The next evolutionary step for fintech companies is customer activation
Fintech companies have proven that millions of users are willing to try out new, convenient digital banking propositions. Acquiring as well as serving these users is less expensive for fintechs when compared to the incumbent banks, who struggle with legacy organisational and technological debt.
For fintech companies it is nevertheless crucial to increase contribution margins, as marketing and international expansion are huge cost factors. That’s why in 2020 and beyond the next threshold will be user activation and monetisation: Increasing active primary customers, boosting unit economics and launching customer-centric services with high willingness-to-pay would shift the focus from acquiring customers to delighting customers.
Part of the evolution will be to adapt the widely used land-and-expand pricing strategies. Offering free basic current accounts and a few lifestyle-focused tiers on top might not work out well over the long-term. The free tier is often lacking true differentiating factors and simply expanding the product portfolio and anticipating that users will move along is risky. Thus, figuring out the willingness-to-pay for specific features of the higher tiers is key.
These features will likely go beyond banking, such as intelligent personal money management or automated subscription or loan contract management. Alternatively, most fintechs haven’t actively explored the other side of the balance sheet yet, i.e. innovating around lending and credit services, which is another promising area to increase profitability.
2020 will be all about fortifying the positioning as a trusted banking entity beyond a mere lifestyle app with sleek budgeting features.