How Big Data and Open Banking Are Combining To Bring a New Era of Fintech-Driven Banking
For a long time, consumers expected personalization of their digital experiences, however, the pandemic has added a new layer of urgency to these expectations.
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The rise of technology and digital services has led to increasing customer demands for simplicity and speed. Banks and financial services institutions are continuously searching for new ways to retain and attract customers while aiming to respond to heightened consumer demand for personalized services. For this reason, customer-centric offerings continue to dominate the financial technology (FinTech) landscape.
Personalization takes advantage of real-time data and cutting-edge technologies to deliver product or service information to customers. In an extremely competitive financial services sector, there is more pressure than ever for FinTech companies to provide customers with a better experience.
A truly personalized financial experience is powered by data that can be harvested and meaningfully translated to create an individual experience. Open banking is also giving organizations a way to gain customer consent in order to access and interpret their financial data.
The socio-economic effects of the COVID-19 pandemic have revealed new changes in consumer spending. It has long been the case that consumers expected mass personalization of their digital experiences, however, the disruption to the global economic landscape caused by coronavirus has added a new layer of urgency to these expectations. Organizations must be able to adapt and innovate quickly to meet the demands of an evolving FinTech sector.
Personalized Customer Experiences
As well as being one of the key indicators of how well an organization is able to adapt to the needs of consumers, personalization effectively drives customer experience. Personalization has the most significant impact on advocacy and loyalty as it attends to basic psychological human drivers. These drivers include the need to affiliate.
Today’s consumers are in constant motion and the stereotypes of linear service journeys and common shared experiences that used to define traditional banking no longer exist.
Personalization has high commercial importance because faster and cheaper digital banking services that go beyond banking are continuously emerging. This means that traditional banks, FinTechs, and financial services institutions need to act quickly to remain relevant.
Banks and financial services institutions are learning that a one-size-fits-all engagement strategy can no longer help them to improve their offerings, instead, they are responding to new challenger offerings by fully digitizing their services. By diving deeper into their customer assets and leveraging behavioral data in real-time to create personalized experiences for each individual, companies can achieve better interaction with their customers. This will secure all-important revenue growth.
Image Source, McKinsey
To make customers feel understood and valued, we are seeing more FinTech companies offering highly personalized benefits for sharing and protecting data as well as automated digital support. They are redesigning their services from the user up and merging their marketing, brand, and product offerings across channels to establish one-to-one relationships with their customers.
The Democratization of Data
Banks, fintechs, and financial services institutions that focus on data granularity and seamless integration between systems are the most equipped to offer flexible and tailored support. They can gather an in-depth understanding of individual customers’ affordability and creditworthiness with ease. To put this in perspective, PayPal, for instance, is a good example of a financial platform that can be regarded as fintech companies, especially when you consider their recent involvement in integrating blockchain to support crypto processing. A surge in the popularity of digital payments has bolstered the need for technology-backed banking.
Innovations such as machine learning (ML) and natural language processing (NLP) facilitate the prediction of individual behavior.
Personalization within the FinTech sector goes beyond driving increased sales to existing customers. As the industry looks to recover from COVID-19, there is even more emphasis on data-driven strategies that accelerate recovery by boosting conversion and acquisition.
By offering solutions that demonstrate a deep understanding of the individual customer, banks, FinTechs, and financial services institutions deliver instant value for consumers and, in turn, a greater return for business.
Data gives organizations a hugely valuable resource that can assist in driving a true customer focus. Companies can use data to gain valuable insights into customer habits and lifestyles.
We are seeing more and more agile platforms with better analytics that can be quickly modified and adapted as customers' needs evolve over time.
For example, Amazon uses humanizing technology to create an experience that is unique to consumers’ specific needs. Lush’s customer experience strategy is rooted in diagnostic questions and demonstrations to offer the highest level of personalization. When it comes to financing companies, TD Ameritrade optimizes its website so clients can quickly access accounts through a simple one-page experience, while Freedom Finance Europe, another stock investment company, has a tailored platform that puts clients at the heart of the user experience, making it seamless to register and get started.
The democratization of data allows organizations to gain access to rich, up-to-date information which helps them build relationships and become embedded in their customers’ lives. The value of data lies in being able to extract insight in order to make the best possible decision.
Data is at the core of everything we do and financial firms are able to exploit and harness this data to better engage with information, improve their operations and strengthen client services - for the benefit of the industry as a whole.
Every financial transaction generates data and banks, fintechs, and financial services institutions are producing and processing more data than ever before. The widespread adoption of technology and the introduction of significant regulatory mandates now requires consolidation and analysis of vast amounts of data.
Open banking has enabled companies of all sizes to create innovative new products by opening APIs and removing barriers to accessing financial data. Open banking users are predicted to double by 2021 and this will continue to drive innovation to help both consumers and businesses alike. Open banking can also speed up loan applications for small businesses and make faster decisions based on accurate, personalized insights.
The more information a bank, FinTech, or financial services institution can gather about a consumer, the easier it is to provide services that are truly relevant to an individual’s specific requirements. Open banking has opened up the opportunity to drive innovation by connecting developers with data once locked behind traditional banks' walls. A clear strategic vision for personalization using open data is what helps companies thrive in a digital, rapidly-changing world.
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