Four fintech companies using customer experience as a successful business strategy
TrendsFintech and Financial Services
For the second year in a row, TELUS International attended the CB Insights Future of Fintech event in New York City. Interest in the space continues to explode; compared to last year, there were more than double the attendees and speakers at the event. But also for the second year in a row, there was a noted lack of programming specifically devoted to fintech customer service and customer experience — a critical piece of this growing marketplace.
The business opportunity in fintech is significant for many reasons. With nearly $13B in VC funding in 2016, the sheer size of the global financial services market (and market disruption opportunity) is in the trillions.
Fintech companies are also well-known for developing some of the most easy to navigate and visually appealing UX designs. Clunky interfaces are just one reason Millennials don’t trust banks and traditional financial institutions. In fact, 75 percent of Millennials would rather bank with big tech companies like Google, Amazon and PayPal, according to a recent report, which also found that a whopping 71 percent of Millennials “would rather go to the dentist than listen to a bank’s message.”
But what makes fintech so exciting is the possibility it creates for a radical realignment with the customer. For instance, what if a money transfer company prided itself on facilitating the lowest-cost transaction possible, rather than take the largest cut they can manage? What if wealth advisors structured their business to keep investor costs as low as possible, while making investing as simple and profitable as possible? What if a health insurance company had a vested interest in improving your health outcomes and extending your life? And what if a credit rating agency made money by ensuring customers pay the lowest interest rate for loans and credit cards, and even offered to do its customers’ taxes for free?
All of these are departures from the status quo in traditional financial services. But a single-minded focus on the customer is paying off in financial success. As the industry begins to mature, more and more fintech entrepreneurs learn a simple but important business lesson: it’s cheaper to retain customers than acquire new ones. And going the extra mile to build trust by delivering an amazing customer experience makes both acquiring and retaining customers cheaper and easier.
Here are four fintech companies leading the way in delivering the best customer experiences:
By charging customers a flat 0.5 percent fee on foreign money transfer transactions, UK-based TransferWise, which launched in 2011, saves customers more than $1.5 million per day on bank fees. TransferWise now moves $1.5 billion per month on behalf of its customers and is poised to become the largest money mover in the UK.
Transparency and lower cost have drawn millions of customers to this fintech unicorn, and away from traditional banks and money transfer companies. “82 percent of people don’t know what they’re paying in exchange rates, because they’re hidden in bank fees,” says Kristo Käärmann, TransferWise co-founder and CEO. “Banks actually have an incredibly high cost base to do the same thing we do. It costs seven times more for a bank to do a foreign exchange transaction than it costs us.”
On top of lower cost and greater transparency, a focus on delivering a great (and simple) mobile customer experience has even resulted in unexpected advocacy from its competitors. “I’ve heard about banks recommending TransferWise because they actually benefit from offering a great customer experience rather than their own opaque money transfer product,” says Käärmann.
With over two million customers, robo-investing app Acorns has designed its slick, simple interface to enable users to save and invest, says CEO Noah Kerner. Using concepts from behavioral economics, the company pioneered a simple tool called Round-Ups to encourage “microinvesting” by automatically investing users’ spare change from purchases.
The Acorns service is free for college students, and only costs $1/month for everyone else up to $5,000, when annual fee peaks at 0.25 percent. Kerner says the company has set its sights on a huge market in the U.S. – the 182 million people who he says are overlooked and underserved. “A lot of companies call them ‘underbanked,’ but we call them ‘up and coming,’” says Kerner, “and we like to say they’re ‘not struggling, but striving.’”
With 97 percent of its customers accessing Acorns via their mobile device, the service feels custom built for the Millennial population. Making investing simple and cheap for the masses means annual revenue per customer is small, but the company is already developing new products to keep customers interested and engaged. Its “Found Money” program partners with diverse companies from Apple to Wal-Mart, Airbnb to Warby Parker who invest a percentage of purchases directly into Acorns accounts.
Many existing health insurers view their customer in terms of simple annual income rather than through their lifetime value, resulting in a misalignment of incentives, says Vivek Garipalli, CEO of Clover Health, a technology- and data-driven health insurance company serving Medicare Advantage recipients. “We actually got into health insurance because we saw an opportunity for alignment with the customer,” Garipalli says.
When the insurer and the customer have the exact same incentives – to live the longest, healthiest life possible – the pursuit of a great customer experience becomes a business imperative. Built with Silicon Valley tech style infrastructure, Clover has no siloes around customer data, resulting in a true omnichannel experience for customers.
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Each time a customer interacts with Clover contact center agents, they find something that impresses them – friendly, empathic people who don’t sound like they’re rushing to the next call. Garipalli says every interaction with a healthcare provider offers an opportunity to improve health outcomes, especially when trust exists between the customer and the insurer. “We hire for two things – kindness and empathy,” says Garipalli, “since building customer trust increases engagement, drives up adherence to medication and other healthy behavior, and everyone benefits,” he says.
Ten-year-old Credit Karma has been around longer than most fintechs, but it has added 70 million users in the past five years for the same reason most other fintechs have gained market share – developing trust through customer-centered experience. Not only does Credit Karma allow users to access their credit reports for free, it helps them understand when they are overpaying on car loans, auto loans, and credit card interest rates.
Founder and CEO Kenneth Lin says the company’s goal is to bring the same kind of frictionless experience to financial services that ridesharing did for transportation – to minimize interest rates and maximize yield for consumers automatically, and ultimately, “to help people move forward in their lives.” Insurers, lenders and credit card companies pay Credit Karma for each new customer referral.
Building on the rapid adoption of its credit-related products, last year Credit Karma began offering its customers free online tax preparation. In its first year in the space, Credit Karma filed over one million tax returns on behalf of its customers, says Lin.
By demonstrating a willingness to give credit reports and simple tax prep away for free, Credit Karma has built the kind of trust that traditional financial services companies only dream of achieving. And with $500 million in 2016 revenue, Lin says the company grew by 50 percent last year, serving as a model of the success at scale that more and more fintech companies will no doubt achieve – if they continue to let an obsession with the customer experience guide their business strategy.