Rethinking fintech growth with a product-led approachBy Mark Velthuis
As we continue to experience economic uncertainty across the world, the Asia Pacific and Japan (APJ) region hasn’t been spared from the volatility.
Whilst APJ economies, including Singapore, are at lower risk of a recession, they will see a spillover from the broader global slowdown. The fintech industry, in particular, is facing a new set of challenges. The industry saw incredible growth as a result of the digital transformation boom that happened during the pandemic. Virtually everything went online and the way people managed their finances followed suit. Unsurprisingly, fintech saw its global users increase over the last year, hitting a peak of 22% year-over-year growth. Singapore also ranks first amongst fintech markets in the region, hitting a three-year high of US$4.1 billion in funding.
But the Singapore fintech industry has become highly saturated—with many products built to do the same thing. Coupled with the economic downturn, it’s no surprise that leaders are looking for the keys to unlock retention and growth – with little to no additional capital needed.
When there isn’t much to invest in, what you choose to invest in becomes even more important. For fintech at a crossroads, the top of the agenda is refining their growth strategy for maximum impact, all whilst stretching their dollar. Thankfully, for businesses looking to achieve that, there is already a blueprint to guide them on their journey.
Making smarter bets with product innovation
Investing in your product is the best way to drive sustainable, long-term growth. Investments in product compound over time, but short-term fixes like marketing campaigns don’t. By making forward-leaning investments in products, fintech leaders can build long-term durability and differentiation in their businesses. This will not only keep existing customers happy, but it will also help fintech organizations stay ahead of the pack—both from new peers in the market and legacy financial institutions.
The most successful fintech organizations understand that their product can become their number one revenue driver. In a digital-first era, average products can’t hide behind strong sales and marketing. This is particularly true in fintech organizations in APJ, where many products are failing to impress. That puts pressure on fintech companies to create immersive, meaningful consumer experiences that will stand out from the crowd. Good products no longer cut it. But great products will become your most efficient distribution channel and competitive advantage, especially when resources are limited.
Shifting gears: From customer acquisition to retention
Acquiring new customers is not an easy feat and can quickly become expensive. In addition to low retention rates, fintech apps, and tools are known for their high customer acquisition costs. In tough times, organizations must recalibrate their acquisition-focused strategy and focus more on retention. This is especially true in Southeast Asia, where the digital economy is outpacing other markets. Consumers are flooded with apps, often leading to short attention spans. The average app loses 80% of its users within the first three days, so organizations must find a way to show users value immediately.
To have a better understanding of how customers are — or are not — engaging with a product, businesses need to align on key performance indicators. This includes metrics like churn rate and overall retention rate, but that's just the beginning. Looking at data around voluntary versus involuntary attrition helps teams understand the conditions in which churn occurred. With retention, they can look at metrics like N-day retention, which measures retention on a set day, looking at how many users performed a specific action on day 1, day 7, and so forth. This KPI is especially helpful for fintech organizations looking to create weekly or daily habits within their user base.
As the adage goes, “customer is king”. If customers are forced to adapt to technology, rather than technology adapting to them, they’ll leave. Today’s crowded fintech market remains a battle for customer retention, especially given consumers’ economic concerns. By aligning on KPIs and leveraging data to better understand the customer experience, fintech companies can build long-term loyalty and increase customer lifetime value, driving profit, not just retention.
Leveraging experimentation to drive product-led growth
In an economic downturn, it might be tempting to slow down experimentation, if not halt it altogether. But teams who don’t experiment are prone to making the same mistakes over and over again. This creates a poor user experience that is more likely to result in churn.
Not to mention, product experimentation is one of the best ways to drive efficiency. And that's something every business is thinking about right now. A product test might show you that a resource-intensive product bet isn't worth the work. Or in other cases, it can help a team convince engineers to dedicate more time to a feature that's increasing sign-ups or repeat purchases. In this economy, businesses should only invest in high-reward activities, and that's exactly what product experimentation enables.
In the fintech industry, there will always be larger macroeconomic trends at play, whether that is changes in consumer behavior, new regulations, or climbing interest rates and inflation. The companies that embrace this change, set flexible strategies, take risks, and learn from their experiments will be the ones to win.