By Mike Rhodes, CEO and Founder of ConsultMyApp
The Covid-19 pandemic has caused unprecedented disruption for many businesses, however, the fintech market has remained steadfast in its growth. In fact, 2021 has become the golden age for fintech IPOs. For example, RobinHood Markets Inc debuted with one of the largest recorded listings for a fintech company – valued at $32 billion on July 29th 2021.
With the global fintech market predicted to reach a value of £380 billion by 2030, this boom is showing no signs of slowing.
Whilst the fintech market has become one of the fastest-growing sectors of our economy, established banking institutions now find themselves in hot water. If they are to truly rival new market players like Revolut or Tide, they must innovate their digital offering. Yet, despite their efforts, traditional banks are failing at the in-app experience and still struggling to create true differentiation in an increasingly saturated market. Instead, fintech companies continue to outperform them, providing a ‘one-stop-shop’ for customers’ financial needs.
So, how have fintechs rapidly gained market authority in a typically ‘closed shop’ sector?
The Digital Transition
The past 18-months have triggered a rapid acceleration of the shift online. For example, digital banking has seen a significant increase in uptake, with 73% of British consumers now embracing e-banking offerings.
As lockdown and social distancing restrictions hindered in-person sales and services, customers increasingly turned to fintech’s as a more convenient and efficient way to manage their finances. This digital transition is now set to continue to transform the financial services sector as the world re-evaluates traditional forms of banking and the personal finance revolution continues to gain traction.
Customer Acquisition Strategies
Amid this backdrop, fintech companies have remained at the forefront of consumers’ minds and developed a strong and sustained customer base.
Whilst traditional banks remain focused on marketing campaigns that drive individual downloads, fintechs have set themselves apart with effective user acquisition strategies, centred around a simple onboarding processes. Industry leaders have acknowledged that a more streamlined sign up process makes it easier to acquire new users through paid channels.
As a result, fintechs continue to achieve high levels of uptake by appealing to new users with their account activation and login mechanics which require only the most relevant information. In contrast, traditional banks have failed to acknowledge that onboarding and overloading do not need to go hand in hand. Simplicity is key here and until established banks accept this narrative, new market players will continue to outperform them in the digital space.
Effective App Store Optimization
Another contributor to the success of fintechs lies in their App Store Optimization strategy (ASO) which remains at the forefront of the agenda. In fact, for Tide (https://www.tide.co/), the UK’s leading business financial platform, ASO and Apple Search Ad (ASA) strategies proved to be crucial in driving new business account signups.
ConsultMyApp worked strategically with Tide to improve all elements of ASO, whilst ensuring it was fully synchronized with their Apple Search Ad campaigns. This resulted in Tide’s organic install volumes rising by 140 per cent over just three months, demonstrating how valuable these tactics can be.
By concentrating on ASO, fintech companies improve traffic from organic searches and increase overall conversation rates to boost the efficacy of their paid channels. In a saturated market, ASO is quite simply a must to ensure a company can compete against the competition and sustain market momentum.
Customer Retention Strategies
Fintechs have also acknowledged the value in establishing a comprehensive user retention strategy. These apps prioritise the user experience to remain competitive and retain customers. They ensure that from the very first moment an individual logs into the app, their experience is slick and convenient – and this includes communication pathways. These new market players are extremely self-aware when it comes to their communication strategy – knowing how much communication is too much.
Findings suggest that push notifications can in fact double the 30, 60 and 90-day retention of customers, but they should be handled with caution. If executed poorly, push notifications can become intrusive and force users to abandon the app altogether. Yet, fintechs seem to be getting the balance right – targeting the right people at the right time and with the right information.
Fintech companies are currently leaps and bounds ahead of established banking institutions when it comes to producing personalised content. By utilising in-app and external data, fintechs have been able to adapt and innovate the user experience according to specific preferences and interests. By pairing app and message personalisation with dynamic content, fintechs are able to connect with users propelling them into a different league when it comes to customer engagement.
The fintech market has accelerated from strength to strength over the past 18 months and, with investment into the market on an upward trajectory, this sector is only set to shatter more records.
Ultimately, traditional institutions cannot afford to ignore the new wave of digital banking that has rapidly gained market authority. Instead, they must embrace the value of investing in ASO and the key marketing strategies needed to build awareness, improve the customer experience and develop a competitive edge, if they are to compete with leading fintechs’ offerings.
WHY THE EXPLOSION IN LOCAL RETAIL DEMANDS NEW PAYMENT METHODS
Kasper Enggaard Krog, CEO at mobile payment and business technology firm, Vibrant, explains why micro businesses are being badly let down by contactless payment providers while local retail has boomed.
Before the pandemic, between 40[i] and 47[ii] per cent of micro businesses didn’t accept card payments, depending which statistics you prefer. This includes everything from corner shops to cafes and builders to barbers. They relied on cash, cheque, or where suitable, perhaps the laborious process of an invoice and bank transfer.
This is despite there being 6 billion contactless cards in the world and 47 per cent of people preferring to pay with one when at a physical point of sale[iii]. At first glance, it might seem that these small traders were cutting their noses off to spite their faces. Customers wanted to pay them with cards, why wouldn’t they just allow them to do so?
What was stopping merchants?
The answer is simple. Because for the smallest of merchants, accepting a card payment has always led to expensive ongoing fees, results in slow settlements, requires admin and calls for an up-front investment in cumbersome and basic technology.
It won’t be news to anyone in the industry that the recurring costs all add up. Transaction fees are typically between 1 per cent and 3 per cent, not to mention authorisation fees and merchant service charges[iv]. A credit card reader might be about £20 and the same for a receipt printer. This all eats into profit, not to mention time.
The pandemic changed it all
Yet the pandemic has forced micro businesses to reassess their reticence to take card payments. Two reasons are behind this. Firstly, there has been an explosion in people shopping where they live. When lockdowns swept across Europe, it became hard to get to larger retailers. Local merchants of all sorts became a lifeline[v].
Not only that, but many people were forced to reconnect to their communities and realised they enjoyed shopping on their street and wanted to support independent businesses. The data proves this. According to research, the convenience store sector grew by 6 per cent in 2020[vi].
This led to the second factor, contactless payments were considered safer than handling cards or cash. The overall impact of more shoppers and the threat of infection led to a boom in contactless payments. In fact, the number of purchases made in May 2021 via contactless technology doubled compared with the same month a year earlier and was up 50 per cent on May 2019[vii].
This shift to accepting card payments among the smallest of businesses should be applauded. There are currently £2.25 trillion in cash and cheque payments made in Europe[viii]. They’re now opening themselves up to this huge market.
This is undoubtedly good for consumers and merchants alike. But it does beg the question, why did it take a pandemic to cause the change? Why did they have to face the prospect of potential infection or financial ruin to make the move?
Simple, the existing model is broken. The barriers to accepting card payments remain – high cost, poor tech and slow settlements – but they’ve been overcome through necessity rather than benefit. These businesses remain woefully underserved yet have been forced to accept what is on offer. There must be another way.
And there is. For the first time, the technology now exists for market traders, stall holders, car washes – any number of micro businesses – to take contactless payments using only their phone. No additional tech. No annoying dongles or readers that take up space and will ultimately add to the vast rubbish bin of obsolete, single-function peripheries. These will soon join calculators, MP3 players and digital cameras.
Furthermore, this tech not only takes payments, but within months is expected to allow merchants to run their whole business on their phone. They will be able to add product lists, inventory details, accounting tools and much more. It’s like a mini enterprise resource management system for the tiniest of firms. And the fees are transparent, predictable, lower than the market rate and don’t have binding contracts. Importantly, it also has the backing of Visa – and Vibrant is leading the roll-out.
The business is proud to do so and sees a huge opportunity. Micro businesses are now worth £1.85 trillion to the European economy[ix]. Their importance will grow, and they need the payments sector to take note of their needs and do better. It’s no longer acceptable to foist poor products and services upon them and allow the pandemic to drive change rather than innovation.
The explosion in local retail demands new payment methods – and they must be made available. In many ways, it’s a scandal that it took a pandemic to force change.
[ii] Visa data
[viii] Visa data
[ix] Visa data
IS SCARCITY OF TALENT THREATENING THE UK’S FINTECH CROWN?
Opinion From Rafa Plantier, Head of UK and Ireland at Tink
From the Square Mile to Canary Wharf, London has been the historic centre of global finance, with long-established trading exchanges and trusted financial institutions. In the digital era, it has also ensured that it’s moved with the times to become a thriving hub for fintech.
But the UK financial services sector is now at an inflection point. In the past year, London’s position as a global fintech leader has been under threat. Earlier this year, Amsterdam overtook The City as the largest European share trading hub. The European Banking Authority moved from London to Paris. And Dublin, Paris and Frankfurt are all competing to win a greater share of the European financial marketplace.
The culprits of the shift are the twin challenges of the pandemic and Brexit, combined with the speed of technological transformation in financial services – disrupting the traditional flow of people, capital and ideas. So the pressing question for the industry is: how do we maintain and, more importantly, accelerate momentum to retain London’s fintech crown?
The answer revolves around one key thing — people.
Diverse talent drives innovation
Attracting the best talent is crucial if the UK financial services sector is going to continue to thrive and retain its global position as the preeminent financial centre.
In February 2021, the Kalifa Review laid out a strategy and delivery model for the UK to lead the fintech revolution, covering five key areas. These included skills and talent, investment and international attractiveness and competitiveness. But what became clear was that access to the right level of highly skilled talent was one of the biggest challenges for UK fintech, with barriers spanning both domestic skills shortages and the need to access foreign talent seamlessly.
As a native Brazilian in the UK, working for a Swedish-owned fintech, I understand these challenges as well as anyone. I love London, but we must recognise that fintech firms need unique talent and skills, and such a talent base can’t be met by a single city – not even one as resourceful as London. Not only do fintechs require technology and data specialists, but also experienced managers with good knowledge of high-growth companies and financial services.
As someone lucky enough to have worked with startup and scale-up fintechs across the world, I understand the unique grounding that comes from being a part of a high-growth global company. That’s why I believe it’s vital that we attract people from across the world with commercial experience at ambitious, rapid-growth businesses — so they can bring this experience to bear on the UK financial services sector.
At the same time, many companies face renewed pressure to create new services and products to meet expectations for growth. That is why it’s critical that the UK has access to people with the right technical skills in areas such as software engineering, DevOps, Cybersecurity and data science.
Put simply, having the smartest minds delivering the best products is good for everyone. It drives efficiency, productivity, growth and, ultimately, prosperity.
The UK is open for fintech
The UK should be proud of being a fintech pioneer and the driving force behind legislation that helped usher in the era of open banking. There is now an exciting opportunity to take this even further. Having access to a diverse pool of talent and skills will empower the financial services industry to create innovative products to tackle complex social challenges, such as better B2B payments, financial inclusion and climate change.
The good news is that the UK government clearly recognises the role the industry has to play in driving growth and innovation. The 2021 Autumn Budget reaffirmed commitments to reskill the nation. With £3.8bn budgeted for skills and a formal criteria for the long-awaited Scale Up Visa, the Chancellor announced a set of proposals that will support the breadth of our sector — from startups right through to unicorns and incumbent banks. This will be essential for fintechs like ours to continue to trailblaze and for the UK to differentiate itself on the global stage.
In an increasingly competitive global landscape, and to sustain momentum, we must keep talent avenues open to attract the best of the best in the industry. As one of the fastest-growing areas of the UK economy, the benefits of nurturing UK fintech to drive productivity, growth and lead the UK’s post-pandemic recovery, cannot be overstated. 2021 has seen a surge of activity in the industry and I am eager to see what London’s fintech sector can achieve in 2022.
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