Keeping Up With Consumer Behavior
By Nicole Casperson
Consumer expectations and experiences are changing faster than ever.
The when, where, and how consumers engage with fintech tools has evolved dramatically – and fintech companies are struggling to keep up.
To understand the pitfalls, we must first look back at history – starting in 1969.
When the first ATM hit the scene in 1969, the way we experience money changed.
Before the ATM, we could only interact with our money during banking hours. So, the ATM revolutionized the “when” behind money experiences.
Accessing money 24/7 was a significant change in expectations, and fintech was right there to push the next expectation.
In 1995 Wells Fargo launched the first Internet banking site, revolutionizing the “where” behind money experiences.
Consumers can access their finances anywhere with WiFi and a PC.
Then, a company called PayPay launched in 1999, changing the “how” around money experiences.
PayPal revolutionized how we pay for goods and services and how we pay our friends back.
And the company keeps innovating. For example, PayPal is changing the “how” on everything else, like how we give to our favorite charities or interact with and spend our rewards points.
If you go on PayPal, they’re paying a higher amount for their savings account than most banks are right now.
So they’re changing how we save, spend, and shop. PayPal is proving one traditional financial service practice at a time that fintech can deliver all these features through a single app.
Here’s the thing about innovation: Many copycats pop up. While that’s great for providing more access to financial services via fintech, it also means consumers are saturated.
“How is fintech doing? Zero stars,” Fava said. “I’m so disappointed in retail fintech, highly would not recommend.
We don’t need any more apps. We are completely saturated. Your clients are completely inundated with choices that they don’t need.”
In 2020, consumers downloaded 4.6 billion finance apps.
In 2021, 573 million downloads in the United States, and during that same period, we spent a combined total of 16 billion hours on finance apps.
That’s the equivalent of 1.8 million years of human brain power spent on finance apps.
Why is this happening? Fintech apps focus on engagement and getting you to spend time there, and they’re doing it incorrectly – like sharing lousy advice.
For example, Dani shared a notification from a fintech app that reads: “Do you want to see what your friends are trading?”
“Have you met my friends?” she said. “I don’t want to know anything!“
That’s the advice that these apps are giving.
Take Venmo as another example. Venmo has you spending time inducing FOMO, so you can scroll through to see which friends of yours are hanging out with other friends who didn’t invite you.
Fintech tools are not where they need to be.
And consumer expectations are about to change again.
Consumers are wising up to the pervasive tech that has induced poor behavior.
What does that mean?
- We’re going to expect more
- We’re going to expect better
- We’re going to expect the what to change and we’re going to expect the whom to change.
What does that mean exactly?
Well, we’ve got this mess of fintech apps we’re supposed to trust by linking our accounts, taking loans, BNPL, and investing in fractional shares of things, which are great for access.
But these tools don’t get to the foundation of helping build wealth.
So we’re about to ask for better tools from companies.
And that means massive consolidation.
The companies you trust and spend the most time on, like Apple, Amazon, and Visa, will start embedding traditional financial services in a way they haven’t done before.
For example, Dani said she now has a savings account on her Discover app.
“Discover who wants me to have debt, they don’t want me to know that I can pay off my debt, but they have figured out that this is where our customers’ expectations are going, so they launched a high yield savings account that sits right next to your credit card balance.
Expect more of that.”
Expect companies like Discover to launch investments and financial planning.
American Express is already on its way. The finserv funded a startup BodesWell to build a financial planning and deliver it through their app.
Envestnet is launching what it’s calling ~ Embedded investing ~ to keep up with these trends and expectations.
It is an app that is deliverable inside another app.
So basically, it created everything Envestnet has: portfolios, rebalancing, consumer dashboard, and account opening, all through an embeddable app.
So when you’re on any finance app, you’ll be able to interact inside that app, open an account digitally and experience good financial advice and professionally managed accounts right through the app that you trust in the place where you’re already spending your time and money.
Envestnet is planning to bring this through an in-app experience where it asks a few questions about what you’re interested in about your financial situation.
Then, in less than five minutes, you can have all of your interests expressed and an account open digitally.
Envestnet plans to deliver the advice through thematic tilted portfolios that allow you to invest in your interests like exercise, relaxation, travel, community, diversity, and climate change.
All of these portfolios are available, but what’s great about them is that the building blocks of these portfolios are risk-based ETFs, fixed income, and broad market index.
Dani calls this “hiding the vegetables” and delivering good financial advice in a way that’s just as fun and engaging as a nudge from a retail investing app.
Envestnet will launch a pilot of Embedded Investing in January with a community bank in Missouri.
Long term, Envestnet plans for this product to be the lead generation for financial advisors by capturing consumers where they are spending their money when they are still small with $500 account minimums.
With the right mix of behavioral and embedded finance, there’s a significant opportunity to turn access into meaningful wealth building.
Learn more about how Envestnet is building to keep up with consumer behavior, here.