The fintech industry, also known as the financial technology industry, is growing rapidly. Arguably, fintech has been around for years—since the days of early mainframes. Today, this industry is mostly known for high-tech startups that focus on developing financial service applications. Buy Now Pay Later (BNPL) is a key example of how fintech has developed over the decades, and how this is now shaping consumer purchasing behaviors.
At its core, this innovative industry is ingesting and outputting a vast amount of data that can be leveraged for further technological advancements, and in turn, shaping consumer trends. With fintech as a key driver of digital acceleration, data quality is becoming increasingly important.
In this article, we will uncover the fintech industry as it stands today and where data quality plays a key role.
Today's fintech company
Fintech companies have become engines of innovation for the financial services industry, able to adapt more quickly than incumbent banks and credit unions while focusing predominantly on value-added products and services.
Their agility stems from the fact that they are mostly digital-first organizations, not subject to many of the regulations that banks must comply with, and without legacy systems to modify and support. In addition, they frequently target new customer populations like millennials, capitalize on the rapid growth of mobile internet usage, and benefit strongly from collaboration with binding banking partners who share market wisdom.
Interestingly, the growth of fintech is both a challenge and an opportunity for existing institutions. Here’s why:
- Fintechs are increasingly competitive: Third-party mortgage, auto loans, budgeting, BNPL unsecured credit, and more have impacted the market share of specific bank and credit union business lines, causing those relying on those lines for margin and growth to change their product and risk strategies.
- Opportunity is for digital expansion: By partnering with or acquiring fintech and obtaining access to their applications, banks and credit unions can rapidly roll out new capabilities such as mobile banking and person-to-person payments. This expansion not only grows a bank’s digital ability to meet consumer needs but enables them to keep business running during the pandemic.
The future of fintech
The future: Embedded finance. This means financial services are merging, acquiring, or partnering with fintech to focus on single application, niche, and new market opportunities.
What does this mean? Super applications are on the horizon. These applications include account management, budgeting, payments, savings and investments, lending, and more. Does a digital wallet sound familiar?
There is a digital wallet in the palm of your hand, and it’s about to get even more technologically forward. Not only will this hold account balance information but also details of financial commitments and income. In addition, you can input your shopping wish list and be informed when items become available or go on sale, and whether you can afford to pay immediately or need to finance the transaction. That’s only the beginning, a digital wallet has the chance to give investment advice based on your risk profile, and so on.
To continuously meet requirements, support a broad range of use cases and technical partners, and be responsive to rapidly changing market needs will require super app developers with the technical skills and scale to deliver tens of thousands of software releases annually. Will that be the large financial institutions themselves or firms they have acquired? Consumer-facing software applications are not necessarily their forte; finding it acceptable to take days to transfer funds or provide results will not meet market needs or operating in business siloes. Yet managing regulatory compliance will continue to be vital. In other words, if you are a financial institution, now is the time to build digital applications or partner with fintechs.
The imperatives of both greater profitability and growth are driving the need for scale, to improve efficiencies, and expansion into emerging and adjacent segments, to increase customer acquisition and growth.
Why trusted data for fintechs
A key question: Will these super apps be provided by banking organizations, fintechs, or by tech giants like Apple, Google, and Amazon? The answer depends on your point of view—and who consumers trust with their money management and personal data.
To stay ahead of the competition and sustain growth, fintechs like BNPL lenders need to build a trusted consumer and banking relationship based on strong security and a satisfying customer experience. This starts with reliable data and a robust data management operation. Why look to your data to manage your financial business?
- Data agility and business agility go hand-in-hand
- Consumer data quality and comprehensiveness enable a better customer experience
- Standardized data formatting and accuracy support regulatory compliance
Top benefits
Data accuracy will continue to be a critical success factor. With apps operating in real-time, making quality personalized decisions and recommendations by leveraging AI and ML algorithms, the quality and completeness of the underlying data must also be continuously maintained and automated.
Data quality is not only an investment for the long term, but it also delivers immediate benefits to fintechs and BNPL firms.
- Personalized customer experience
- Improved fraud prevention and authentication
- Increased competitive edge
- Reduced risk and costs associated with duplicate consumer data
- Better match rates when consolidating records or using third-party data or services
How to get started with data quality
Answer: Data automation.
Successful firms must be adept at automation, especially when it comes to their data. Automating the data workflow will be key to eliminating errors, speeding development cycles, and ensuring real-time high performance. Automation must be used to ensure consistent data quality, the creation, testing, and quality of algorithms and software, the rapid deployment of new releases and capabilities, and the delivery of real-time results.
How Experian can help
The journey to developing trust and delivering incredible consumer value is one that Experian has been on for many years. We understand that it takes complete dedication—our data quality solutions and consumer insights can help.
Our data verification solutions ensure the data you collect from consumers is accurate and that it can be maintained as such over time. Our data quality platform supports your data governance program, providing user-friendly ways to process, standardize, profile, harmonize, and deduplicate datasets dynamically, ensuring you always have the right reference data for authentication and personalization. And our wealth of consumer data attributes, derived from the largest repository of all US credit transactions, can ensure that you can have a real-time understanding of your application users’ characteristics.
