Three things to help fintech unicorns grow profitability

By Kash Amini, CEO and Founder of MasLife

The new breed of fintech companies is missing a trick with a massive market opportunity. Lack of customers isn’t the problem – profitability is. CEO and Founder of health and finance app MasLife Kash Amini suggests that there are three key ingredients neobanks lack in their journey to growing profit.

The ‘doom-and-gloom’ merchants are out in force, predicting that the UK economy could tank, especially on the back of a second lockdown. Devotees of 70s English rock will remember an album by the group Supertramp called “Crisis? What Crisis?”, and you can see the new breed of fintech firms thinking exactly that. Figures from Accenture’s Digital Banking Tracker show that neobanks scooped up an extra 6 million customers in the second half of 2019, tripling their customer base – even before the pandemic hit. But every silver lining has a cloud, and in this case, Accenture’s Tracker shows some of them losing as much as £15 per customer in 2019.

The new neobanks are examples of that old adage ‘old wine in new bottles’. They are doing everything that traditional banking does, but in a more seamless manner. But a seamless experience is not enough – fintechs have been focused on providing customer-friendly experience, solid customer service, flexibility, and quick onboarding. But the technology doesn’t wow customers anymore. This is what they expect, they don’t want to pay premium rates for what they consider standard.

Fintechs know they need to offer more than frictionless technology, but only the right execution will make sense to the customer – to be in line with their values and attractive enough to drive revenue.

What’s missing is the connection between the platform and users, which can ease the experience of consumers dealing with their finances. Make users feel they are part of something beyond banking solutions and give them a platform that really listens and resonates with the users’ needs and goals, without making them feel that they are just another client.

Having values and purpose is another positive attribute. Recently launched German neobank Tomorrow is focussing on protecting the climate, pointing out to their customers that not a cent goes into armaments and coal power. Another brand example – non-fintech this time – which has features and attributes fintechs could integrate into their apps, is Calm, the meditation, relaxation, and sleep app.

Since the birth of fintech, it’s been quite revealing how simplifying the user experience has made dealing with financial apps more fun, and this plays into two separate groupings of the UK population – the Millennials (born between 1981 and 1996) and Generation Z (born between 1996 and 2015). A 2019 report by finance, IT and media firm Bloomberg showed Gen Z accounting for 32 per cent of the global population – ahead of Millennials who weighed in at 31.5 per cent. It’s difficult to pigeonhole these two groups, but let’s try anyway. Millennials are ambitious, hardworking, and self-focused, whereas Gen Z is searching for truth, authenticity and looking for ethical brands. A significant number of these two groups has switched from the way the banking experience was handled previously to how neobanks handle it. That’s why there is constant growth and innovation: new designs will only amplify and substantially attract more users to more neobanks.

Don’t buy some of the negativity associated with Gen Z, like them having ‘the attention span of a goldfish’. They’re thinking critically about brands which claim high values, trust, helping the world, fighting for a better purpose. Pakistani activist for female education Malala Yousafzai – the youngest Nobel Prize laureate, and Swedish environmental activist Greta Thunberg are examples of what I think Gen Z is all about. So, you need to combine the element of finance and seamless tech and add something ethical and unique, to attract Gen Z – which are your future premium customers.

Below are outlined three attributes the unicorn breed of fintech firms are missing, which could spell the difference between an onwards-and-upwards trajectory rather than a crash-and-burn scenario.

1. Aesthetics

Images that decrease the anxiety associated with financial matters, together with a calming user interface design. When the user fires up the app it promotes a more relaxed and stress decreasing approach to handling the financial app and in turn their finances. The vast majority of fintech apps are very ‘financial looking’ – aka dry as a bone, and fintechs need to address the look and feel of their applications. Customers paying premium rates for financial services, expect something more than a standard finance app, so fintechs need to add a better-designed interface, both graphically and interactively – currently that’s missing.

Incorporating nature and meditation images to give a much more holistic feel would also promote a better relationship with one’s finances. Health and wellness themes will make it more pleasant for people to deal with finances.

2. Human connection

A lot of fintechs are completely missing the point of humanising financial apps and giving added value to the customer. When you’re incorporating finance holistically, it’s important to realise that a healthy relationship with money is part of one’s wellbeing and affects all the other aspects of one’s life – personal, business, etc. just as much as physical health.

Fintechs should think about adding gamification to their apps. It moves the process of dealing with money away from it being ‘just a finance app’ and adds more support to creating a healthier approach to personal finance.

Respected financial psychology expert Dr. Bradley Klontz has conducted several studies on customers’ relationships with their finances. People with money avoidance issues will avoid looking at account balances, bank statements, will not adhere to budgets and run away from their financial problems. Gamification and calming features can help people overcome the worry of opening their money account and make them feel more connected.

The way customers feel about their finances affects how they feel every day about other important areas of their lives. Satisfying the non-financial aspects of users would help them to evolve in all aspects of life, as this will ultimately bring them financial freedom.

3. Purpose

The finance sector and most fintech apps do not have the consumer’s interest in mind. They are intentionally letting users go into debt in order to generate revenue. This isn’t the way to humanise the finance sector, and it is definitely not a mindful approach to customers’ wellbeing and future finances. Generation Z customers are looking for ethical applications, so fintechs who can show and prove they care about not just the customer, but about scenarios chiming with customer feelings – like improving the climate or minimal use of unrecyclable materials will likely be chosen.

Helping people realise how to reach their potential is missing big time. Fintechs need to give users a 360 approach to their life and realise the need for a holistic approach to customer finance.

We have seen these trends emerging in the last few months with some fintechs startups having approached new ways of engaging with their customers. But the big unicorn fintech world still awaits a strong player which will embrace these trends and cater to the current and future premium customers. Neobanks who find a way to help their customers create healthy financial habits will win their loyalty and the industry fight for premium rates.