The fintech industry has grown considerably in the last few years, providing businesses and customers with accessible, affordable and innovative financial products needed for some time. Investment in fintech is rising, with studies from KPMG suggesting that the UK fintech investment market exceeded $37 billion last year, a figure standing seven times higher than the previous year.
One challenge impacting all marketing is the existing economic situation. We’re experiencing a rise in interest rates, increased inflation, a surge in layoffs and an overall reduction in customer confidence. These factors are creating a concern, and many are asking whether the current situation will impact the long-term development of the fintech industry. For fintech businesses to continue expanding and secure long-term growth in the current financial crisis, they must focus on their main source of revenue – the digital product.
The challenge of customer retention In times of economic downturn, businesses must focus on retaining their customers as attracting new customers becomes tricky and more expensive. Retention focuses on creating habits and recognising why users return to your product. Traditional studies suggest that while fintech apps have a high customer acquisition rate, the average retention rate is much lower than the general app market. Discovering new ways to improve customer loyalty remains a top challenge for the fintech industry and has been heightened further by the current economic climate.
Customers today are bombarded with new apps, which often lead to a limited attention span. Data suggests that the average app loses approximately 80% of its users within the first few days. To eliminate customer churn, businesses need to display user value instantly and within every interaction. The challenge, however, is that many fintech companies struggle to understand what their customers are leveraging. For most businesses, the entire customer experience is yet to be fully understood and can result in products not meeting all of the requirements where instead of technology adapting to us, we have to adapt to the technology. And in the case of low retention rates for fintech apps, this is a significant issue.
Financial institutions have invested heavily in digital transformation and require recognition of the return on investment. By investing in the product and leveraging data to understand the customer experience, fintech businesses can deliver a long-term resilient service in the marketplace. The fintech market today is a challenge for customer retention, and the organisation that can find ways to become a vital asset to their customers will ultimately win.
During an economic crisis, it’s tempting to stop or slow down testing and experimentation. Industry experts suggest, however, that fintech companies should increase their testing. This process can deliver new opportunities for growth and help teams recognise what measures are not performing. This element of knowledge empowers businesses to allocate resources to more valuable projects. Accessing information, like customer behaviour data, enables organisations to understand how customers interact with their products and leverage the insights to generate better results. Companies can determine problem areas and explore the individual more likely to subscribe and those actively exploring the services and products available. This information enables organisations to position products to specific users and adapts their messaging to improve customer conversion. It may be difficult to forecast the economic situation for the coming years, but it’s clear that fintech companies must learn to do more with less.
Fintech leaders must prioritise simplicity and define what problem they intend to solve for customers and how their product empowers customers to meet their needs. There is no need nor opportunity to overcomplicate the process. Often business leaders refuse a simple solution and try to make the process complex. Focusing on the critical parts of an economic crisis is the best way to succeed.
The market involves many challenges for the fintech industry, but there are ways fintech can prepare itself for retention and further growth. To deliver long-term prosperity and to meet customer needs, fintech businesses must continue to invest in their services, not just in times of scarcity. In the fintech market, there will be ongoing macroeconomic measures at play, such as rising interest rates, inflation or new regulations. Continuous changes require businesses to deliver flexible strategies, take calculated risks and learn from testing new solutions. By recognising the needs of their customers and focusing on the problem, fintech companies can continue to grow with their customers and progress through the current economic climate.
