Experience the Age of Personal Finance Transformation
The Age of Experience is profoundly transforming markets and will do so even more. More than ten years ago, when I was Chief Marketing Officer at ING, I wrote my book
‘Do you have the equalizer? Costs!’ supporting my fellow CMOs with practical approaches to winning the hearts and minds of their clients. The book reached the top 10 of the international marketing bestseller list in 2009. Since then, I have been passionately developing financial AI solutions to revolutionize the customer experience. My fascination with the subject exploded due to the disruptive impact and ubiquitous availability of interconnected devices on customers, businesses and markets.
Nowadays, people are online almost continuously, researching products and solutions, watching videos on Instagram, playing games, sharing fleeting moments on Snapchat, posting photos of exciting experiences on Facebook, and buying things. . For this reason, customer experience has become a top priority for CEOs. A remarkable customer experience is essential to the sustained growth of any business. A positive customer experience promotes loyalty, helps retain customers and encourages brand promotion. Today, it is the customers who have the power, not the sellers. In this context, Apple has even abandoned all KPI’s to replace them with just one: the customer experience! Apple’s customer experience strategy focuses on super persuasive marketing to boost Apple customer engagement. Building effective customer engagement is a subjective matter, but buyers love Apple products and become loyal customers.
However, most companies are not there yet. They cling to doing things in the old-fashioned silo way because they lack vision on how they could intelligently strategize customer experience in this interconnected world. As a technology entrepreneur, I can recognize that creating business models, solutions and services obsessed with AI-driven customer experience is not an easy thing. But, for those who want to prevail and build sustainable business growth in the years to come, there is no other choice! In this blog, I will focus on one of the most promising customer experience strategies: integrated finance.
Embedded Finance as a Major Profit Pool in the Age of Experience
Integrated finance refers to the seamless integration of financial services adopted by non-financial corporations. This merger of non-financial entities and integrated financial services has revolutionized the way we interact with money and businesses.
Hundreds of millions of customers have already benefited from integrated financing due to the attractive rewards offered by technology platforms for payments. Omnichannel digital payments, mobile wallets, and buy-it-now-pay-later are forms of integrated finance. Buy-now-pay-later (BNPL) covered 6% of all digital transactions in 2021 and is expected by Accenture cover 13% of all digital transactions in 2025. Bain Capital Ventures sees the opportunity to expand personal finance into these integrated environments, from payments to insurance, lending and wealth management into a $7 trillion market by 2030. Driven by this BNPL growth, a shift strategy from upselling financial products to integrating the right product at the right time into the customer’s buying journey is emerging.
Impact of integrated finance on banks
This trend poses a great threat to traditional banks to disintermediate by non-banks entering the market at high speed.
McKinsey estimates that global banking revenue pools will fall by $3.7 trillion (14%) from pre-covid levels already by 2024. Banks must decide now their role in this highly interconnected world and explore new business and revenue models such as banking-as-a-service (BaaS). The opportunity to bring finance into non-financial environments has everything to do with trust, or lack thereof! These days, consumers and businesses already trust companies like Google, Amazon, Facebook, Ikea and Tesco more than their bank when it comes to financial matters.
On the other hand, the rapid growth of this market also entails increasing risks for consumers and entrepreneurs. The poor financial knowledge and financial skills of young people, for example, must be detected before buying expensive goods digitally with loans. Additionally, understanding personal traits like their level of materialism and need for instant gratification helps provide affordable financial solutions in their lives or, even better, improve their financial health. In a world of hyper-personalized digital customer experiences, a deep understanding of someone’s lifestyle helps protect against financial risk, but also helps improve financial health. AI Credit Decision Platform as a Service (CDaaS)
TipRobo for example, found in their 2.5 million rated consumers and small businesses that there is a wide range across geographies when it comes to their scores on spending habits, financial skills, attitudes towards debt, the desire for materialism and instant gratification. Scores that impose a different lifestyle, risk and opportunity profiles.
However, most providers are not yet advanced enough to apply a wide range of behavioral and attitudinal data for in-depth customer profiling! Currently, regulators are therefore implementing regulations to protect broadband customers. UK regulator FCA has announced the introduction of “buy now, pay later” credit check regulations later this year. In addition, the European Banking Authority’s guideline for granting and monitoring loans was further developed last year with guidelines for assessing client affordability. The guidelines specify how credit facilities are granted and monitored throughout the customer life cycle. Over time, the proportion of borrowers in deficit will decrease as lenders calculate their income, cost of living, and total loan repayments at the time of the loan. Alternative data and AI are available to facilitate automatic and secure consumer decision-making that helps consumers achieve and maintain a healthy financial life. I think lenders of all kinds should take advantage of this incredible opportunity!
Key success factors of integrated finance
From my digital business development work at Innovations in e-cology (helping targeted brands with business development and growth of smart customer experience strategies and solutions), I’ve learned time and time again that companies must fundamentally reinvent themselves and develop new capabilities to be successful. First, the usual “slow speed to market” must be replaced by “continuous innovation approaches” to keep pace with ever-changing preferences. Continuous innovation around a corporate goal that makes this world a better place. Second, companies need to replace the culture of the uninvented here with the ability to create hyper-personalized experiences with ecosystems. Gartner research shows that organizations that invest in personalization typically outsell their competitors by 30%. Third, companies need to turn their siled historical databases into accessible golden data lakes. And last but not least, businesses need to embrace AI and real-time data to create hyper-personalized customer experiences.
Fortunately, most CEOs I meet recognize that artificial intelligence has the potential to completely change the way their organizations work. Recent research by Paolo Alto based
Samba Nova Systems even reveals that 78% of US CEOs see AI as an important revenue driver as early as 2022. An unimaginable, yet exciting, digital future awaits us! Retail CEOs envision a future in which retailers deliver personalized products before customers even ask for them, perhaps even the same day the products are made. Bank CEOs envision a future in which they provide predictive financial assistants and the best-fit products instantly when their customers need them. These kinds of scenarios may sound like science fiction, but the AI and data to make it possible already exist. Despite growing investment and excitement around AI driving innovation and revenue, many organizations are still in the early stages of implementing AI initiatives and are facing challenges. various challenges to scale their AI initiatives.
According to my calculations based on Analytics Insight & Forbes (2022), the state of the data-driven business in 2022 is:
- 7% do not currently use AI, but are considering it
- 14% have tested some proof of concept with limited success
- 21% have some promising proof of concept and are looking to scale
- 33% began implementation with limited AI use cases
- 25% have fully AI-enabled processes with widespread adoption
- 0% have one or more fully AI-powered full domains
Obstacles to overcome to capture the dream future of AI
What hinders this dreamed future is that companies have not figured out how to fundamentally change themselves to respond to it. To be fair, most have worked hard to integrate digital technologies, sometimes truly transforming the way they serve their customers and craft their offerings. However, to fully grasp the promise of AI-powered experiences, companies need to rethink their business models, the way work gets done, and the data intelligence that supports them. They can’t just plug AI into an existing process to automate it or add insights.
It takes courage, vision, strategy, and a lot of time to create and scale engaging customer experiences. For example, the successful training of AdviceRobo AI credit score cards took a total of five years during which we trained models with over 10,000 different data points from open banking, social media , psychometrics, internet behavior, mobile and biometrics on arrears, default, refund, fraud and unsubscribe. It really is a combination of courage, art, science and perseverance! But what a fantastic prospect for every business to have the opportunity to become highly valued by its customers. What a blessing for businesses determined to work day and night to become a leader in smart customer experience strategies and solutions that get there. Giving your customers cool instant experiences at the right time and place is the name of the integrated financial game! Let’s have super cool & personalized and rock & roll experiences!