Within the startup community, fintech companies
were once a surefire bet for securing funding from investors. Today, the
crowded market means that investments in the industry are now declining as a
more saturated market encourages greater caution even among the most liberal of
funding bodies. It’s not hard to see why: by the time a fintech startup reaches
Series A funding, the survival rate is only 40%. The figure drops to 5% by Series
To stay competitive, fintech companies need help.
Not only is their own market increasingly crowded but big banks are gearing up to take them on. What’s more, big
banks have the wealth, talent, and data to give startups a literal run for
Thankfully, fintech companies don’t need to go it
alone. Business intelligence (BI) can help fintech startups and tech companies
entering into the space not only beat the banks but ensure they provide the
best products to their customers as they grow larger and their customers’ needs
change. BI could even help these young, fast-paced startups attract the most
notoriously difficult customers.
Business Intelligence Offers Fintech
Securing a competitive advantage both for funding
and market share is more critical than ever for fintech startups. Thankfully,
the industry has a friend in business intelligence and analytics.
Business intelligence (BI) uses software (or
services) to take the vast amounts of available data and transform them into
something more than trends. It offers data-driven decision making, which creates
insights that allow companies of all backgrounds to make strategic business
decisions based on huge amounts of data — not gut feelings.
Why is BI so important in fintech? It’s not just
because the finance and technology markets are increasingly saturated. BI is
also crucial because big banks are using BI combined with big data and
artificial intelligence to reclaim what was once solely theirs.
For example, ING is using a combination of the three to improve
its experience and win back customers. Global behemoths like ING have deep
pockets and vast amounts of data thanks to their significant existing customer
bases. In other words, the competition isn’t just inside the fintech house:
it’s also knocking on the door.
Allows Fintech to Monitor Trends
As fintech companies grow, so too will their
transaction data. But they still need to provide the same level of service that
they did when they were young and nimble. It’s much harder to monitor potential
glitches as their customer base and corresponding data grow, but BI can help
sort through the data and identify the bigger trends.
For example, hyper-personalization is beginning to take hold
in fintech just as has in the tech space more generally. Fintech has the data
to create this kind of personalization, but BI can help companies make sense of
it quickly. Meanwhile, European start-ups, like Germany’s N26 and the UK’s
Revolut, are looking to move abroad and take on markets
like the U.S. They can use BI to learn more about what their new customers want
and find ways to provide it while also dealing with the topsy-turvy approach to
fintech policy used in the U.S. that’s designed to protect existing players
rather than encourage innovation from new entrants.
Companies that invest in BI will be able to stay
one step ahead of their competitors as well as identify new opportunities for
investments. In other words, fintech no longer needs to take a blind leap of
faith into a new feature or market. It can hash out every aspect of a trend in
a very visible way and reduce as much risk as possible. The practice will also
allow fintech startups to better pitch to investors, which will make those who
adopt BI more attractive investments.
User Experience is Critical to Survival
Bill Gates once said, “Banking is necessary,
banks are not.” And his idea encapsulates the big difference between fintech
and the behemoth banks and legacy organizations (like PayPal). The difference
is in user experience. Creating a user experience that transforms the way
customers experience banking is the game-changing factor for a start-up, but
it’s not as easy as it looks from the outset because it requires more than
sleek design or trendy debit card models.
To win the experience game, fintech must increasingly challenge the traditional banking model and culture in favour of a customer-centred approach. BI has the potential to contribute to better UX by processing user behaviour data and then using it to create a competitive edge. For example, it can optimize the on-boarding process to make signing up easier than ever while still remaining within the bounds of banking regulations. Asian banks are particularly good at this: they offer digital onboarding experiences that are seamless. Signing up needs to be as easy as possible because the first hiccup can lead to abandonment. UX can point out those trouble spots in the on-boarding process and minimize the pain points.
Those companies who survive will do so not just
because they create a data-focused UX but because they use data to create a
more engaging UX. Their BI will also give them a fuller opportunity for
explaining their changes. The key to changing anything in UX is to figure out how to communicate the change effectively,
both for employees and customers. Because the change comes from insights, it
will be easier to provide a more comprehensive explanation as well as share
your vision about both the rationale and the new process itself.
BI’s Contributions to
Cybersecurity Will Win Customers
One of the biggest barriers fintech faces is the threat of cybersecurity. It’s both a real and
existential threat in this sector. Cybersecurity is an issue for every single
business, but fintech faces obstacles other sectors, like retail, don’t because
fintech wants, even needs, real-time access to customers’ money rather than just
the last four digits of the card numbers. A swath of potential customers won’t
make the switch from their traditional banks because of the perceived sense of
trust — or distrust. Millennials and Gen X trust fintech in ways
that Baby Boomers typically have not. But that can change.
BI can help fintech target Baby Boomers by improving cybersecurity. Baby Boomers are banking customers who will need services that protect them and their money from fraudulent behaviour (as well as unethical behaviour committed by big banks). Their needs will be more pressing as they reach retirement.
The investment in security will be important because fintech is also more nimble than traditional banks, which will be a boon to Baby Boomers whose finances are far more complicated than their parents were. Today’s retirees will need to be able to provide account access to members of their families and integrate their bank accounts with other financial products. More importantly, they need these services to be cheap and avoid taking a huge chunk of their money in fees and charges.
Ultimately, the same real-time applications that
BI offers for actions like predicting glitches and preventing fraud can also
allow fintech to use real-time data applications to pivot between customer