Consumers are seeking banking products that really know them from companies that should be even more down on the beat. Knowing your customers has evolved into the deciding factor between companies that fly and fall, so how can providers keep their finger on the pulse of personal?
Here Ahon Sarkar, general manager of Helix by Q2, studies the rising demand for personalised financing products, and how the industry is meeting that demand through the use of embedded finance and cloud-native tools.
Launched in February 2022, Helix is the banking-as-a-service (BaaS) platform of Q2 Holdings, a provider of digital transformation solutions for the banking and lending sector.
As a cloud-native core purpose built for embedded finance, Helix enables any company to offer differentiated banking products that are personalised to the unique needs of their users.
While Q2’s digital banking platform is focused on serving banks and credit unions, Helix enables fintechs, technology companies and consumer brands with the platform and financial institution partners needed to embed banking into their ecosystems.
In this article, Sarkar discusses how personalisation is helping to make banking as customised to the user as algorithms are for social media platforms:
This Time, It’s Personal: The Future of Tailored Banking
If you open your phone right now and look at your most-used apps, what do you see?
My guess is you’ll probably see some combination of messages and calls, work apps, and various tech companies like Facebook, Google, Instagram, Netflix, TikTok, Amazon, YouTube, Reddit and more. Ask yourself – what do all those products have in common? They’re built around you.
Over the last 20 years, the tech industry has undergone an evolution – today, the products that drive the most engagement are not those that simply offer a service, but are built around understanding the people that use their products and solving real problems for them.
Personalisation drives engagement. As humans, we love to be understood and that context in turn makes the products we use more useful to us. It’s why you keep watching new recommended shows on Netflix – they know what genres you like and show you custom images, text and suggestions based on that.
It’s why your online ads seem to know what you’ll need next – they saw you searching for it and figured out what you’re probably looking for. It’s why TikTok’s algorithm has been so effective – they’ve become truly efficient at figuring out the niche content that different people find watch-worthy and pulling it from every corner of the world to a phone near you.
But it’s not just the tech industry. If you think about it, this concept exists in virtually every industry in some way. It’s why you probably have the same person cut your hair every time, why you love it when your local coffee shop asks if you want ‘the regular,’ why you’ve been going to the same restaurant for years.
Why, then, hasn’t this existed in banking?
Today, if you walk into most banks, chances are you will get offered a couple of one-size-fits-all products that are effectively the same as what you’d get at a different bank down the street. The products don’t consider any additional context about you, they aren’t really personalised to you, and they generally don’t change that much as you use them over time. Case in point: my bank account today hasn’t changed one bit since the day I got it more than 10 years ago.
But that’s not entirely the bank’s fault – until a few years ago, the technology that existed to create banking products only gave them the ability to define ‘ProductIDs’ – Product A had certain attributes (think the free entry-level account), Product B had certain attributes (think the ‘premium’ account for people with high deposits), and that was that. Accordingly, people were bucketed into Product A or B when they signed up. That doesn’t leave any room for nuanced understanding.
Embedded finance and cloud-native cores
In the last five years, we’ve seen a revolution within the world of banking. Companies like Helix have designed new banking platforms that let tech companies and brands (who have existing context about you from user data) design unique banking products built around you. Instead of being stuck to “ProductIDs” and legacy workflows or processes, they can now design the product around the specific needs that you have as opposed to generalising you as a ‘consumer’ or within a certain demographic.
Who cares? What does that actually mean for me?
It means you can get unique banking products from the companies you love to use (where you might not even expect it) that consider your specific context and offer you a better product because of it.
Imagine if you were a Lyft driver and Lyft could help you manage your finances, earn rewards at places like gas stations that you use a lot, and get access to capital based on your driving history with them, not just your financial history or FICO score.
If you’ve been driving for Lyft for a long time, they should be able to use that context (and, more importantly, trust) to help you get access to better financial products that are tailored to you without necessarily taking on additional risk. You’re not getting denied because of ‘volatile income’ as a self-employed worker since you’re getting your financial services from one of the companies that understand you best.
Or what if you were an employee whose employer used Gusto? By signing up for Gusto Wallet (its banking product powered by Helix), you could leverage your relationship with Gusto to put more money in your pocket.
If you had an emergency and needed cash, instead of going to a payday lender and paying exorbitant interest to compensate for your perceived ‘riskiness,’ you could get a fee-free cash advance from Gusto, who knows you, knows you’re still employed, and even knows how much you’ve earned this pay period.
What that means for you, if you’re living paycheck to paycheck like many, is five to eight per cent of your income going to your pocket instead of towards lending fees. Who knew building a unique product and tailoring it could drive such impact?
This evolution is only at its beginning. If you think about it, most of the companies you interact with understand you well and could use that context to build financial products that are useful for you. The wave of embedded banking that has made its way from payments companies and investment companies to lending companies and payroll companies is pushing into new realms: insurance, gaming, marketplaces and more.
Embedded finance brings a better economy for all of us. One where our products understand us, solve real problems for us, and enable everyone to access financial services, no matter where they live or how much money they have. It means the end of standardised, ‘one-size-fits-all’ and the beginning of a tech transformation that will undoubtedly change the face of finance to come.
It means we’ll have products built around people instead of retrofitting people to products, and that’s a change that I’m eager to see.