Selling highly commoditized products, the world’s big banks and wealth managers are facing low levels of customer engagement, while new fintechs have been able to grow their customer bases rapidly, observes GlobalData a leading data and analytics company.

With the fintech revolution in full swing, the big question for incumbent banks is how to remain relevant and how to engage with customers on a level beyond simply offering a competitive APR – with even that being a struggle at times. In many ways, new smaller players are leading the way, and the giants should look to the fintech sector for best-practice examples and potential partners.

Speaking from Money 20/20 the largest fintech event globally, Heike Van Den Hoevel, Senior Banking Analyst at GlobalData, comments, ‘‘A good example highlighted at Money 20/20 is MoneyLion – a digital personal finance platform we spoke with at the event – which has acquired 1.5 million new customers since its launch in 2013.’’

MoneyLion is not alone in adopting a range of customer engagement strategies, with three diverse themes: incentivization, the creation of goodwill, and gamification being explored at Money 20/20.

MoneyLion: incentivization of interaction

MoneyLion is a financial management app that helps consumers manage their savings, wealth management, and borrowing needs. Incentivizing customers with cashback rewards, more than 60% of the fintech’s customer base log-in daily. In comparison, just 16% of consumers across the globe visit a traditional bank’s homepage daily in 2018, according to GlobalData’s 2018 Retail Banking Insight Survey. Running a subscription-based model, MoneyLion charges $29 per month but users earn $1 for each day they log in, rendering the service ‘free’ if they login daily. The company also incentivizes users for positive financial behavior with points that can be redeemed for rewards like gift cards.

Dave: the creation of goodwill through tailored advice and microloans

Essentially, Dave targets disgruntled banking customers. According to GlobalData’s 2018 Global Retail Banking Insight Survey, 27% of consumers indicated that a dispute with their provider about penalties influenced their decision to switch providers. Clearly, penalty fees are a big headache for customers. Capitalizing on this, Dave has acquired 400,000 customers since its launch in April 2017. For $1 per month, the app assesses users’ incomes and spending patterns, then predicts how low their balance could get between now and their next salary. It then sends a warning if users are at risk of dipping into costly overdrafts due to an upcoming predicted expense. However, the main selling point is the interest-free paycheck advances for small amounts. Users can request any amount up to $75. When their next paycheck arrives, the amount borrowed will be automatically deducted. In the US where roughly 46% of people do not have enough money to cover a $400 emergency expense according to the Federal Reserve, that is a big draw. The forgone interest is negligible but the utility to customers is significant.

Long Game: gamification

Long Game is a new startup company that is encouraging user engagement through the use of gamification, making a game out of the saving experience. Users open a savings account and are rewarded with virtual coins, which can be used to play games on the mobile app. Picking up on the cryptocurrency trend, users can also earn free crypto assets as a reward for saving.
Van Den Hoevel, concludes, ‘‘Fintech has brought unprecedented disruption to the financial services space, changing how consumers bank and interact with their banking providers. As the number of disrupters continues to rise, it has never been more important to engage with customers. Clearly, there is a lot the big incumbents can learn from smaller challengers.’’