Trust: a key commodity in fintech
Trust is the key commodity in fintech: do your customers trust you, and how can you trust them? With complex intermediary relationships and cross-border transactions, it’s never been more important to build a trusted brand.
The notion of trust is hard baked into financial services. What else is money, after all, but a story we choose to believe about the worth of otherwise worthless bits of paper?
We all choose to believe in money, but we don’t always believe in the companies that handle it on our behalf.
Many of today’s fintechs can point to the loss of trust in traditional financial institutions after the crash of 2009 as a factor behind their formation.
But trust is slippery. According to one Capgemini report, financial services customers have greater trust in the brands of traditional firms than those of fintechs. Incumbents have size, history and name recognition on their side. They are often seen as “too big to fail”. No fintech can yet say the same.
Which leads business customers and consumers to ask the same sorts of questions. Is my data secure? Is my privacy assured? Will my money be safe? Will they survive a crash? These issues can feel particularly acute in cross-border sectors, where customers often deal with companies based outside their familiar regulatory environment.
Fintechs can overcome barriers to trust in several ways. They can collaborate with incumbent institutions and gain trust by association. They can also create the idea of an inclusive community. Challenger bank Monzo does this especially well, as founder Tom Blomfield explains: “From the very early days we wanted to do a couple of things differently. One was involve our community in basically everything.” Customer forums and top notch customer support both play their part.
Perhaps the most important contributor to trust in this context is transparency. Fintechs have a head start here. Many were founded with the aim of simplifying banking procedures that had become misted over and mired in complexity.
A fintech that shines a light in the dark can quickly inspire trust.
But to retain it, fintechs must be squeaky clean. They must be transparent about the fees they charge and the calculations behind those fees. They must be fully compliant with data security and privacy regulations. For fintechs with a reputation to build, ‘blameless’ needs to be the default state.
British challenger bank Revolut found that out the hard way. The company is accused of a lax approach to the transactions of individuals on sanctions lists, though it disputes this. But allegations of a toxic work culture led to an open letter from founder Nikolay Storonsky: “I now know that there is much more to running a successful business than simply hitting targets,” he wrote.
As Storonsky doubtless knows, these things matter. The risk for many fintechs is that the rush to rapid growth can undermine one of their most potent weapons: an untarnished reputation for honesty, fairness and transparency.
A two way street
Trust is a two way street, of course. Fintechs also have to trust that their customers are who they say they are, which is a requirement of modern ‘Know Your Customer’ (KYC) regulations. Compliance doesn’t come cheap. A Hyperion report estimates that KYC processes cost between £10 and £100 per check.
And these checks lengthen the buying cycle, which can be directly costly to the business. The same report found that, in the UK, 25% of applications are abandoned due to KYC friction. If KYC and Anti Money Laundering (AML) requirements lead to slow onboarding or erroneously rejected applications, customers lose faith in the ability of fintechs to handle data efficiently, and trust suffers.
That – along with the development cost of reinventing the wheel – is one reason why more fintechs are turning to third party specialists to provide the extra layer of security between themselves and their customers, and make compliance and onboarding faster and more accurate.
“A fintech needs to establish sufficient trust for people to be prepared to trust them with their data and money….A single data breach could be fatal for a company’s reputation.” – Vanessa Richards, Chief Product Officer, Northrow
Says Vanessa,“Getting these basics right is important and they include treating your clients fairly, and not overcharging them with hidden fees or in a backhanded way. If anything, use the classic sales technique of under-promising and over-delivering.”