In my works with fintech companies across ASEAN, I often ask them this question:
Will your fintech be able to onboard a Goldfish?
As you can imagine this is hardly a question, that anyone is expecting. The response from the audience is often a laughter, and sometimes an unhappy confused stare.
So, what’s the story around this question, let me answer that in 2 parts
Part 1: Why Goldfish?
Interestingly, the attention span of goldfish is around 9 seconds. Roughly 12.5% more than that of humans
Let’s call this customer segment as the “Goldfish” of your target audience.
Now, if you had to narrow down on a sub-segment that would be unhappy with the current state of the financial system
Will it be the “once-a-month paper statement” evaluators or these goldfish.
The Answer is
Part 2: Why On-boarding?
The 4 forces that are shaping most digital businesses:
1) Experiential Offering
2) The Network Effect
3) The Devil of Retargeting
4) The Regulatory Landscape (for B2C fintechs)
The USP of most digital products is in the experience they offer. Thus, the customers need to interact with the services to truly experience your value-ads, and that can happen only after the acquisition and the successful on-boarding.
The Network Effect
We live in a time when networks (facebook, linkedin, Alibaba, uber, etc) are more valuable than actual companies. This has naturally encouraged companies to build networks with the hopes of either profiting from
- transactions within the network;
- Economies of scale; and/or
- milking the data, via advertising
The Devil of Retargeting
In 1998, DoubleClick launched a product called Boomerang, allowing marketers to identify past website visitors and “re-target” them with ads across the DoubleClick Network. It’s now widely acknowledged as the first retargeting solution.
The theory behind this was simple, only 2% of web traffic converts on the first visit. Retargeting is a tool designed to help companies reach the 98% of users who don’t convert right away.
So, a prospect who is hopping around for solutions, ends up getting re-targeted by multiple vendors, which not only intensifies competition, but also increases the customer acquisition costs.
The Regulatory Landscape
As a Fintech, unlike other digital companies, you cannot rely on a single click social profile registration and sign-on.
As a part of the financial system, one of the many expectations from Regulators, Governments, and partner is to know your customer and meet AML/CFT requirements. This adds another level of potential friction for your customers, and a hurdle for you.
How these forces work in the real world:
Due to the values of networks, everyone is in the rush for acquiring customers, and that has resulted in customer acquisition costs escalating to multi folds of the lifetime value of the customer.
So, to acquire a customer, you first need to go up against, not only other fintech companies but also, deep-pocketed banks.
Let’s say the Goldfish has bought into your dream, and clicks the “REGISTER/BUY” button, you will still need to keep their attention away from all the retargeted advertisements from your competitors, during this process.
This includes the friction filled process of asking for customer documents, reviewing those documents, checking against AML/CFT requirements, addressing false positives, and responding back. On the other side, while your Goldfish await for your results, they are constantly being baited by re-targeted ads from your competitors.
So, if your onboarding process takes too long, you could
lose the customer even at this stage; or
acquire only partial assets from the customers; or
acquire a customer who has already committed his/her assets to a different provider.
While none of the other factors are in your control, your onboarding process is. To give you an example of how this can hit you hard.
Imagine the scenario of a wealth management start-up that charges 1% on client’s AUM and has a pre-drop customer acquisition costs of $150.
After the 40% drop, the customer acquisition cost increases to $250.
The average portfolio size of a robo-advisory customer is USD 14,382 and is expected to decrease to around USD 11,000 (Source) Thus, it will be a 2 years (after 15K of funds have been deposited, which can take from 3–9 months in itself) to recover just the customer acquisition cost and this is assuming everything else works well for all this time and your customer is not swayed away by the constant retargeting bait of your competitors.
Now multiply that loss by the number of customers you onboard or you couldn’t onboarding.
Therefore, if you are trying to win in the ultra-competitive Fintech space, Ask yourself, Can we onboard a Goldfish?
Watch this space for other articles in this series:
Article 2: Catch22 of fintech customer onboarding
Article 3: Let’s Go fishing
If you are a B2C digital business or fintech in Indonesia or Vietnam, connect with me on Linkedin to discuss how you can make onboarding a strategic advantage for your business?
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