What marketers can learn from the ‘fintech’ disruptors

Financial technology brands are shaking up what has been a stuffy and inaccessible industry by meeting changing consumer demands head-on, and marketers stand to learn a great deal from their disruption.

The world of financial technology, also known as fintech, offers valuable lessons for all marketers on how to disrupt an industry, bring innovations to market and meet consumers’ changing needs. The sector itself is attracting soaring levels of investment, driven by the emergence of countless startups that aim to revolutionise the way people use money and transact with businesses.

The UK has become a global hub for this activity, with London-based fintech companies raising $554m (£384m) of venture capital investment in the first nine months of last year alone, surpassing the total figure for 2014 ($487m), according to figures compiled for City AM. Most of these firms are based in the government-backed east London tech cluster known as Tech City UK.

Lawrence Wintermeyer, CEO at Innovate Finance, a fintech trade organisation, suggests that many startups have emerged to fill a vacuum left by the existing financial services sector following the 2008 financial crash. Innovate Finance has around 200 members ranging from seed startups to global financial institutions such as Aviva and Barclays.

“New technologies that make up fintech, such as mobile transactions, peer-to-peer platforms and digital banks, have shaken up the status quo and won over millions of new consumers by offering greater choices and services, as well as giving them access to finance when traditional banks have refused to offer loans or mortgages,” he says.

Recent examples of disruptive financial services include Atom Bank, the UK’s first mobile-only bank that claims to make banking easier and more intuitive by offering all of its services through a smartphone app. Set to launch this quarter, the bank aims to allow consumers to personalise the entire experience, by choosing their own unique version of Atom Bank’s logo when they interact with the brand and by using face and voice biometrics to log in.

The money transfer market, meanwhile, has experienced major disruption from digital players such as TransferWise, WorldRemit and Azimo, which provide online international transfer of funds at substantially lower costs than the banks. “[Money transfer] is a massive market that grows bigger every year as more people move abroad to find work or escape unrest and conflict back home,” notes Wintermeyer.

Increased competition in the sector is also prompting large financial institutions such as Visa Europe and Lloyds Banking Group to seek out new partnerships and collaborations.

So what are the lessons that the marketing community can learn from the highly disruptive and rapidly growing world of fintech? Marketing Week has identified three key lessons that marketers can take away from the sector.

Peer-to-peer lender Zopa’s simple user experience has helped it double in size over the past year

1. Make services more accessible

A common trait across all fintech businesses is their focus on making services more accessible and easier to use than existing players in the marketplace. Mobile wallet provider Yoyo Wallet, for example, states that its mission is to “democratise” the process by which businesses can offer mobile payments and loyalty services to their customers.

The company was founded in 2013 after taking inspiration from a Starbucks mobile app launched the previous year, which enables customers to make payments and collect points on their phone. Yoyo co-founder Michael Rolph says its founding vision was to create a better version of the Starbucks app for businesses that do not have the budget of a big corporation.

Yoyo Wallet uses QR codes to allow people to scan their phone at retailer till points, but its technology is also available as a white label app so that any retailer can create their own branded mobile wallet. The retailer administers their reward scheme and collects customer data from a dashboard connected to the app.

“You can have a mobile wallet literally overnight, without having to invest the tens of millions of dollars that Starbucks has,” claims Rolph.

At present, Yoyo Wallet is used in more than 40 UK universities, enabling students to make payments in campus shops and canteens. Although the company plans to expand further in the education sector, Rolph says that the business is also in talks with several high street retailers interested in using the technology for their own mobile wallets.

As a startup with 33 employees, Yoyo is able to experiment with new ideas and bring innovations to market at greater speed than larger companies, says Rolph. However, he also notes that the sheer number of fintech startups can be confusing or intimidating to potential customers. Yoyo has therefore focused on building its reputation through test cases with its existing clients.

“Retailers did have this wait-and-see approach that we’re starting to emerge from,” says Rolph. “We are doing 300,000-plus transactions a month now and scaling up – [that’s important because] retailers need to know they are choosing someone that will still be here five years from now.”

Payment technology firm Sthaler is developing a finger vein reader

2. Educate your customers

The ‘wait-and-see’ approach, where brands put off committing to a technology until it gains a widespread user base, is partly why the much-trumpeted digital currency bitcoin has so far failed to gain mainstream acceptance. The payment system, which launched eight years ago, has endured plenty of negative headlines following big investor losses, volatile swings in its value and revelations of its role in facilitating money laundering and black markets.

Despite these problems, bitcoin continues to attract investors. Figures from CB Insights show that bitcoin startups raised $375m (£260m) in the first six months of last year, up 11% on the entirety of 2014. The price of bitcoin also surged in the second half of last year and was comfortably above $300m (£208m) at the time of writing – the benchmark for solid bitcoin trading.

Similar to Yoyo Wallet, bitcoin’s disruptive power lies in its ability to make a financial service widely accessible. This is rooted in the fact that bitcoin is a decentralised virtual currency, meaning that users can transact directly over the internet without the need for an intermediary like a bank.

Mark Lamb, CEO of bitcoin exchange Coinfloor, says that bitcoin is becoming an increasingly popular choice for investors to store their money because of a declining faith in the currencies issued by central banks. He also notes that bitcoin performed particularly well last month on the days when global stock markets saw big falls.

“People don’t trust central banks,” claims Lamb. “That’s less of a problem in the US and the UK, but it has become a problem in the eurozone and it is a huge problem in emerging markets. In countries like Nigeria, Argentina and Venezuela, currencies are going down by 10%, 20% and 80% in some cases in a year. You don’t trust the central bank in that scenario and you shouldn’t. In those places, the only decentralised way of protecting your assets that you can also use online and transact with globally is bitcoin.”

Bitcoin is accepted as payment only by a small number of tech-savvy retailers, meaning its consumer applications are limited. However, Lamb insists this is not a problem and that it is more important for bitcoin to continue to gain traction with the investor community as “a store of value”. Coinfloor uses a network of brokers to build relationships with investors – a strategy Lamb says is vital to help customers understand the technology.

“To get someone from the point of ‘I’ve heard about bitcoin in the news’, to actually buying bitcoin and investing in it takes a lot of education,” he says. “People need to understand what bitcoin is, how it works and why it would be more valuable in the future. Brokers are crucial to that.”

3. Become a service specialist

Fintech startups are disrupting their markets and taking business away from established financial institutions by homing in on specific services. Peer-to-peer lending website Zopa, for example, has doubled in size over the past year by focusing on providing a simple user experience that allows savers to lend their money to approved borrowers.

This taps into a wider shift in consumer behaviour, exemplified by the rise of companies such  as Uber and Airbnb that favour simplified, specialist services and peer-to-peer sharing. “The same thing is happening in finance,” says Zopa CMO Amy Miller.

“Rather than millennials thinking ‘I need to go to the big bank and they will do my mortgage, car loan and current account’, they increasingly think ‘I will go to the best provider for each of those things’.”

Zopa lent a total of £530m last year, up from £267m in 2014, and aims to double that again this year to reach £1bn. To achieve this, the company plans to improve its use of customer data, develop a mobile app and run out-of-home advertising for the first time.

For marketers, the lesson is clear: disruption is one thing, but you also need to invest in your brand in order to build awareness and trust. “When you look at price comparison sites [for loan rates], Zopa often comes out top, with Sainsbury’s next, but lots of people will choose Sainsbury’s because they’ve heard of it – it is based on nothing more than that,” says Miller.

“The challenge for us in 2016 is simply making sure that more people know about us in a positive way.”

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