More than four out of five financial institutions believe their business is at risk due to digital innovation, according to a PwC study.
They certainly have good cause to lose sleep. Fintech – the startups, tech companies, and even legacy providers leveraging new technology to deliver a better customer experience at lower costs – is starting to disrupt financial services as dramatically as Amazon has rattled retail and Netflix has transformed at-home entertainment.
Mobile banking trails only social media and weather as the most popular app on smart phones, a report by Citi shows. Almost half of consumers – including two thirds of millennials – have increased their mobile banking usage in the last year, according to the study. Thanks to these intuitive apps that enable real-time transactions, the global mobile wallet market is expected to surpass $250 billion by 2024, Global Market Insights projects.
As customers rely less on brick-and-mortar banks and more on digital channels, traditional financial institutions are confronted with a new reality: They are expected to deliver personalized, easy and super-convenient experiences on par with the likes of Amazon or Netflix.
Which leads to an interesting irony: While digitization has stripped away a great deal of the human-to-human interaction that financial services companies have had with customers for as long as banks have existed, knowing how customers experience the brand has never been more important.
To deliver the trendy, innovative, and exciting services that customers now expect, it is essential to truly learn about, understand, and empathize with them. Financial services companies that get this wrong are in jeopardy at a time when people can switch loyalties with a few clicks or taps.
In my work with fintech companies, I’m hearing three common themes in what has made them successful in grasping customers’ motivations, needs, desires, and behaviors.
- In-demand products and services. A primary reason consumers are flocking to fintech companies is a product or service they can’t find elsewhere.
This highlights a key distinction between traditional and emerging financial services models. Fintech companies have the advantage of not being burdened by an organization’s legacy technology or traditions. Thus, they’re able to adapt to create products and services that may not fit into the frameworks or philosophies of more traditional organizations.
Fintechs are seizing the opportunity to serve new customers such as millennials in the margins that traditional financial institutions had mostly ignored and have created new personas and market opportunities as a result – simply because they seem to understand them better.
- Trusted recommendation. Another common reason why consumers choose a specific fintech company is that they were referred by a friend, family member, or another trusted source, such as a respected publication or blog. This shows the viral effect that deeply empathizing with customers can have.
- Ease of use. A seamless online experience — a simple design, an easier application process, and the ability to resolve issues through the app or website without calling customer services – is a huge differentiator. So are lower fees, higher annual percentage rates on savings, a good rewards program, and anything else that makes for a superior customer experience.
Furthermore, there’s a perception among many consumers that fintechs care more about them on an emotional level and understand them more than traditional banks.
When it comes to their finances, consumers have high expectations and ever-changing needs. Winning in this environment for a financial services company – traditional or otherwise – is all about displaying customer empathy and offering better products, and superior digital experiences.
Consumer loyalty for financial products can be fleeting, but companies that incorporate fast human insight into every stage of the development process are likely to earn their business for a long time.
Janelle Estes is Chief Insight Officer at UserTesting, a human insights platform.