Finding the Right Customer Data Balance in Fintech

In the world of fintech and financial services, customer data is a valuable asset that allows for personalized products and services, as stated in the article written by Alex Clere for Fintech Magazine. However, there is a delicate balance to be struck between collecting sufficient data and overwhelming customers, risking disengagement. According to research from software company Fenergo, a significant number of financial institutions lose customers due to a slow or inefficient onboarding process, costing the industry billions of dollars annually.

Alistair Dent, Chief Strategy Officer for data consultancy Profusion, explains that fintechs have shifted towards a simpler data collection approach. By offering a streamlined signup process, fintechs can attract more customers initially, even though it limits personalization. However, Dent suggests that the best approach is to provide customers with a choice. Making data collection optional while highlighting how each additional piece of information enhances their experience can encourage users to share more data.

While the quantity of data collected is important, the quality of data holds equal significance. Louise Potts, Head of Banking Customer Advisory Practice at SAS UK&I, emphasizes that organizations can offer better services when they possess high-quality data. In regions like Latin America where credit information may be limited, alternative data sets, such as utility bill payments or phone contracts, are being used to assess creditworthiness.

Jay Reilly, SVP EMEA at Precisely, suggests that the challenge for fintechs lies in ensuring the integrity of the data rather than its quantity. Fintechs must connect customer data across the organization and understand the context in which customers engage to gain insights into their lifecycles. Implementing strong data governance practices and a data quality management framework can address these challenges.

Compared to traditional financial institutions burdened by legacy systems, fintechs have an advantage in terms of their technology infrastructure. However, fintechs face the complexity of integrating data from various sources to provide comprehensive services. Data strategies that prioritize a customer-centric approach and enable easy access to complete customer overviews can foster improved customer service.

To enhance their data strategies, fintechs should focus on leveraging data to optimize and scale their operations. Investing in data analytics and insights can provide a competitive edge in a rapidly evolving and highly competitive sector. Effective data management, along with clear business goals, is vital to fueling business intelligence and making informed decisions.

Fintechs must strike the right balance in customer data collection, ensuring they collect enough information to personalize services while not overwhelming customers during the onboarding process. By prioritizing data quality, implementing strong governance practices, and adopting a customer-centric approach, fintechs can leverage data to enhance the customer experience and gain a competitive advantage.