Fintech’s Customer Advantage

The below is based on the sixth episode of the Outside In podcast, which you can listen to here.

In our digital world, bank tellers are inching closer to obsolescence. But being able to deposit a check from an iPhone is not enough to solve customers’ pervasive problems with traditional banks. And the problems run deep.

Lots of customers don’t know where to turn for financial advice. They’re constantly perplexed by unnecessary fees. The ironic consequence is that the bank they trust with their money gives them incessant stress about money.

Which is why investors are doubling down on private financial technology, or “fintech,” companies. In less than a decade, global investment in private fintech companies has grown dramatically – from $1.8 billion USD in 2010 to $19 billion in 2015.

And the smart investment will be on fintech that’s built from the ground up with customers. Like the UK’s Tandem Bank. The company is born out of people’s confusion about, and frustration with, traditional banks, and the “challenger bank” is preparing to launch its mobile-only retail banking app this year.

In the latest episode of my Outside In podcast (which you can listen to here), I spoke with Ruth Handcock, Tandem’s Chief Customer Officer (CCO), to learn about the bank’s mission and allegiance to its customers (the first 10,000 of whom it calls “co-founders”).

“They can’t figure out how to get their money to work for them so they can live the life they want to live,” Ruth says. “Tandem’s mission is to help customers with that.”

The Tandem app as is unique because it’s “product agnostic”; you can access all your bank accounts in one place – whether they’re Tandem accounts or not – and use that information to make personal financial decisions. The ultimate goal is to “transform [people’s] relationship with money so money can be an enabler of the things they want to do rather than something that drags them down.”

Relationships are mission-critical for the company, too. The bank works closely with customers to understand why their behaviors are changing, pinpoint where the problems exist within the banking experience, then develop new solutions around that.

At Tandem, customer engagement is a continual learning process, and Ruth asserts that the agility to consult with customers in real-time is paramount. As CCO, Ruth is responsible for many of the decisions that feed into the company’s strategy. Her role is to influence how her peers think about customers and “create opportunities for that closeness to happen.”  And, to remind them that “there is no question too big or too small to ask customers.”

Banking on co-founders

Tandem’s diverse community of more than 10,000 co-founders – customers who invested early in the bank via an impressive round of crowdfunding, donate their time and ideas, or both – are its trusted advisors. It’s the enthusiasm of co-founders, Ruth says, that further legitimizes the bank’s customer-centered mission.

Tandem’s co-founders make their voices heard in a number of ways. For example, they log on to an online hub to chat and exchange ideas with each other. Many attend monthly “Break It Breakfasts,” where they’re joined by the bank’s leaders to break down an existing banking problem and try to solve it in a way that traditional banks have not. Some “super-advocates” have attended almost every single one of these events.

In exchange for their ground-floor involvement, co-founders get early access to the Tandem mobile app, special lower interest rates, invitations to in-person events, and other benefits. “They almost feel like part of the team,” Ruth says. “They’ve given us a huge amount of their time and headspace to help us design a great bank.”

Banking on good behavior

Most retail banks charge fees when customers do things like forget to pay a credit card bill or run up a big debt. Whether or not this is fair, punishing this “irresponsible behavior” is how “banks make a disproportionate amount of money,” Ruth explains.

Tandem has flipped that business model on its head. It positively reinforces good financial behavior – similar to how a Fitbit motivates you to meet your fitness goals, or how certain health care plans reward members for healthy behaviors like quitting smoking. Besides being wildly empowering for customers, positive reinforcement is good for business, too. Ruth sums it up: “When customers make good financial decisions, they win. They save money, they even might find money. That’s commercially successful for us.”

In the new world of digital banking, where customer experience is the differentiator and the rules are still being written, partnering with customers is a competitive advantage. Big banks can learn a lot to learn from fintech startups.

As Ruth asserts: “When the customer wins, we win.” It’s a simple mindset that can lead to a powerful outcome.

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