Fintech is becoming an increasingly competitive market. A KPMG analysis saw investments decline in 2016 and investors are now more cautious about betting on segments that are becoming saturated. Lending and payments are two segments that saw increased participation over the past two years.
Competitors come in all forms. We now have traditional institutions, tech giants, and startups all competing for the same market. Despite this growth, fintech is still largely considered a “Wild West.” Governments are scrambling how to come up with new laws to regulate the industry. In addition, the jury is also still out for many of the fintech pioneers as some new business models such as peer-to-peer lending have yet to be proven successful.
Companies should leverage all possible sources of competitive advantage. Business intelligence (BI) and analytics are emerging to be ideal sources. Much has still yet to be made sense of in fintech and the first companies to be able to do so will surely have a definitive advantage over the competition.
Here are 3 ways BI is changing the game for fintech.
Monitor user behavior and market trends
Fintech is still in a state of flux. Traditional institutions are aggressively trying to cope and many of the new services have yet to reach critical mass. It is in these early stages where BI is crucial for fintech efforts. BI helps track usage and market trends. Data analysis can limit uncertainty and uncover trends that could guide companies to improve their strategies early on. What’s more, many online trading platforms are looking into sophisticated BI solutions.
Robo-advisor startups like Wealthfront and Betterment came into the scene looking to disrupt the investment segments through their easy-to-use apps. Yet, investment mainstay Charles Schwab was able to compete against these upstarts by offering their own robo-advisor service. Schwab Intelligent Portfolios now has over $10 billion in assets under management. A key part of how Charles Schwab took on the project was relying on speed and early feedback and testing in order to come up with a viable service.
In another recent development, end-to-end BI service provider CoolaData announced its integration with trading platform MetaTrader. This integration allows brokers access to enterprise-level BI and behavior analytics. Through analytics, traders can get valuable insights on what market conditions are affecting their performance.
“With Cooladata and the new MetaTrader integration, the ability to unify all trader activities and get any insight as to how market scenarios are impacting the company performance is finally here,” said Mr. Daniel Kibel, CEO of CMTrading.
Improve user experience
One of the supposed advantages of tech firms over traditional banks when it comes to fintech is the expertise in crafting superior user experience. Traditional banking isn’t exactly known to offer a pleasant experience. The convenience brought about by online and mobile apps and services is expected to be a key point of disruption in the financial services industry.
Amazon’s rise as a digital retail giant is due to its superior user experience. 1-Click or the functionality that allows customers to check out with a single click of a button is considered an innovation worth billions. This innovation was largely made possible by studying data on user behavior during the purchasing process and creating a way to trim down on the time spent checking out.
We could expect user behavior data in fintech applications and services to be gathered extensively for similar purposes. In the case of stock trading, for example, most experienced traders consider stock trading as a multi-screen activity hence their reluctance to jump on to exclusive mobile trading. Those new to trading, however, benefit from a streamlined and intuitive interface. Free stock trading app Robinhood targets the 18-24 demographic which is composed mostly of users who are starting out in stock raiding for its service. Its easy and intuitive onboarding experience has been key to its appeal and initial success.
Increase security
Another area where BI and analytics is seeing much use is in security and fraud detection. Fraud has been a major issue in ecommerce payments. A report from Radial reveals that overall fraud is up 30 percent year on year. Just this year, there has been a 200 percent increase in “testing” or when fraudsters try small purchases to check the validity of stolen credit card numbers.
Behavioral analytics plays a huge role in determining fraudulent behavior. Analytics can track and identify patterns which could reveal fraudsters’ modus operandi. This way, merchants and payment processors could put up safeguards against such attempts. The data can also be used to refine automated fraud prevention protocols to minimize instances of legitimate transactions being flagged as fraudulent. Legitimate users who encounter such issues often consider it poor user experience to be denied and can eventually become a lost customer for the business.
Other fintech segments need to be ready with such measures as well. Fintech services will be a prime target for cybercriminals due to the wealth that they are managing. The proper implementation of BI and analytics can guide prevention strategies.
Fintech companies must consider investments in BI and analytics early on. Implementing analytics across all facets of the fintech service has several benefits. Analytics could help reveal better ways to engage the market, create a superior customer experience, and safeguard the business and its clients. The insights that a business could get from its data efforts and the consequent decisions it makes based on these insights could very well determine its success in a highly competitive environment.
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Image: Fintech, Technology and Finance, by CafeCredit, CC BY 2.0
