Business intelligence trends in the fintech industry

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 D.

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 their money.

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.

What 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.

BI 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.

BI-Based 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 markets.

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