Perspectives
Blog
Banking and Financial Services
Read Time
Date
15 June 2022
Author(s)
Neelesh Pal
Practice Lead - Banking, Capital Markets and Risk & Compliance
Key Points
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Most FinTech companies expect to spend heavily on technology and innovation, but few comprehend how much customer acquisition can cost them in a marketplace rife with competing players.
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The lack of a clear roadmap has often led FinTechs to burn cash to attract a wider clientele – an unsustainable growth-at-any-cost strategy that needs clearer understanding of customer demands and behavior.
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Investing in data and artificial intelligence partnerships can bring increased customer granularity and fuel a more effective, cost-conscious and long-term strategy for successful customer acquisition.
FinTech companies are operating in a buoyant market that is projected to grow at a CAGR of 26.87 percent over 2020-2026. The numbers would be better still if revenues weren't bleeding away in the acquisition of new customers.
FinTechs invested around USD 3 Billion on customer acquisition in 2020. This figure is slated to increase with rising competition and customer expectations. A thought leadership paper by ISG and WNS, Helping Fintechs Soar, reveals that the solution lies in forging effective partnerships with the right service providers. Such partnerships can help FinTechs explore new business models, co-innovate and scale up in a rapid and cost-effective manner.
Service providers act as catalysts, bringing together growing FinTech firms and other stakeholders, such as investors, domain experts, government agencies and financial institutions (looking for innovative tech). In a hypercompetitive field where everyone is vying for customers, this symbiotic partnership can bring the lion's share to a FinTech firm.
Harnessing Data and AI with Strategic Collaboration
The role of experienced service providers can be pivotal in driving cost-effective customer acquisition. They can leverage their data-to-insights and digital automation capabilities to drive the right outcomes across the customer acquisition journey.
Identifying the target audience: The FinTech market is crowded with an increasing number of companies offering similar services. That makes the effectiveness of marketing campaigns critical for success. FinTech marketing needs more granularity in customer segmentation. This will bring greater impact in activities such as offering deals and rewards to draw new customers. This has a direct effect on marketing ROI and, ultimately, on customer acquisition costs.
Based on factors such as spending habits, lifestyle and demographics, an entrenched service provider can leverage data and analytics to build detailed consumer profiles. This helps FinTech companies find patterns in different customer segments and effectively target the audience.
Creating an innovative value proposition: FinTechs have transformed the banking industry, but the disruptors are now in strong competition among themselves. The race to innovate is neck to neck across segments, from payments and lending to wealth management, neo-banking and blockchain. Meanwhile, the scale and complexity of operations are ever-increasing. Subtle insights can make the decisive difference in attracting more customers and taking the firm from market acceptance to market dominance.
FinTech firms partnering with service providers have access to analytics-led insights. This can create a powerful value proposition that aligns with customers' needs, solves their problems and helps them stand out from the competition.
Prioritizing new customer experience: Customers are quick to abandon a platform if too much personal information is sought or the authentication is time-consuming. In Europe, financial institutions lose over EUR 5 Billion a year owing to poor onboarding practices.
Intelligent automation, supported by a 360-degree view of customers, can enhance the customer experience across all touchpoints. A good customer experience helps retain customers, which, in turn, lowers customer acquisition costs.
Adopting a hyper-personalized strategy: It is imperative to provide contextualized communication to meet specific needs of customers and meaningfully engage with them. Tools powered by Artificial Intelligence generate personalized messages that can enhance customer engagement as well as conversion rates. With an effective hyper-personalization strategy, FinTechs can reduce customer acquisition costs by up to 50 percent and increase revenues by up to 15 percent.
Strategic partnerships are clearly vital to addressing operational gaps and laying out an execution roadmap. Such alliances will enable FinTechs to access new technology capabilities, streamline internal processes, improve on good customer experience and achieve sustainable growth.
Read how strategic collaborations can help FinTechs overcome technological, commercial and competitive challenges.
Related To:
Research and Analytics Customer Segmentation FinTech Customer Acquisition Artificial Intelligence
