How financial services apps help consumers engage more positively with providers

Everyone is familiar with the saying, ‘creature of habit’ and that, it appears, is for good reason.

According to Next Gen Personal Finance, 45% of our personal activity is the same every day. This has been exacerbated by lockdowns as we have had even less opportunities to vary our behaviours.

The figure is important when it comes to being able to tap into habit-forming behaviours to enhance commercial opportunities with financial services products, in particular across digital platforms.

Being able to understand more about the motivations for human behaviour, the triggers and reasons for doing what we do, can be powerful tools for brands seeking to engage with consumers in an immersive way.

Here we look at how financial services can employ behavioural science when it comes to enhancing digital experiences for their customers.

Habit Loops

A useful start is to think about how habits are formed and facilitate our daily life. For example, we all instinctively know that when we get up in the morning, one routine is brushing our teeth to feel fresh and clean as we start the day, and to ensure good dental hygiene. It becomes natural and effortless to us.

From here we can deconstruct the habit into three parts: a response (brush your teeth) to a given cue (getting up in the morning) that delivers a reward (feeling fresh and clean and having good dental hygiene).

So for a brand seeking to get its product or service into a similar habit loop, taking a look at things through a behavioural lens can really help in identifying opportunities to establish long-term positive relationships with customers as they experience rewards through repeat behaviour.

The response element means identifying the behavioural change you are trying to implement. The cue refers to the trigger element, which reminds the customer to take part in that behaviour. And the reward is about creating a satisfactory result for the user that makes them want to repeat the behaviour again and again, forming a habit.

Shaping habits vital to winning the fintech battle

Saying the last 18 months have interfered with normal routines is quite an understatement. Banks closed and then reopened with partial hours, physical footfall plummeted and transactions moved online. Internet banking and new online banks took off exponentially.

According to a report from Adjust and Apptopia, payment apps underwent significant growth in 2020, with sessions increasing by 49% globally and by 75% in Japan, 49% in Germany and 29% in Great Britain. Multi-purpose ‘super apps’ like WeChat are also continuing to grow and dominate the mobile payment space, a trend which is emerging in markets beyond APAC where it’s already very much part of daily life as you pay for shopping and taxis via the same app with which you connect with friends and follow news feeds.

Investment apps also boomed last year, seeing an 88% growth.

With millions of apps available and many deleted every day to save storage, there has to be a good reason to both download and continue to use one. Becoming part of the habit loop is one of the best ways to achieve this.

Consumer loyalty and acquiring the right users

Acquiring high numbers of new users is only effective for fintechs if they are able to make them stick around and continue to use the app. An introductory offer may help short-term goals for app downloads, but it’s onward consumer loyalty that is the major metric for later-stage companies. Sticky users will stay on the platform for years and their engagement increases over time.

This means playing the long game, as high payback over time offsets historically rising acquisition costs to the point that these companies can become profitable on a per-user level.

Often apps will be created with lots of great features and customer benefits that might be well communicated at the very beginning when users are being encouraged to make the initial download but can then quickly be forgotten unless a clever strategy is employed for reminding users that they are there.

It will be important to ensure that content around the benefits of using the app is regularly refreshed and then communicated effectively. Users should be prompted with new ideas and reminders of why the app is useful in their daily lives, encouraging them to return to it.

Credit Karma, which gives users free credit scores and reports, launched “Stories” for this very purpose – a newsfeed-like feature to offer personalised tips and advice on how to achieve financial goals. These updates are delivered in a timely way to ensure that they remain relevant to the user at different points in their year, such as ‘it’s now a good time to shop around for new and cheaper car insurance’. This helps the app function not as a one-trick pony, but as an accompaniment to life that offers added value to the user and regular opportunities for the app to communicate with them in a helpful way.

Becoming part of a regular cycle

Finances are on most people’s minds on a daily basis. This offers a great opportunity for fintechs to create new services that help to take away some of the burden of managing personal finance.

Budgeting apps like PocketGuard and Mint offer free budgeting support, for example, connecting credit and saving accounts and tracking and categorising transactions. They will detect recurring bills and income in one place and send reminders when payments are due, as well as details on how much budget is left to help prevent users from over-spending, or to reach their saving goals.

In doing so, these apps position themselves in the regular cycle of a user’s monthly income and outgoings and make them a valuable tool that users will come to rely upon.

Status Money takes this in a slightly different direction by incorporating a more gamified and social approach. It enables users to compare their spending to those of similar backgrounds with similar incomes — all anonymously. It presents budgeting like a competition, giving virtual badges as rewards when users receive likes and comments on their posts, and when they follow the app’s advice to cut back on their spending or save more each month.

The goal isn’t to encourage competition so much, but to put user money management in a more ‘social’ context that encourages people to cooperate and help each other make smarter financial choices. This taps into the psychology for a mindset of user that finds greater motivation in these types of social interactions, offering an alternative path to the reward.

Future proofing

Financial services are increasingly using apps to maximise consumer engagement and ease of reward.

By planning on how you pique your target audience’s interest, what behaviour you want to change and how you can offer rewards, you will increase the chances of your app becoming an important part of a behavioural loop and a valued accompaniment to daily life.