How Behavioral Finance & Customer Experience Drive Fintech in 2024?

Understanding behavioral finance gives fintech companies a competitive edge! How do they do it? By using customer feedback and applying the most effective customer experience techniques.

We’re all driven by emotions, especially when it comes to money. Just like you, I enjoy seeing my card balance grow and feel uneasy when it falls. But beyond the numbers, what really connects us with banking apps is the feeling we get when checking our balance and managing our finances. By building a product that meets user needs and emotions, your business can grow quickly and offer innovative solutions.

In this article, I’ll explain what behavior finance is, why it’s important, and how to implement behavioral economics into a banking customer experience strategy that delivers results for your business.

Understanding Behavioral finance

Behavioral finance combines psychology and finance to provide insights into customer behaviors. The study helps us grasp why people make specific financial decisions, emphasizing the emotional aspect over logic and a rational mindset. It’s primarily used to analyze investors’ actions. But understanding people’s irrational financial behavior isn’t just about investing funds. 

Behavioral finance sheds light on how people generally behave with money, such as when using a digital bank. Use these insights to design services that cater to your customers’ needs and facilitate smarter financial planning and decision-making.

Common Biases in Behavioral Finance

If you create financial management products, delving deeper into common behavioral finance biases influencing users’ financial decisions is a must. This understanding not only assists in constructing a good product but also makes it top-notch or even “magnetic” for users.

Anchoring Bias

Anchoring bias means that users rely heavily on the investment or financial advice they receive. This reliance often leads them to ignore their own financial goals, risk tolerance, or market conditions.

How to Address This Bias?

Implement features like interactive program guides or pop-up reminders. These instruments prompt users to explore various investment options before making decisions. With these prompts, users can make more informed choices aligned with their financial objectives.

Confirmation Bias

Confirmation bias occurs when users overlook investment opportunities or fail to notice warning signs of potential risks. This happens because they rely solely on their existing beliefs or knowledge.

How to Address This Bias?

Use personalized recommendation algorithms in your fintech products. These algorithms analyze each user’s financial profile, risk tolerance, and investment goals.

Additionally, create educational content or alerts to encourage users to explore different perspectives before making financial decisions. 

Such simple things build trust and loyalty with users because they see your fintech platform as a helpful tool that meets their needs and assists them in reaching their financial goals.

Herd Mentality Bias

The herd mentality bias relates to people who blindly follow the crowd, assuming that popular decisions are correct and rational. This means that users may follow trends or investment strategies without fully understanding the risks involved.

How to Address This Bias?

Educate your users consistently. Take every opportunity to provide educational materials, whether it’s through emails, newsletters, or in-app notifications. Even if users initially ignore these resources, they may return to them later when they need guidance. 

When you demonstrate that your brand cares about their financial well-being, you build trust and encourage users to rely on your fintech solution consistently.

Loss Aversion Bias

Loss aversion bias is when individuals prefer avoiding losses over acquiring equivalent gains. In banking and financial markets, users might hesitate to explore investment options offering higher returns but with some level of risk. Instead, they may prefer to keep their funds in traditional savings accounts or low-risk investments to avoid losing money.

How to Address This Bias?

Integrate features into your product that show users the potential benefits of taking risks or investing in new solutions. For instance, you could offer a particular savings account where funds are locked in for a year with interest. This encourages users to see it as a way to grow their savings securely. 

Collaborate with your marketing and design teams to develop strategies for informing customers about these solutions and relieving their fears of investing.

To foster trust and engagement and achieve better financial outcomes for your business and users, help them overcome their fear of loss and be open to taking calculated risks.

Integrating Behavioral Finance into Customer Experience

Ever thought about how your fintech business compares to, say, a restaurant? Even though your services are different, there’s one crucial similarity — customers.

Your users, just like those in a restaurant or hotel, seek positive experiences when using any service. They’re not just looking to fulfill a need; they want to feel good about it, whether it’s enjoying a meal at a restaurant or making a money transfer with your fintech product.

An article from Harvard Business Review suggests sharing joy throughout the customer journey. This means understanding digital banking customer experience principles to minimize any pain points and maximize pleasant moments when using your service.

An example: When a customer finishes paying taxes and filling out forms, they should have positive memories of the banking experience — because, after all, the tax is paid, which brings relief.

So, creating an emotional and positive conclusion to every action, supported by friendly and encouraging design, can make all the difference.

Let’s delve into this further in our following blog post section.

5 Tips to Improve Customer Experience in Banking with Behavioral Finance

To keep customers happy and coming back, banks can use behavioral finance strategies. 

Here are five practical tips to enhance customer satisfaction and loyalty:

1. Fix Problems Fast

It’s important in fintech and banking products to quickly address any negative experiences financial services customers may encounter. 

For example, if there’s an error during account setup, give clear instructions on how to fix it right away. This prevents poor customer experience, frustration from getting worse, and shows you’re dedicated to solving problems fast.

2. Mix Good and Bad

When designing features or services, think about separating enjoyable experiences from potentially frustrating ones. 

For instance, when setting up an account, focus on the benefits first, like rewards, instead of starting with security checks, which might feel tedious. By balancing positive and negative aspects carefully, you create a smoother customer journey with less hassle.

3. Finish Positively

Make sure the last steps of the customer journey leave a good impression. 

For example, after a transaction, send a personalized thank-you message and offer help for future needs. By ending customer interactions on a positive note, you reinforce good feelings about your fintech or banking product, increasing the chances of repeat business.

4. Give a Choice to Your Users

Offer customers various options to customize their experience. 

For example, provide different payment methods, account settings, or investment choices. Giving customers control over how they use your product or service makes them feel more satisfied and in charge.

5. Respect Customers’ Habits

Respect customers’ preferences and habits when designing your product. If someone prefers paper statements over digital ones, offer both options. This shows you’re flexible and attentive to their needs, building a positive relationship.

Trends for Enhancing Customer Experience in Fintech

To stay ahead, it’s not just about offering innovative solutions. It’s also about understanding customer expectations and meeting all their needs. Let’s explore 3 trends for building trust and fostering loyalty: centralizing service offerings, combining AI and human support, and connecting with users on an emotional level.

#1. Centralize Service Offerings

This is one of the main banking customer experience trends and particularly meaningful for fintech companies that operate both digital platforms and physical branches, such as banks. Adopting an omnichannel approach is necessary to ensure customers can seamlessly transition between online and offline tasks. 

Optimizing processes and allowing users to do any task remotely enhances the comfort and accessibility of your product.

Use the following methods:

• Allow customers to request an income statement or any other document online and receive it via email.
• Ensure all services are accessible from one place, such as the comfort of their home.
• Provide the option to open a bank account for their child entirely online, from verification to confirmation.
• Eliminate the need for multiple visits to the bank for various checks.
• If you’re offering a digital fintech solution, ensure it’s entirely digital.
• Prioritize loyalty and simplicity for clients, especially in complex tasks.
• Avoid hiding essential functions deep within your platform or app, which could frustrate users.
• Make your solution straightforward and easy to use.

#2. Combine AI and Human Support

AI helps simplify tasks,  like when you use a chatbot as a financial assistant for quickly addressing inquiries about finances. 

But, 63% of users prefer talking to a real person for detailed and complex help. 

To improve issue resolution and enhance user satisfaction:

• Develop an intuitive interface for seamless switching between AI and human assistance.
• Provide clear guidelines on when to utilize each support option, considering the nature and complexity of user inquiries.
• Ensure support staff are well-trained to deliver helpful and effective assistance during user interactions.
• Regularly review and update AI to improve its ability to address queries.
• Offer self-service options for users to find answers independently.
• Maintain transparency regarding data privacy and security measures, informing users to ensure they feel protected.

#3. Connect with Users on Emotional Level

Creating a strong emotional bond with your customers can result in lasting loyalty and support.

Research shows the consumer trends in banking that 87% of direct banking clients who feel valued will likely stay loyal and make more purchases. Therefore, it’s essential to understand your customers’ emotions when they interact with your banking services.

Here you can consider:

• Analyze mood data to identify when and why customers feel upset.
• Collect emotions-related data through simple pop-up surveys asking, “How are you feeling today?” and using emojis to represent different emotions.
• Tailor your services according to analytics results.
• Create personalized propositions for users according to the data; for example, if a customer feels down but frequently orders food, you can partner with restaurants to offer discount codes directly in your fintech app.
• Make sure your personalized approach shows you care about their preferences and emotional well-being. It will foster trust and loyalty.

DashDevs: Your Partner in Building a Customer Journey

Every day, clients bring us a range of requests to develop fintech businesses. This shows that fintech is evolving, competition is increasing, and solutions are becoming more refined and practical.

But do you really know what your target audience wants?

When partnering with DashDevs, you don’t have to wonder. Our expertise in integrating behavioral finance principles ensures we provide solutions that work for you. With over 500 successful projects under our belt, including digital banks, neobanks, and investment platforms, we’re committed to delivering top-notch customer experiences. 

If you’re seeking a reliable partner who understands your needs and those of your customers, contact the DashDevs team.

Wrapping Up

Integrating behavioral finance and prioritizing customer experience in banking industry is essential if you want your fintech business to thrive in 2024. Only adding numerous features and functionality won’t cut it; simplicity, personalized approach, and user-friendliness are paramount.

Remember to invest in personalized recommendations and design thinking teams proficient in addressing financial biases and delivering exceptional user experiences. 

Follow this advice, and if you need assistance or want to discuss implementing your fintech product ideas, don’t hesitate to contact the DashDevs team.