5 Steps For Choosing The Right Financial Service Provider
Companies like Amazon and Apple are increasingly inserting themselves into the context of financial services — and they are blazing a path for companies in other sectors, such as retail, to diversify revenue streams and increase customer loyalty. Read more and find out why companies are so attracted to the possibility of offering financial services.
The world is entering a new age of banking. With fintechs taking up a larger portion of the market year over year, we are witnessing companies from totally different segments beginning to incorporate financial services into their day-to-day operations.
This is due in large part to the rapid spread of the banking-as-a-service phenomenon.
You’ve probably noticed that more and more companies are offering some form of financial service. Whether it’s a store credit card or a digital wallet, companies are dipping their toes into the financial services market, and it’s becoming increasingly evident that this is no fad, it’s here to stay.
While you may think that services like this are something only available to big players, that couldn’t be further from the truth. It has become increasingly easy for companies to provide their customers with financial services, but the challenge lies in deciding what kind of service to provide.
In order to help you find out what you should be looking out for, we’ve created a five-step solution to choosing the right financial service for you to provide to your customers!
5 Steps for Choosing the Right Financial Service
In the market of financial services, there are a ton of options to choose from. Whether it’s a digital wallet or simply offering store credit, the important thing is making sure that the service you offer is right for your company and your customers.
Instead of simply listing out all of the options available to you, we thought it would be best to take a more holistic approach to make this decision.
The goal is to build up a model of what your financial service should achieve, how it should operate, and what the best way to present it to your customers is. Let’s begin.
1. Define the purpose of your action
Providing your customers with a financial service isn’t something you do simply because the competition is doing it. The goal of your action should be clearly laid out, both for your company and your customers.
The easiest way to define this purpose is to tie it to one of the many benefits that financial services provide. Once you know what you want to get out of this venture, you’ll have a better idea of what kind of financial service you want to provide.
Some of these benefits include:
• Gaining proprietary data on consumer behavior
This is an excellent way to better understand how your customers think and why they act. Most financial services offer this benefit, but the best way to track this kind of information is through services like lines of credit or digital wallets.
• Creating new revenue streams
Any financial service that incurs fees or interest can provide your business with a brand new revenue stream. Diversifying your revenue streams can be extremely beneficial for companies that have a limited revenue pool to collect from.
• Increased customer loyalty and retention
This is also an excellent benefit of digital wallets and credit cards. Many companies provide kickbacks or benefits for customers who use their credit card services. Amazon, for example, offers exclusive deals to Amazon cardholders.
• Increased independence from banks
Companies like Apple are envisioning competitive advantage and increasingly incorporating financial services architecture to its operations in order to gain more autonomy from financial institutions. The recent collapse of the Silicon Valley Bank, and a rising fear of companies that one day their bank will also go bankrupt and all their investments along with it, is accelerating the path towards this transformation.
• Staying ahead of the curve in a market dominated by financial services
More and more companies are beginning to offer financial services. The pace of this decentralization is rapidly increasing, and it might be a good time to throw your hat in the ring before customers start to rank their favorite non-bank financial institution.
2. Create a true value proposition for your solution
Customers are understandably skeptical of investing their money into financial services provided by institutions that aren’t traditional banks. But the tide is turning. Regardless of how customers will view this change in the future, it’s important to craft yourself a strong value proposition.
Creating a unique value proposition can be difficult, but there is a ton of information as well as some excellent examples from other companies online. It can help to focus on what makes your solution different from the competition. Focusing on ease of use (navigation) and convenience (ease of access).
If you’re looking for a sure-fire way to develop a proper value proposition, we’ve actually written an excellent article about it which you can find here.
3. Defining the key features of your solution
When it comes to defining what key features and functionalities your service should provide, the best way to go about it is by making a minimum viable product. But, before you build it, we highly recommend interviewing your customers in order to better understand what their needs and pain points are.
This step will help guide you as you determine what you want your final solution to look like. Learning from the process of testing, failing fast, and iterating to find success is a principle that we use in all of our projects.
4. Test your solution with real users before launch
You’ve probably heard of this statistic before: 95% of all product launches fail. This is not only a shocking statistic, but it’s unfortunately true.
You can spend hundreds of hours and millions of dollars creating the perfect suite of financial services for your customers, only to have it fail on ignition. The best way to get around this issue is to test your final solution with real users in small batches to make sure that there isn’t anything you’ve overlooked in your research and development.
If you’re looking for a fool-proof solution to making your product launches a success, MJV actually offers a Business Strategy Sprint for just that. Take a look if you’re interested!
5. Choose whether to outsource or build the solution internally
When it comes to actually building your financial service solution, you have a big decision to make, and that’s how you’re going to build it, or rather who is going to build it for you.
The three most common ways of acquiring financial services are through mergers and acquisitions (M&As), white label solutions, and building the platform yourself in-house.
Let’s quickly go over how each solution works as well as their pros and cons:
→ M&As
M&As are usually something reserved for larger companies and institutions. When an industry giant wants to adopt fintech solutions it will usually just buy out another company that already specializes in financial services. This option is also available to smaller companies if they decide to merge with a smaller fintech.
Pros
• This solution can provide companies with a spectrum of specialized employees.
• The solutions offered by the fintech are already in place and ready to go.
• Strong long-term financial service solution stability.
Cons
• Acquisitions can be incredibly expensive.
• The two companies might have wildly different cultures that struggle to adapt.
• Department redundancies can lead to massive layoffs.
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→ WHITE LABEL SOLUTIONS
A white label solution is when a third-party company produces software that your business can use and has the right to distribute under your own name. This means that when the user finally gets their hands on the finished product, it will seem as though your company produced the solution in-house.
Pros
• One of the fastest ways to get a financial service solution on the market.
• Having the solution bear your name means that customers will automatically associate it with your company.
• Simplicity of production and less risk/cost when it comes to development.
Cons
• Limited control in the development process.
• All data for white label solutions are stored on the cloud, which could be a problem if your company handles sensitive user information.
• Apple once banned white label solutions from their app store, due to the fact that competitors could simply buy the same product right off the shelf.
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→ IN-HOUSE
Building a financial service in-house is exactly what you think it is: getting a team comprised of your own employees to build the solution themselves. This is a solution that can give your company more autonomy and control over the finished product, but as with all things, it comes with its own drawbacks
Pros
• Full control over the development process.
• Your final product will end up being more adherent to your company’s needs and values.
• Long-term maintenance and adjustments are much easier to do when the people who made the platform are just a few offices away.
Cons
• Producing anything in-house will always be more expensive than paying for a white label solution.
• Depending on your company and industry, your team may have limited expertise when it comes to producing a financial service platform.
• You might have to find and hire talents with financial service development expertise and experience, which will increase costs and the time it takes to go to market.
Build with MJV!
There is actually a fourth solution to this dilemma, and that’s outsourcing your financial service development. MJV has extensive experience in producing digital wallets and other financial service platforms for our clients.
With the option of both nearshore and offshore outsourcing (we actually recommend a combination of the two), we can guarantee that you’ll have the right experts for the job, no matter where they are.
If you’d like to know more about what MJV can do for you, we’ve recently released a case study where our team assisted a leading telecom company in developing its very own digital wallet solution.
If you’re interested in working with us or are just looking for some more insight into the possible solutions available to you on the market, don’t hesitate to reach out to one of our consultants.
Remember, you don’t have to go it alone.
