While countries across the globe are experiencing the effects of a severe economic downturn, financial service providers are facing unprecedented challenges as they try to stay afloat among shifting consumer needs, increased market volatility, evolving fraud, and major budget restrictions.
Yet, Albert Einstein once said, “In the midst of every crisis, lies great opportunity”, and financial industry players are indeed finding ways to adapt and innovate even during such turbulent times. In this guide, we uncover the practices that help banks and fintechs win consumer trust and unlock new revenue streams despite economic uncertainty - read on not to miss out on valuable insights!
As a result of these events, the world output growth rate is expected to drop from approximately 3% in 2022 to 1.9% in 2023, which is among the lowest indexes seen in recent decades. During such times of economic turbulence, the resilience of organizations across a variety of sectors is put to the test, with those operating in the financial services sphere being no exception.
Modern banks and fintechs face a variety of complications, including:
These circumstances force them to make adjustments to their operations to stay afloat - keep reading to find out which practices are currently on the rise.
Many FIs and fintechs are taking steps to optimize revenue generation in the new market conditions. Here are the three common practices:
Tapping into New Customer Segments
While focusing on existing clients is important, many businesses in the financial services industry have also been attempting to reach out to new customer groups.
One group of consumers that is currently being actively targeted by financial service providers is the underbanked population - in other words, people with limited access to traditional banking. These individuals often lack credit history records, which makes it challenging for FIs to perform standard Know Your Customer (KYC) and identity verification processes.
To address this issue, companies develop low-friction yet secure solutions that enable new customers with various backgrounds to verify their identities swiftly.
What’s more, a growing number of fintech companies and FIs are striving to appeal to younger consumers as they gain financial independence. Winning the attention of this target group often entails coming up with innovative products and employing trending marketing solutions.
Introducing Progressive Fraud Prevention Measures
One such form of advanced fraud is account takeover, which impacts both consumers and businesses. Moreover, the ecosystem is also facing an increasing threat from synthetic ID fraud, which is a type of dishonest activity that entails fraudsters utilizing a combination of valid and generated information to open new accounts or apply for lines of credit.
These fraud types pose significant risks to establishing a secure and seamless digital economy. In the US alone, identity thieves steal over $5.8 billion annually, with a quarter of victims suffering financial losses. This number is projected to keep increasing as fraudsters adapt their tactics and consumers spend more time online.
This situation calls for strategic action from all financial industry players. To effectively manage these risks, banks and fintechs have to take the following steps:
As recent practice has shown, financial service providers that engage in these activities have significantly higher chances of effectively safeguarding their customers and the overall financial ecosystem.
Continuously Optimizing the User Experience
More and more consumers nowadays are not willing to sacrifice convenience for the sake of security and expect a seamless blend of speed, efficiency, and reliability.
Thus, FIs and fintech companies that manage to strike the right balance between fraud prevention and user experience will reap significant benefits across the board. To achieve this equilibrium, it is essential to embrace intelligent friction by adopting such practices as risk-based authentication, biometric identification, and so on.
This approach ensures that the customer experience is both smooth and secure, enabling companies in the financial sphere to thrive in the digital era.
While all the measures described above are sure to be helpful when it comes to unlocking new revenue streams for financial service providers, neither of them would reach their full potential without one critical ingredient - consumer trust.
After all, no matter how advanced or effective a business’s security measures are, without a sufficient degree of trust, customers may be hesitant to engage in financial transactions or adopt new services. What’s more, nearly 50% of consumers are likely to take their business elsewhere after a single negative online experience.
But how can FIs and fintechs achieve consumer trust to ultimately boost their revenues? The key here is to adopt a multi-layer approach and implement the following measures:
Overall, it is essential to establish a flexible and comprehensive long-term strategy that focuses on building lasting relationships with clients as well as the continuous improvement of the services.
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