1057. Insights: From inertia to advocacy: Rethinking customer loyalty in fintech

27:22Yeah, I think those B2B examples are so interesting. For some reason, I always think about hairdressers. I don't know, like, doing hairdressers. Every single website seems to have, like, hairdressers on. I don't know why. but I think it's I think again it speaks to another particular opportunity but also challenge for financial services in that like money is connected to everything and so to my to my mind like loyalty is about a sort of customer having a gut sense that's just going back to Jazz's original example from like how his parents used to bank like you probably go into that bank branch having just a gut sense that they wanted to help you they wanted to help you do stuff with your money that made sense for you and helped you to kind of manage your money in the best holistic way that made sense for you or your family or your household like they were kind of looking for opportunities to help you with things and make your life easier and in the world of financial maybe in the world of um music or film or whatever or healthcare like maybe that's that's got slightly more of a container around it about like how far that can stretch um but in financial services like money connects out into every single other part of your life and so i think in theory a financial services provider could help you to you know reduce the outlay on your house renovation or they could help you to kind of manage the costs of your health care or they could help you to manage your child's educational costs and all of those things take you down a rabbit hole of how far how far do you want to help somebody um which i think again is a really interesting challenge for loyalty like if if you're trying to build a sense for a customer that you're a brand that's going to really just have your interests at heart and help you make your life easier and simple.

28:56How do you set the balance to that? So I think, yeah, what you're saying, Alex, about picking a customer group and almost defining how you're going to help them and how far you'll go is really key. Because otherwise, like, where do you stop? And I suppose this is a challenge maybe, like, we haven't talked about super apps yet, but maybe this is a good time to bring them in. Yeah, I think that's right. I mean, I think that the point you make is exactly the right one. like how far do you chase a problem for a customer down a rabbit hole before you sort of stop and say, ah, this is not really our job.

29:26And it's interesting because if you think about, I always think about like fintech as sort of reinventing private banking, right? Because private banking is like the ultimate banking experience. It's having a human being who you can call at any hour, day or night, and give any problem, whether it's financial services or not really financial services, and they'll just go, yep, I got it, and they'll fix it. and they just take care of it for you. And I think, like, we can sort of naturally extrapolate on the idea that every human in the world wants a private banking experience. Most of them can't afford to have a human doing that work for them in that obsessive way, but we can scale that with software, right?

30:04And so to your point, I think one of the mistakes that fintech companies make a lot of times is sort of drawing the same boundaries around their products that banks have historically drawn. Like, oh, well, a credit card doesn't really do that, so we can't do that. Why not? Why can't you do that, right? Like the customer is trying to solve a problem. The customer is not trying to get a loan or a credit card or a deposit account. They're trying to solve some larger problem. Can your product grow to fill that space and solve 100 % or close to 100 % of that problem? And obviously, you know, Kate, to your point, you can't do that for everyone, right?

30:37Like if you were chasing that rabbit all the way down the rabbit hole, you can't do that simultaneously for all of these different problems. That's what requires the focus. And so the trick is, how do you hone in on a set of problems that you're going to try to own as much of the solution to as possible? To me, that engenders loyalty rather than just stopping and going, eh, that's not really our job. You have to go fix that yourself. Yeah. Jazz, what are you seeing in the organizations you're working with? Are they chasing all the way down the red bar? No, I agree. They're not because they can't.

31:06There are constraints all across the board. If you want to go expand to a new customer group, you have to first go do the research and figure out whether the problems and solution map to the same group to the same extent. There's resourcing constraints. Yes, they are becoming less relevant with the ability to spin up a team of people that are zeros and ones on a Mac mini that can do that work for you. A fraction of the cost, but there's still a constraint. I like the point you touched on, Kay. I think it's also how. That's part of the differentiation is not just building loyalty. It's not just intent.

31:53It's, well, you can differentiate by doing things differently. And, you know, we've seen this neobanks in the UK that Monza, for example, are the obvious one. But they're a bit more transparent with the way they explain terms and conditions. Their emails are a little bit more fun. That resonates with myself and one group, but it might not resonate with another group. So you can differentiate, you can grow loyalty by just executing the same product in a very different way and maybe communicating it differently. So there's a few ways of doing it. I just think, yeah, I don't see many going down the rabbit hole all the way because I just don't think it's possible for most of the fintechs, especially the ones I'm working with.

32:35But there are some super fintechs, the kind of scale-ups that are, especially the B2B ones, that do look like they're creating everything. Like company setup, card issuing, payment processing, treasury capabilities, accounting, all of that stuff. They can do it. But I think for the consumer side, like Alex said, I think for the consumer side, it's a bit more difficult. Yeah. I mean, we haven't talked a lot about super apps, right? which maybe feels odd in the context of loyalty conversation. Lots of people I speak to kind of are really jealous of super apps because they think they've like solved loyalty by just doing everything for all of their customers.

33:16Is that fair? You know, it's funny. Everyone wants to provide a super app. Like, sounds like the greatest business in the world. We want to be the one app that everyone uses for everything. What we found, I think, in a lot of more mature markets is that super apps don't really work because the level of competition across all of those individual jobs to be done is so high. And this goes to an earlier point, but like the friction of managing multiple apps has kind of gone away, right? Like it used to be really hard to go get vastly different services in different places. There was an inconvenience to that.

33:50That's why people used to only have one checking account. Now people have two, three, four, five different like bank accounts that could function as your primary bank account and they use them for different jobs. And I think on a small scale, that's kind of an illustration of what's wrong with the super app concept in mature markets like the UK or the US. It's just hard to convince consumers to accept a B minus product within a super app when they could go get the A plus version with just one more click. And I think if you skate forward into the future a little bit, you start thinking about like AI, like agentic AI should be able to orchestrate all of this on our behalf.

34:28So whatever little friction remains from me having multiple different service providers, I should be able to have an agent layer sitting between me and all those different service providers that can stitch them all together. And so I think we are likely headed into a world where there's more sort of bespoke competition on each of those individual jobs to be done and less of the sort of super app concept. I think super apps worked at a specific moment in time in certain less mature markets where there was less competition. But I don't necessarily see them as the future in mature markets, even though I'm sure every provider, including large banks like JPMorgan Chase, would love to be the super app for their customers.

35:08Yeah, absolutely. Rosie? It's funny, though, because I agree with everything that you just said. However, I recently got rid of my Amex and my Monzo because Revolut is giving me everything that it needs. And I never thought I would be a spokesperson for Revolut. But I love to travel. I love to, yeah, book holidays, go away, get eSims. And Revolut's doing all of that for me. It's got the hub. It's got the rev points. So when you spend money, you earn points. you can then use those points to book a hotel when you arrive at your destination you can get an e-sim through the app and you use your points to get the e-sim so it feels free um i've got home insurance through them i had pet insurance at one point but then they removed it um and they've also got better interest rates on the savings pots than monzo so for me it was it was a no-brainer and i know that you've got to so yeah it's i agree with what you're saying about the super apps um But then on the other hand, if you can cater to kind of all of those jobs to be done or most of those jobs to be earned for one person, then it could work.

36:12Well, and I think to that point, that's a really, really good point. And it's kind of this question of does every single thing that you do reinforce all the other things, right? So like is the whole greater than the sum of its parts is kind of the question you have to answer. And I think this gets to the difference between sort of bank bundles, so to speak, versus the new sort of fintech bundles that we're seeing. bank bundles were like, yes, we have a credit card, we have a deposit account, we have a home equity loan, and you have to talk to completely different parts of the bank that are run by different groups that have their own separate P &Ls, and they'll all talk to you sort of underneath our brand.

36:48And you might be able to log in to our online banking and be able to see all those products in one place, but that's the extent of the integration that we've done. And so it really felt like five different companies that all just happened to call themselves the same thing and roll up to the same executive management team. FinTech companies, by contrast, and I think, Rosie, you did a great job describing like an example of this, they're thinking more holistically about how does each thing that we add to this bundle of services that we have reinforce and make the other parts better? And I think that is an area where you can create more of a durable advantage and more stickiness, but it does require that sort of like whole company pulling on the same or working together to integrate those things.

37:30And the test I always think about is if you had an AI agent who was helping you optimize all the individual parts of your finances and the AI agent came to you and said, hey, I know you get savings from Revolut. That's great. But I found an offer for an even higher savings rate. If you go over here, do you want to do it? if you have a really strong bundle, what you want the consumer to do in that moment is to overrule the AI and go, no, because I value the totality of everything that I get from Revolut, I want to stay there rather than get picked off on individual products that might be better on an individual basis, but the whole is less.

38:07That's the test you're going to have to pass. And it's cool that Revolut and other neobanks are starting to build towards that. I think it circles back to your point around competition Alex because I think the reason lots of these value props have been created I think Monzo have started Monzo create their perks plastic package and added Greg sausage roll once a month and a view cinema ticket and I signed up because I go to the cinema once a month but I think it goes to the amount of competition in the market that Revolut have gone done some research and and decided that based on all our customers we think that building out a travel lifestyle prop with airport lounge access, which is becoming a much more desirable thing.

38:51eSIMs, which I've started to use more and more, and points that are interchangeable within a bunch more different products and not just limited to American Express services. I think they've looked at the market and realized that if we bundle everything together, it's much more likely that someone will stay. and over time we will create loyalty because it's a matter of creating a value prop, trust, and then seeing that over a long period of time. And I think that's, you know, again, to all of your points, is what they're trying to do. And I think time will tell whether they do build true loyalty or not and whether Rosie stays with Revolut for the next three to five years.

39:31But I think, yeah, if they improve that prop over time, I think that's a true test of loyalty. Well, and I think the trick, I think that's exactly right. And I think the trick with doing that is you assemble the bundle and then you have to not make it worse in pursuit of profit. And that to me is always the test that these companies fail is we built this great bundle. It works really well. But gosh, you know, our margins could be slightly better if we just upcharge this or if we swapped out this component of the bundle for a cheaper alternative, who's going to notice and we'll have a higher margin.

40:03So there's this constant temptation. And you see it, especially with public companies that have to answer on a quarter to quarter basis. But I think you see it even with late stage private companies where fintech investors get a little bit restless. There's this pressure to make the bundle worse. And I think the discipline you have to have as an organization is saying, no, we're playing a long game. We want to build loyalty. Like loyalty gets built over decades. Like we want to build loyalty and trust over a long period of time. And the way we do that is by just never taking shortcuts, never trying to optimize profit over value to customers.

40:38So I totally agree, Jazz, that that's exactly what these companies are doing. The test will be, can they maintain the discipline to keep these bundles strong over time? And I think that's a test that many companies in financial services and outside of financial services have failed over time. And the ones that haven't are the ones that we all sort of glowingly talk about as these great legendary companies that have been built. That's the difference. Yeah, I think the time component to loyalty is fascinating as well. In a previous life when I didn't work in financial services, I actually did some research on behalf of Nando's.

41:14I mean, I was going to say, where does Nando's exist? I mean, it's a large chicken-based restaurant in the UK and other markets, right? But when I was speaking to the kind of person I was working with, they were saying like their specific aspiration was to kind of capture customers when they were teenagers, going out with their friends for their first meal, kind of make that a really great experience for them, which is why they kind of had like a lot of specific menu functionality and payment functionality around just making that really simple. because they then had confidence that you would stay with them, albeit in a different frequency in different ways.

41:48But as you kind of progress through your life, then you'd bring your children back to Mando's and it all starts a beautiful circle all over again. And I kind of often think about that in the world of financial services because we sort of see a similar, we have historically seen a similar pattern, right? Where people get, I still remember being taken down to a local bank branch by my dad to open my first bank account. And I still have, I would still say but I am loyal to that bank, as in I still pay my salary into that same bank account. And I'm really intrigued to see how this shifts in the new generation because I have a four-year-old, I think, well, he can open an account.

42:24I think in most UK instances, I think the earliest age is six. So the time is coming up when I will have to decide where I open his account. And for me, it feels like personally just quite a big pivotal moment, But I'm seeing this kind of come back up to the awareness of big banks. I think lots of big banks are starting to think about how do we capture the next, if we don't have as many bank branches, despite our PR campaigns, that we're opening loads more, like if we don't have as many bank branches, we're not going to have that kind of physical moment of like starting a journey. Like how do we start the journey?

42:54So, yeah, I mean, Jazz, we're seeing lots of, I personally feel like we're starting to see more of a focus on shaping up propositions for kids to try and start this next generation of loyalty. you seeing something similar? Yeah, I mean, if you look at Monzo, Revolut and Starling, they've all got, they've got 16 to 17 products and they've got under 16 products. I think it makes sense. It is almost ironic that they kind of have copied the traditional bank model because like you, I was hooked to the bank that I banked with when I was 15, 16, that I got a little piggy bank that they gave me. You put your coins in there and then you'd have to take the physical piggy bank to the bank and it was a whole experience and I'm still with them, still with them technically.

43:39And I put my salary into there. So I think it's a, I think more and more people will do it because it does make sense. But then, yeah, to your point, I think the average age that people are staying with a bank is going lower and lower and lower. I think there were some stats I saw a couple of years ago that I think our generation, it's 15 to 16 years, you'd stay with the same bank and the next generation down is 10. And I think they're saying that it's going to become, the cycle times are going to be shorter. So that will work for five years maybe. So you have a 16-year-old, have a bank account, and when they turn 21, that maybe there is some sort of cyclical marketing campaigns that happen from banks that specifically target that, you know, 16 to 21.

44:32Like when you're 21, you specifically have a campaign that tries to switch people at that age with specific products with specific propositions, based on age based on things they're doing maybe based on graduating from from university or college and they have specific propositions set up for that for that switching time. But yeah, it's a good strategy to start with. But again, maintaining a customer keeping a customer is always way more cost effective than trying to acquire a new one so acquiring them great but making sure you keep them i think that's the more important thing yeah absolutely um annoyingly we're coming towards the end of our allowed time so i just wanted to allow each of you kind of a final say i suppose on you know if you are if someone's listening who is working either fintech or a large bank who's really trying to work out like what should i be doing to increase loyalty for my company what would you recommend they focus on?

45:24Alex? Yeah, I would say small wins is probably the way I would describe it. You know, loyalty is this huge, massive subject. It touches so many different questions and so many different parts of the business and so many different products. It really is the entire job of the whole company to think about customer loyalty. And if you try to solve it at that sort of galaxy brain level, you'll probably fail. And many, many consulting ships have run aground on that exact patch of land. So I would avoid that and focus instead on what's just a very small thing we can do that will be additive in terms of value to customers and show them that we care about them.

46:04And it can be the smallest thing in the world. But what I've found is small wins tend to compound and an obsessive focus on just giving as much value to the customer tends to compound. And so small wins over time build momentum for larger initiatives. So just find some small place to get a win where you're like, I know for at least a segment of our customers, when they use this or they experience this or they call into the call center and have this conversation, it's going to dramatically increase how they feel in a positive way about our company. And that's a great place to start. Yeah, absolutely.

46:38Rosie, what about you? What would your advice be? I think that financial well-being is the ultimate end game. We're seeing some customers switch for cash bonuses. If they don't feel financially secure, like they have financial well-being, they're going to go into a scarcity mindset. They're going to be more likely to switch to jump ship. So I think the ultimate endgame that banks and financial institutions should be focusing on is financial well-being for their customers. And I think something we also haven't touched on is the idea of prevention. and this goes into discussions around AI, but AI is going to help to prevent things from happening before they happen.

47:22So instead of saying, I've seen that, well, this person has scammed you, let's try and get your money back. It's let's stop this scam from happening in the first place. So I think, yes, prevention and financial well-being are two good things to focus on. For sure. And Jess, what about you? I'm going to rant about Alex's point first because I love the small wins and I don't like the idea of people talking about loyalty programs. I don't like the phrase loyalty program because it implies it's finite. It's, oh, it's a loyalty program. So we'll start it and then maybe at some point we'll end it. So I love Alex's point about small wins.

48:04I would say small wins, but think outside of financial services. Look at where loyalty works in non-financial services organizations. So, you know, why does, look at the strategy that Coke used when they put Coke fridges into people's shops and made them fill them with Coke, not Pepsi. Look at different ways companies over the years have kind of embedded loyalty into their products and services and then try and transport some of that into your financial services product and then go back in time again. I make this point every time I'm either on the 11FS pod or any other pod, to be honest, that probably the most personalized time of financial services was when people went in, spoke to a bank manager or a bank rep, bank teller, and were able to converse because they were able to learn about the consumer, the consumer was able to tell them about their challenges, and there was a symbiotic need to kind of create value.

49:12I think people need to do more to pull that into the digital experience. I think, yes, AI might do that. Conversational input box might help. But I think just look to history. What were those moments, what were those experiences that really created loyalty? Again, to your point, Kate, that first piggy bank when you went to your bank branch, how do you recreate that in a digital age? I think look at those experiences and look at what's worked and then try and transpose it into what we see today. Yeah, no, absolutely. I think all fantastic points. I suppose the one thing I would add is maybe like, I think sometimes people are a bit afraid to kind of look at the commercials behind everything as well.

49:58I think ultimately if you are not set up as a business for it to make commercial sense for you to keep a customer for the long term and if it's not going to be in a customer's commercial interest for them to be with you in the long term, then ultimately it's going to be very, very difficult for you to make the right decisions. It's very difficult for you to make, even if you make some of the right decisions and early decisions, it's going to be very difficult for you to maintain that throughout your roadmap as you develop your products and you broaden out your offerings. and I think as we've covered loyalty isn't a quick I think the small wins thing that Alex talked about is hugely important but you need multiple small wins building consecutively over time to build true loyalty, like loyalty isn't going to be built overnight, so yeah I think really think about that are the commercial interests of the business aligned to the commercial interests of the customer as well as much as possible, I think that's also really key.

50:48On that note that wraps up today's discussion, so I'm sure we could have talked about this all day but sadly said we've hit our time. Where can people find out more about you and what you're working on, Rosie? Just LinkedIn, I guess. LinkedIn. Awesome. Jazz, what about you? Yeah, a platform called LinkedIn, like Rosie said. I'm also on jaz.substack.com under FinTech Under the Hood. And here on the 11FS podcast. Yeah, you do excellent diagrams. I would highly recommend. Alex, what about you? Yeah, I will first subscribe to fintech under the hood it's awesome um i am at fintech takes.com um and i also am on linkedin and twitter so you can find me there as well awesome and you can find me also unsurprisingly on linkedin i'm not on substack because i'm not cool um but you can drop me an email kate dot com thanks so much for listening if you like what you've heard follow our podcast and don't forget to leave us a review it helps us to make the show better and helps others to find the show as well as always if you want to join the conversation just find us on social media You can search for 11 Affairs or FinTech Insider or email podcast at 11affairs.com.

51:53Thanks very much. Goodbye.

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