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The Experience age transformation of personal finance

The age of experience is deeply transforming markets and will do so even more. More than a decade ago, when I was Chief Marketing Officer at ING, I wrote my book ‘Got EQ? Cool!’ to support my fellow CMO’s with practical approaches to win the hearts and minds of their customers. The book reached a top 10 position on the international marketing bestseller list in 2009. Ever since, I have passionately been building financial AI-solutions to revolutionize customer experiences. My fascination with the topic exploded due to the disruptive impact and the ubiquitous availability of interconnected devices on customers, companies and markets.

Nowadays, people are online almost continually, searching for products and solutions, watching videos on Instagram, playing games, sharing ephemeral moments on Snapchat, posting pictures of exciting experiences on Facebook, and buying things. Because of this, customer experience has become a top priority for CEO’s. A remarkable customer experience is critical to the sustained growth of any business. A positive customer experience promotes loyalty, helps retain customers, and encourages brand advocacy. Today, customers have the power, not the sellers. In this context Apple even dropped all KPI’s to replace it for only one: customer experience! The customer experience strategy of Apple focuses on super-persuasive marketing for building strong Apple customer engagement. Building effective customer engagement is a subjective matter, but buyers love Apple products and become loyal customers.

Most companies however are not that far yet. They hold on to doing things the old-fashioned siloed ways because they lack vision on how they could smartly build customer experience strategies in this interconnected world. As a tech entrepreneur I can acknowledge that building AI-driven customer experience obsessed business models, solutions and services is not an easy thing. But, for those who want to prevail and build sustainable business growth in the upcoming years there is no choice! In this blog I’ll focus on one of the most promising customer experience strategies: embedded finance.

Embedded finance as a major profit pool in the experience age

Embedded finance refers to the seamless integration of financial services adopted by non-financial companies. This merger between non-financial entities and embedded finance services has revolutionised the way we interact with money and businesses alike.

Hundreds of millions of customers have already benefited from embedded finance due to the attractive rewards given by technology platforms for payments. Omnichannel digital payments, mobile wallets and buy-now-pay-later are forms of embedded finance. Buy-now-pay-later (BNPL) covered 6% of all digital transactions in 2021 and is forecasted by Accenture to cover 13% of all digital transactions in 2025. Bain Capital Ventures estimates the opportunity of expanding personal finance in these embedded environments from payments to insurances, lending and wealth management at a $7 trillion market by 2030. Driven by this BNPL growth a strategic change from push driven sales of financial products to embedding the right product at the right time in the customer's purchase journey is emerging.

Impact of embedded finance on banks

This trend poses a big threat for traditional banks to become disintermediated by non-banks entering the market at high speed. McKinsey estimates that global banking revenue pools will fall with $ 3.7 trillion (14%) from pre-covid levels already by 2024. Banks must decide now on their role in this highly interconnected world and explore new business and revenue models such as banking-as-as-service (BaaS). The opportunity to bring finance to non-financial environments namely has got everything to do with trust, or the lack of it! Nowadays, both consumers and businesses already trust companies like Google, Amazon, Facebook, Ikea and Tesco more than they trust their bank when it comes to financial matters.

On the other hand, the fast growth of this market also brings increasing risks for consumers and entrepreneurs. Low financial knowledge and financial skills of young people for example need to be detected before digitally purchasing expensive goods with loans.  Also, understanding personal traits like their level of materialism and need for instant gratification help for offering financial solutions that are affordable in their living or, even better, improve their financial health. In a world of hyper-personalized digital customer experiences a deep understanding of someones way of living helps to protect against financial risks, but also helps to improve financial health. AI Credit-Decision-As-A-Service (CDaaS) platform AdviceRobo for example discovered in their 2.5 million scored consumers & small businesses that there is a wide range across geographies when it comes to their scores on spending habits, financial skills, debt attitudes, drive for materialism and instant gratification. Scores that impose a different way of living, risk and opportunity profiles.

Most providers however are not that advanced to apply a wide set of behavioral and attitudinal data for deep customer profiling yet! Currently regulators therefore are implementing customer protection regulations in high speed. The British regulator FCA announced to put buy-now-pay-later credit vetting regulation in place later this year. Also, the European Banking Authority’s guideline for loan origination and monitoring has last year been deepened with guidelines for assessing the customer’s affordability. The guidelines specify arrangements for the granting and monitoring of credit facilities throughout the customers lifecycle. Over time, the proportion of borrowers with deficits will decrease when the lenders make a calculation of their income, cost of living and total loan payments at the moment of lending. Alternative data and AI are available to facilitate safe automatic embedded consumer decision making that helps consumers to get and maintain a healthy financial life. I think lenders of all sorts should grab that amazing opportunity!

Key success factors for embedded finance

From my digital business development work at E-cology Innovations (helping purposeful brands with the business development and growth of smart customer experience strategies and solutions), I repeatedly learned that companies need to fundamentally reinvent themselves and develop new capabilities to be successful. Firstly, the usual ‘slow speed of go-to-market’ needs to be replaced by ‘continuous innovation approaches’ to keep pace with the ever-changing preferences. Continuous innovation around a company purpose that makes this world better. Secondly, companies need to replace the not-invented-here culture with the capability to build hyper-personalized experiences with eco-systems. Research from Gartner shows that organizations which invest in personalization typically outsell competition with 30%. Thirdly companies must transform their siloed historical data bases into accessible golden data lakes. And last, but not least, companies need to embrace AI and real-time data to build hyper-personalized customer experiences.

Luckily, most CEOs I meet recognize that artificial intelligence has the potential to completely change how their organizations work. Recent research from Paolo Alto based Samba Nova Systems even reveals that 78% of American CEO’s rate AI as important revenue driver already for 2022. An unimageable cool, but challenging digital future is ahead of us! Retail CEOs envision a future in which retailers deliver individualized products before customers even request them—perhaps even on the very same day those products are made. Bank CEOs foresee a future in which they deliver predictive financial assistants and best-fit products instantly when their customers need it. This kind of scenarios may sound like science fiction, but AI and the data to make it possible already exist. Despite growing investment in and excitement about AI driving innovation and revenue, many organizations however still remain in the early stages of implementing AI initiatives and face varied challenges scaling their AI initiatives. 

According to my calculations based on Analytics Insight & Forbes (2022) the state of the data-driven enterprise 2022 is: 

  •   7% don’t use AI currently but are looking into it
  • 14% have tested a few proofs of concept with limited success 
  • 21% have a few promising proofs of concept and are looking to scale
  • 33% have started implementing with limited AI use cases
  • 25% have processes that are fully enabled by AI with widespread adoption 
  •   0% have one or more complete domains fully powered by AI 

Hurdles to overcome capturing the dreamed AI-future

What’s getting in the way of this dreamed future is that companies haven’t figured out how to fundamentally change themselves to meet it. To be fair, most have been working hard to incorporate digital technologies, in some instances genuinely transforming the way they serve their customers and manufacture their offerings. To capture the full promise of AI driven experiences however, companies must reimagine their business models, the way work gets done and the data-intelligence supporting that. They can’t just plug AI into an existing process to automate it or to add insights.

It takes guts, vision, strategy, and lots of time to agile build and scale cool customer experiences. Successfully training the AdviceRobo AI credit scorecards for example in total took a five-year period in which we trained models with more than 10.000 different data points from open banking, social media, psychometrics, internet behavior, mobile and biometrics on arrears, default, repayment, fraud, and churn. It truly has been a combination of guts, art, science, and perseverance!  But what a fantastic outlook it is for every company to have the opportunity to become highly beloved by its customers. What a blessing for purposeful companies to work day-and-night on becoming a frontrunner in intelligent customer experience strategies and solutions that accomplish this. Serving your customers cool instant experiences at the right time and place is the name of the embedded finance game! Let’s make some hyper cool & personalized experiences and rock & roll!





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