Importantly the FinTech is becoming an extremely competitive space with newer and at times challenging entrants into the sector. All this means INCREASING cost of CUSTOMER ACQUISITION. Most smart executives are cognizant of the growing complexities of customer acquisition. It is no more about product superiority or explaining product features. The good old days of simply communicating the facts to potential customers are gone. From there, the rest should simply take care of itself.
Overcoming customer acquisition cost challenges in the fintech sector is important. Fintechs are faced with an unprecedented combination of opportunities and challenges. These firms are perfectly placed to meet customer needs currently left unaddressed by traditional wealth management companies. Helping people manage their money through increasingly sophisticated apps and technologies. From Robo advisors and stock-trading apps to crowdfunding platforms and portfolio management solutions, technology is quickly augmenting the number of ways in which customers can manage their money.
According to the research, the average cost of new customer acquisition in the US is $3,119. Similar trends would apply to Indian markets. On the other hand, however, the fintech market is quickly filling up, with an increasing number of companies offering attractive deals to onboard new customers and push out competitors. Many customers are hesitant to invest in financial products that they deem to be overly complex. This is particularly true for elderly customers who may rely heavily on traditional banking and financial firms to handle their money. The job for up-and-coming fintech companies, therefore, is to convince these customers that fintech can positively improve how they can manage wealth and make smart investments for the future.
Unfortunately, client acquisition costs currently represent one of the biggest challenges to fintech who want to fine-tune their growth strategy keeping the following in mind:
– Time taken for a product to get to the market
– Ways to improve existing products
– Timing for launching new products and
– Ways to market new products to the customers.
Each of the above heads is a cost center by itself making customer acquisition an expensive proposition and one of the biggest challenges.
There is a change required in the acquisition strategies: Pursue A Customer, Not A Product!
Traditional banking is arguably constrained by the boundaries of the physical branch or human network to generate new customer growth. With digital assets, whether a traditional credit card or a financial aggregation app, a nationwide approach can amplify customer acquisition potential with a data-rich framework that feeds into the strategy which is rolled on the ground. Based on consumer spending patterns or financial wellness, institutions can make more informed decisions like branch expansion or closure, ways to develop and improve the relationships across discrete customer segments.
Can digital marketing help?
Cost per click and related marketing metrics which are already very high are further likely to increase. Winning more bank customers is only going to get more complicated. Advertising on major platforms like Google and Facebook for financial services like insurance is already high. In 2019, the average cost per click for finance and insurance was $3.44 in Google Ads according to Wordstream. If you convert 1% of clicks to customers, your customer acquisition cost only for Google/Facebook ads is probably above $300. Few industries face higher costs to acquire customers than financial services.
How Data makes a difference?
Data provides information to marketing in several ways. First, it gives the company insight into their consumers, how people of every demographic spend their money, which helps the company leverage those financial moments. For instance, they know that the family has insurance coverage of XX amount, with this insight, a bank can angle the messaging for their insurance product to the family.
Data should be at the heart of the campaigns that are run for financial products, predictive modeling can be used to monitor, optimize, and inform decision making.
A data strategy helps to refine the selling strategy by mapping the customer journey. For example, if a bank is focused on selling four products – Saving accounts, credit cards, mutual funds, and student loans. Instead of offering all products to all prospects and hoping for the best, they may use data to plot a logical sequence of offers. The strategic offering may look like providing a credit card with a low limit to customers under age 25. After that product has been used for 12 months, follow up to offer a checking account to increase customer loyalty.
In conclusion, data could help in acquiring the right customers, lowering the marketing effort and hence the cost of acquisition. Customers acquired through a proper data strategy would be more satisfied and will result in better customer loyalty. Fintechs now need to focus on products related to customer acquisition, which can help banks and fintech to optimize the customer acquisition cost.