6 Ways Big Data in Fintech is Creating a Better Customer Experience
By Drew Hendricks

The digital transformation has impacted nearly every industry.  Tech advances in the financial service industry, including banks and fintech enterprises, have led to fundamental changes in the way they operate.

Nearly 72% of the U.S. population now has a smartphone.  The proliferation of mobile devices, along with smart devices in the home, that are always connected, storing and sending information back and forth.  Much of the data is shared willingly by users.  This information allows Fintech organizations to create more customized services for customers.

Customers are paying attention.  Fintech companies now make up 38% of the personal loan market.  That market share has grown dramatically since 2013 when fintech lending accounted for just 5% of the market.  At the same time, the number of loans from banks, credit unions, and other traditional financial vendors originate has all decreased.  That’s changed the way every financial institution approaches its business.

Changing Customer Expectations

Online banking changed the customer experience.  No longer do you have to travel to physical locations or wait days for transactions to process. Fintechs have created borderless financial services that allow for real-time data transfer.  It creates frictionless eCommerce between buyers and sellers.

Fintech opened the door to more customized options when it comes to financial services and forced traditional players to adapt.  Because fintech companies have been built on modern technology platforms, this tech allows them to be more agile and adapt quickly to changing market conditions.

All of this has changed customer expectations.

How Fintech Companies Are Using Data to Better Serve Customers

Algorithms, Artificial Intelligence (AI), and Machine Learning (ML) can process the vast amount of data that is generated every day and create actionable items.  The data that is shared can be used to predict and anticipate customer behavior.  This allows companies to share potential products, upsells, cross-sells, and strategic planning to customers.

Data can help fintech companies to target customers with appropriate offerings.

Segmentation

The more fintech institutions know about their customers, the better than can serve them.  In addition to checking credit scores and other hard credit variables, segmenting your potential customers can help you target marketing and services.

Segmentation sorts customers by various categories and can provide data about what products meet the needs of its customers.

  • Demographics (Age, Gender, Education, Location)
  • Family (Size, Dependents)
  • Employment (Years in business
  • Financial (Income, Net Worth, Assets)
  • Online behavior

Segmentation can also help identify the high-value customers that are most likely to purchase financial products.

It also helps to understand customer needs and provide more personalized offers.

Understanding Customer Needs

76% of customers now expect companies to understand their needs and expectations.  Big data allows you to know customers now better than ever.  The amount of data generated by credit card transactions, ATM withdrawals, credit scores, and other financial tools is staggering.  Using this trove of information, fintech businesses have a deeper insight into their customer’s needs.

This knowledge also helps to personalize offers directly to targeted customers.  Customers pay more attention to personalized offers.  Research shows customers view personalized offers as more than twice as important.

When it comes to doing business with someone, trust is crucial.  People are judging a company’s credibility and trustworthiness by the quality of their user experience.  Increasingly, that experience is mobile.  If your app doesn’t perform as advertised or is not intuitive to use, it will negatively impact their experience and their trust.  Big Data lets companies continuously optimize their customer’s online experience.

Managing Risk

A big part of success in the fintech industry is about managing risk.  Data analysis can help identify potential bad investments or flag customers that are showing warning signs of trouble.

Detecting Fraud

Part of managing the risk is quickly identifying fraud when it occurs.  Credit and debit card fraud alone accounted for $14.7 billion in losses for the financial industry in 2018.  Even a small reduction in losses can add up quickly.

AI and ML are now flagging potential fraud even before it occurs.  By analyzing the spending habits of customers, it can identify purchases or locations that do not fit the profile and flag them for review before completing transactions.

Compliance

Tech can also help when it comes to compliance.  In addition to tracking transactions, AI can analyze and detect where financial irregularities are more likely to occur.  This allows fintech companies to take preventative measures before a problem grows.

Chatbots, Bots, and Robotic Process Automation

AI-enhanced Chatbots provide 24/7 interactivity.  These smart virtual assistants can handle transactions, provide important information, and help customers in a variety of ways.

Robotic Process Automation (RPA) is improving the user experience by allowing bots to handle repetitive (and labor-intensive) tasks without human intervention.  Not only does it reduce errors, but it frees up team members to handle more complex queries and provide better customer service.

The “Tech” in Fintech Continues to Evolve

The fintech industry is evolving rapidly.  It’s changed the customer experience and customer expectations for all financial institutions.  Artificial intelligence, machine learning, and big data are allowing for a more personalized and customized experience for customers.

Customer experience has become a differentiator and a prime mover in evolving customer expectations.  It’s allowed fintech to siphon customers away from traditional financial providers.

Industry observers point to this improved customer experience as one of the reasons for the rapid adoption of fintech companies and non-traditional financial institutions.