The increased use of fintech apps highlights the importance of hyper-personalization.
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The increased use of fintech apps highlights the importance of hyper-personalization.
Traditional companies should consider how they can build personalized customer journeys.
Middle market financial services firms need to invest in knowing their customers.
Financial products are often built for the average user—not for a specific individual. This often leads to products that are adequate but fail to delight customers. Fintech companies are changing the approach by working to solve specific issues faced by niche communities. The hyper-personalization of services is another way the fintech movement could affect how traditional financial services respond to changing consumer preferences.
One example of hyper-personalization comes from fintechs serving the creator economy, a space that comprises content creators, influencers and social media personalities, among others. It is estimated to be a $100 billion industry, according to marketing platform Influencers Club. Creators require financial products that offer flexibility, convenience and value, just like other customers. But they also need to account for unpredictable income streams, sponsorship deals, merchandise sales, affiliate marketing, and direct payments from their audience. Nerve, a prominent fintech serving this niche, offers an FDIC-insured debit and savings account for creators that features no monthly account fees or minimum balance requirements. Nerve also offers an in-app invoicing and embedded card processing feature that allows creators to monetize their fan base.
Apps that promote financial literacy for kids in an engaging way offer another example of specialization. Greenlight is one example of multiple fintechs whose products incorporate “bite-sized” money lessons, chore allowance tracking, and basic saving and investing features.
For co-parents who are unmarried or divorced, having an easy way to track shared expenses, facilitate payments and streamline communications about shared expenses is incredibly valuable. Onward and CoParenter focus on such needs. CoParenter even offers unlimited on-demand mediation and sentiment analysis to help with co-parent communication.
The range of these examples indicates how fintech companies can address the needs of distinct users.
Why does this matter to the middle market?
Increasingly, consumers get personalized experiences in other aspects of their lives, such as e-commerce, social media and entertainment. As such, they are likely to expect a similar level of personalization from their financial services providers. The trends that drove fintech adoption—the rise of e-commerce, digital payments, and online and mobile banking—remain strong, and fintechs that hyperfocus on a particular niche and prioritize the user experience, community building, and providing financial products are winning in the market.
Evidence of the importance of hyper-personalization is also coming from the increased use of fintech apps and customers' willingness to share their data for a more personalized experience. According to Plaid’s Fintech Effect report, the proportion of millennials using digital apps and tools to manage finances in 2022 was 91%. Additionally, 8 out of 10 customers noted they are using some type of digital financial tool, and almost half (48%) of Americans use fintech to manage their finances daily.
To remain competitive, traditional financial services companies should consider how they can also build hyper-personalized customer journeys. Middle market financial services firms need to invest in knowing their customers and their pain points and upgrading their customer journey experiences.
Building hyper-personalized financial services products starts with deeply understanding the customer and thoughtfully engaging them throughout the product build-out. But this is only part of the equation. The other prerequisite is the technology needed to facilitate this process. Fintechs use artificial intelligence, machine learning and big data to hyper-personalize products for their customers, and other financial services organizations should consider getting more comfortable with doing the same.
Building hyper-personalized financial services products starts with deeply understanding the customer and thoughtfully engaging them throughout the product build-out. The other prerequisite is the technology needed to facilitate this process.
Traditional financial companies could face a few challenges in pursuing a hyper-personalized product strategy. Legacy systems and processes could be outdated and unable to handle the large amount of data required to provide personalized experiences; siloed data can be scattered across different systems and departments, making it difficult to get a holistic picture of the customer and provide a personalized experience based on their needs and preferences. Frequently, cultural resistance to change is the biggest hindrance in pursuing a hyper-personalized product strategy.
However, traditional financial services companies can compete in the hyper-personalized financial services market by deepening their understanding of their customers, having a strong digital strategy and fostering a culture of innovation. Here are a few considerations for pursuing a hyper-personalization strategy: