding of a business’ customers. This brings benefits to a fintech's customers, but it also means that fintechs are able to get the most value from current, as well as new customers.
Understanding the value of data
Data is a term given to facts or figures that once analysed in depth, can enable individuals, businesses or organisations to extract and generate useful information. For fintechs, the most important data extracted originates from customer information; such as transaction activity, personal payment preferences and geographic location, all of which can be monitored using Customer Relationship Management (CRM) or Customer Data Platform (CDP) systems.
Fintech and financial services products have unique customer management needs, given the interaction between regulation and compliance, money flows, and customer transactions. And by looking at the context behind the figures, and truly understanding what this information means, fintechs have a real opportunity to excel. Through harnessing data, they are able to properly understand the needs and requirements of their customers, to create patterns and products that map their demands.
For example, data can be used to anticipate customer behaviour. By monitoring what customers have done before, say their payment habits and preferences, an understanding of future trends can be established. This in turn can be utilised to improve future customer transaction journeys. And create new products and services targeted specifically to meet their criteria and preempt what they may begin to demand next.
So why hasn’t data been fully harnessed?
Data can have an enormous effect on the success of a fintech company, but there are barriers in the way of unlocking its full potential.
Increased regulatory activity around customer data and privacy, means there is heightened customer awareness over how personal data is used and managed. Constructing a “stack” of various third party solutions in order to provide customer management, analytics, retargeting, marketing and other capabilities, is no longer acceptable. Through harnessing data, financial service companies can control all customer details, meaning no data is sent to third parties and is self-hosted, in a virtual private cloud.
We are then faced with an ever growing market that’s becoming overcrowded. Many fintechs are therefore simply focused on one thing - getting to market quickly. They want to keep up with their competitors and prove why they are a top contender in the ecosystem. But as some fintechs rush through the building blocks of creating a successful fintech, many are ignoring additional data that can maximise profits. By harnessing additional data, fintechs can amplify their product or offering, and improve the way their customers, or potential customers, view their business to improve the product development lifecycle.
By doing this, fintechs are losing sight of their purpose. Fintechs often spend an enormous amount of time and effort getting to market quickly - which can take up to a year, or sometimes longer, meaning that once they’re live, they’re slow to change focus and use collected data to build upon engagement, to maximise profits through customer acquisition and retention.
Establishing customer loyalty will build a brand. Take Revolut as an example. Despite the coronavirus downturn, Revolut has continued to grow its customer base, albeit at a slower rate. For startups looking to take on the fintech giants, through utilising additional data, they will have a real opportunity to add further value and build on both customer acquisition and retention.
Now is the time for fintechs to use data better
It goes without saying that now is the time for fintechs to utilise data more efficiently. Though the demand for new services increases, the crisis has shown that the market is tough and those who don’t use all the assets at their disposal to maintain customer loyalty are going to struggle. Data at this point is also paramount because we expect consumers behaviours and habits to change - there will be a new set of underserved needs.
Incumbent financial services companies for example are stuck on legacy technology stacks, limiting their ability to compete with the new crop of challengers and match the speed of today’s market. Fintechs can serve customers at a much faster pace, using services like open banking to speed up transactions in a safe and secure way.
For example, in the UK, fraud attempts in general were up 66% in the first half of the year compared with the previous six months. By harnessing data, fintechs are able to better understand spending habits, and spot fraudulent activity which will subsequently help speed up an economic bounce back.
Fintechs also add a sense of personalisation, that can be greatly improved using data. In the current climate where businesses require flexibility, data can do just that. Fintechs are able to identify spending habits, as well as help users save money - in fact a fifth of Brits admit they are considering moving their savings from incumbents to challenger banks. Unlike big banks, fintechs focus on bespoke services that meet every demand of the customer, and this is where data comes into play.
But, to fully utilise this data, fintechs need to partner with like minded players that can provide data capture and management strategies. These players are creating one-stop-shops, which are important as data remains within the site of the fintech. They take care of back-end processes that harness the endless data touch points - specific for financial services, which fly below the radar of other generic CRM tools. This in turn means fintechs can focus on profit maximisation. And, as demand increases, fintechs more than ever need to sharpen their edge to ensure they are completely attuned to their customers' needs and data is the key.