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Fintech Customer Acquisition - Building Customer Trust

This blog builds on the last blog, that can be found here[1]. The reader may wish to read the last one for context, although this blog should make sense on its own as well. Here, the attempt is to answer the following key question - what could financial technology companies (fintechs) do, to build greater consumer or SME (customer) trust in order to enable significant adoption of their products and services beyond early adopters?

 

Customer segments where trust may be a barrier 

Before attempting to answer this question, it would be opportune to establish the customers for whom, not having high levels of trust in a fintech may not be a barrier to adoption. These types of customers exist in a small or large proportion in every segment. Segments that form the early adopters of a fintech, by definition will have a larger proportion of these types of customers. Early adopter segments across fintechs may be as follows:

  • The financially and tech savvy
  • Early adopters of technology
  • Customers under 35 years of age 
  • Customers with strong unmet needs e.g. ‘In Difficulty’ segments looking for credit

There is quite a lot of overlap between the first three segments. There is also some overlap, between the last two segments. Most of the above are self-explanatory, the financially and tech savvy can be defined as digitally active customers that are aware of their financial matters and needs. The segments defined above are consumer centric however, for the purposes of defining fintech adoption behaviours, they largely apply to SMEs as well, especially the ‘Early adopters of technology’ segment.

Most segments outside of the above, are likely to have a large proportion of those customers for whom the ‘trust’ issues may need to be addressed, before significant adoption may take place. These ‘trust’ issues are not generic and may vary from segment to segment. This would mean for the majority; the issue of trust may need to be addressed.


What is customer trust?

Customer trust at the most foundational level is the customer’s confidence in the fintech:

  • Doing well, what they said they would 
  • Putting things right when something goes wrong, if the fintech is at fault

High customer confidence relates to high levels of trust and vice versa. This presents the fintech with a chicken and egg problem. This is because, this type of trust is built with customers only after they have used the fintech’s products or services and repeatedly experienced the two bullet points mentioned above. So, how would a fintech go about building trust, even before the customer has engaged with them?

Within the context of customer adoption, trust is about demonstrating just enough trustworthiness, to help customers make that leap of faith and engage with the fintech’s product or service. Therefore, fintechs must give honest signals about their trustworthiness and let the customer decide if they are willing to go ahead with the product or service and trust the fintech.

 

How to build customer trust

There is no silver bullet, trust is built layer by layer through every interaction the customer has with the fintech’s brand, product or service. Starting from the customer facing messaging, to the online or mobile customer experience, through to the customer support teams interacting with customers via email or phone. The end to end customer facing process should give honest signals about the fintech’s trustworthiness.

Find below a specific set of trust related remedies, that when implemented should give the desired uplift in customer adoption.

  • A large part of building trust is doing well, what the fintech said it would do for the customer. So, fintechs should focus on meeting the needs of specific target segments really well and avoid over-promising through their messaging.
  • Even though trust is built through products, services and operational processes, it is associated to the fintech and its brand more than anything else. As perceived benefits and ‘trust’ issues are segment specific, the benefits & trust messaging needs to optimised for and communicated to the specific target segments. This will ensure that the fintech and its brand are positioned correctly amongst the specific target segments.
  • The tonality and the language used within the end to end customer facing process, is one of the most important levers available to fintechs. Generally, customers don’t want their fintech to be their best friend, so the use of casual language should be avoided. At the same time, the use of jargon, overly legalistic language and a tone that emphasises risks a bit too much, can be seen as trying to obscure the truth and as a result deters customers. Therefore, a fintech should come across as a responsible partner, be direct and yet use a tone that is as reassuring as possible. Making customers work too hard can also cause alarm and arouse suspicion. So, words that are already used in common parlance and mean something to the customer within the financial context, should be used instead of inventing new words or concepts. The customer experience guidelines published by the Open Banking Implementation Entity explain this really well and can be found here[2].
  • The online or mobile customer experience has a major role to play in building trust, the customer experience guidelines published by the Open Banking Implementation Entity  explain this really well and can be found here[3].
  • How a fintech deals with a customer dispute or when something goes wrong, is truly when a fintech demonstrates its trustworthiness. Having streamlined systems and processes that effectively and quickly deal with customer disputes is critical. This may also mean that a very tiny fraction of revenue may be lost to putting things right, but the rewards could be huge. Therefore, fintechs need to optimise and find the sweet spot between minimising revenue loss and maximising good word of mouth. The success of online marketplaces is built on this principle and are good role models to follow in this regard.

 

Signals of trustworthiness

A fintech may look to champion and embed the following signals of trustworthiness into their end to end customer facing process, especially into their customer experience and trust messaging. A word of caution, just embedding the following in the customer facing process for the sake of adoption and not actually following through, could have the opposite effect.

  • Providing a specific, tangible guarantee or assurance, signals high levels of trustworthiness. Ideally, the guarantee should be meaningful in the context of the product or service provided i.e. something customers value. However, a guarantee is better than no guarantee, as along as the fintech is willing to stand behind it.
  • Historically, retail customers have felt a lack of control in their relationship with established providers. Customers felt that established providers have a lot more power than they do in determining the terms of the relationship. Fintechs may want to take a more balanced approach and enter the relationship as partners. The customer’s sense of control and choice is central to this approach. A good example of this is PSD2 consent that needs to be requested from customers, in the open banking context. By providing this consent and knowing that it can be revoked, customers feel a greater sense of control and choice, and as a result, are more willing to trust the fintech. Off-loading all responsibility to customers and offering too much choice can overwhelm and may have the opposite effect. Therefore, fintechs may want to appropriately build on a customer’s sense of control and choice to build trust.
  • Customers may not always be well informed to make all the decisions or even understand all the risks involved. They may at times, want to rely on some form of protection, therefore signals of safety and security are powerful anchors of trustworthiness. Fintechs could, in easily understandable terms demonstrate how they would protect the customer, their data and money without emphasising the risks.
  • Ethical conduct is another powerful anchor of trustworthiness. Fintechs could demonstrate in easily understandable terms, how ethical they may be. They could do this, for example by minimising the customer’s sense of loss of control over their data and detriment to them by being transparent about how the fintech may use their data, what will be inferred and which other third parties may receive their data.
  • In the event of a dispute, the ability to involve a third party as an arbitrator if the customer wishes to do so, is another signal of trustworthiness.

Not all of the above may be appropriate for the specific segments a fintech may be looking to target. If the signals are too subtle or overt, then they may not produce the desired effect. In conclusion, in order to build trust, the product or service, customer experience, brand promise, messaging and operational processes may all need to be optimised through customer research and feedback to get the balance right. This would need to be done for the specific segments the fintech may be looking to target and the rewards could be huge.

Haydon & Company Limited | rishi.chauhan@haydonandco.com

All external research and reports have been referenced explicitly. The views expressed in this blog are solely my views and not of the organisations that produced the reports that have been referenced in this blog.

[1] https://www.finextra.com/blogposting/18475/fintech-customer-acquisition---beyond-early-adopters

[2] https://standards.openbanking.org.uk/customer-experience-guidelines/introduction/section-a/latest/

[3] https://standards.openbanking.org.uk/customer-experience-guidelines/introduction/section-a/latest/

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Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 28 February, 2020, 17:48Be the first to give this comment the thumbs up 0 likes

Like most new-age tech-driven startups, fintechs are VC funded. The way the VC Investment Model works, in the initial rounds of funding, it rewards growth over profits (or even revenues) with skyhigh valuations. Unburdened by revenue and profit considerations, the fintech can afford to overcommit and overdeliver, thus finding it easy to foster trust during this phase. 

However, the rubber hits the road during later stages of funding when revenues - even profits - become critical. It becomes difficult for the fintech to continue doing what it was doing earlier. In other words, later funding stages put a tremendous strain on trust maintenance.  

I illustrated this challenge in my blog post PayTM Shows How Fintechs Can Lose Trust with the specific example of India's largest fintech.

According to the common narrative, fintechs who fail to to surmount this challenge will die. But, going by the robust growth in customer count and valuation of PayTM in the subsequent two years after I published the aforementioned post, I'm not so sure.

PayPal is another example that comes to mind. During its +20 years of existence, the fintech has surely not enjoyed growing trust from the merchant community, what with the rising number of merchant accounts it keeps freezing arbitrarily.   

Sometimes I wonder if trust is overrated, at least in the context of fintechs.