Finance with a face: How personalization drives engagement, retention, and profitability

By Ahon Sarkar, GM of Helix

Five years ago, it was impossible for anyone besides a bank to offer banking products, and these products were relatively homogenous between banks. As a result, consumer expectations were relatively consistent – they just wanted a place to store their money and to have a debit card in order to use it.

Things have changed. New platforms have democratized the ability to offer financial services, causing banking products to proliferate across nearly every fintech vertical. Companies in investing, payroll, PFM, and more have started to embed banking products as a way to deliver more value to their customers and to differentiate themselves from the competition. And as a result, consumer expectations have evolved. For instance, it’s now expected that banking products will include features such as no overdraft fees, early direct deposit, and interest-bearing checking accounts.

The spread of the ability for companies to offer these banking products, an arrangement called embedded finance or banking as a service, has led to an increase in competition. But in a world of increased competition, who will emerge victorious? Those that engage their users with content that’s relevant to them, retain them by establishing a relationship and growing it over time, and build on a sustainable business model to drive profitability. Personalization is the key to unlocking all three.

Metric #1: Engagement

People tend to disengage with products that either aren’t useful or offer no benefits over what they already have. Think about it — if you were offered a product that’s exactly the same as your existing bank account but was themed in green instead of blue, would you use it? Probably not. Some embedded finance platforms will allow you to launch a vanilla product quickly, but in the long run if your product is no different than anything else in the market, your customers won’t feel incentivized to use it. It almost defeats the purpose of spending the money to offer the product — although “vanilla” offerings may be cheaper and faster to get to market, they end up failing to accomplish the main goal of adding the product in the first place: driving engagement and revenue. 

In order to drive engagement, you need to create a product that offers a different service — a uniquely personal experience. This will drive interest by solving unmet needs and keep the customer around because it calibrates its offering based on how the customer uses the product. Think Netflix but for banking. If Netflix only showed you a static list of programs, it would be far too arduous to navigate its vast library to find shows you like. By serving up shows that Netflix’s algorithm determines you’ll be interested in, you get far more value out of the product.

Metric #2: Customer retention

As more and more fintechs and brands burn cash trying to drive user growth, consumers are going to be approached from every angle to try competitive banking products. But it’s easy to spend marketing dollars in order to acquire users — it’s difficult to keep them around. If your product hasn’t built customer relationships, is not better than alternatives, and isn’t personalized to each user, then your customers will most likely leave when someone else offers them “free money” to convert. In five years, when embedded finance competition is even hotter and more difficult to navigate, retention will be the most critical metric because it will highlight which companies are a good investment. 

How do you retain users?

The first step is to design a product that allows for progression based on activity. As users take more actions that you like, such as making transactions with their debit card or depositing funds into their checking account, you can reward them by incrementally upgrading their functionality. For instance, you can unlock progressively higher limits or better rewards as users show they’re trustworthy through usage and successfully paying back previous loans. This capability requires a platform that allows you to set different access parameters for different users. Not all platforms allow this, so it’s important to do your homework.

The second step is to build a relationship with each user. Every action a user takes on your platform teaches you something about them. Think of it as a conversation, where users express their desires by accessing different parts of your app. Unfortunately, many platforms don’t allow you to do anything with that context. It’s important to choose a platform that offers granular user-level personalization — whether that’s improving limits and rewards, creating experiences that help users meet goals, or even slimming down the offering to focus on what’s useful. Once you show users that you understand them, they’ll be more likely to stay. It’s like going to the barber. You go back to the same barber because they understand your hair. You don’t have to explain every cowlick. The same is true for banking products. Show that you know the customer, and you’ll win their loyalty.

Metric #3: Profitability

The current venture-backed climate prioritizes user growth over everything else, and as a result, you now have a crop of companies that are spending VC dollars to acquire users just to get to the next round of funding. This creates a dynamic of unprofitable companies that expect to become profitable as they scale. Instead, it’s important to create a profitability plan from the start. Ask what will actually drive revenue and create a product strategy that incentivizes usage instead of trying to fulfill every single unmet customer need. Every new product hook is an incremental cost, so use them wisely. There’s no use acquiring users into a product that will eventually fail because it’s not a sustainable business. That’s a waste of time — both yours and theirs.

In the case of embedded finance partnerships, the biggest levers that drive profitability are incoming revenue, fraud management, and operational costs. Many platforms lack robust fraud tooling and rely on flat files to fulfill back-office operations, which make it difficult to control fraud, partner with your bank, and drive revenue efficiently.

While finding a platform that gives you the granular controls and tools to mitigate fraud is one of the main things you can do to become profitable, it’s a delicate dance. You want to stop bad actors, but it’s important not to alienate your good users. Many platforms force you to generalize rules across all users, but with platforms like Helix, you can treat each user as an individual and create fraud thresholds that reflect the context you have about them (which can change over time). Additionally, easy collaboration with your partner bank is critical. It leads to a good customer experience, saves time, and ultimately drives profitability.

Finance is changing

Technology is driving a massive shift in the banking landscape. Winners and losers will be chosen according to who is able to stand out and provide the most personalized, useful experiences on the back of this new technology. If you focus your product on solving individual human needs, instead of providing a one-size-fits-all service, you’ll go a long way toward attracting customers and keeping them around.

Looking for a platform that specializes in making finance more human, more personalized, and more profitable? Check out Helix. We offer market-leading controls, data sets, and other personalization tools that will ensure your product thrives — even in the face of growing competition.