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By Oscar Wall, General Manager EMEA – Recurly
It’s safe to say that 2023 will go down as a year of big tech stories. From the ongoing news of Chat-GPT to the collapse of multiple cryptocurrency billionaires, the financial technology sector has faced increasing scrutiny and maintained its status at the forefront of technological ingenuity.
And looking forward to 2024, the sector shows no signs of slowing down, turbocharged by AI and pressurised by economic instability – let’s have a look at what the years before and ahead have in store.
Customer retention as a core focus
In a year dubbed by Mark Zuckerberg as the “year of efficiency”, many businesses have been looking to streamline their processes more than ever before, responding to the wider industry around them. As cost-saving decisions have become the reality for many consumers, efficiency has become a top priority for businesses wanting to retain their valuable customer base. Fintech acts as an important facilitator of this efficiency, providing flexibility, simplicity, and accessibility to consumers who might be looking to leave their services, cancel their subscriptions, or reduce their spending. For example, a strong billing and payments platform can increase revenue up to 8%, closing many points of inefficiency and leakage for businesses.
Businesses have been looking to fintech to make their offerings smoother and easier for consumers, a challenge that has been met head-on by major players in the industry. Convincing customers to stay despite economic uncertainty requires proactivity – highlighting value at every step of the service process and ensuring concerns are countered quickly and effectively.
The never-ending march of AI
It’s no surprise that AI has continued its ascendancy not only in the world of fintech, but also in the public consciousness with Collins Dictionary naming it their Word of the Year for 2023. Companies not developing an AI strategy are being left behind by their more digitally savvy counterparts, as the impact is continually demonstrated across all sectors.
For many in the industry, the development of AI comes as a secondary to the already heavily-utilised machine learning (ML) systems that have been providing analysis and reporting for many years now. Transforming the insights already gathered from ML has been an opportunity for many to get ahead of the curve when optimising their systems with AI. Subscription businesses with whom Recurly works have used ML and AI technologies for years to ensure streamlined recurring payments for subscription products and service.
For fintech in particular, many have seen benefits in previously labour-intensive processes. This freeing up of human resources, particularly those in skilled, high-demand roles such as software engineers, allows industries to redirect their workforce to their key products and services, rather than maintaining payment software or subscription platforms.
Alternative Payment Methods – Comfort for customers
For consumer-facing businesses, the rise of alternative payment methods (APMs) has been a strong method for maximising conversion rates. More and more customers are turning to APMs for their everyday purchases, relying on comfortable and routine systems such as PayPal or Apple Pay as a simple payment option. Finding novel ways of closing a sale requires businesses to have their finger on the pulse of their consumers, and investments here are likely to continue in 2024.
APMs do not just involve external currencies and third-party services like crypto and pay-later lenders, and many of the most effective methods are business-specific loyalty schemes and coupons. Allowing customers to accrue points and exchange them for rewards or discounts fosters loyalty and trust between businesses and their consumers. The likes of Netflix, Amazon and the New York Times offer these incentives within their existing subscription services, tying customers into stronger relationships with longer-lasting recurring payments.
What’s on the 2024 horizon?
Software consolidation – packaged with a bow
The variety and quality of fintech has improved significantly over the past few years, and this kaleidoscope of innovation has benefited industries from retail to healthcare. With so many options, requirements and add-ons, many are looking for simple alternatives. The complexity derived from having one solution for month-end accounting, another for customer analysis, and a third for reporting and monitoring is making more and more businesses seek integrated solutions. The concept of bundling services together has long been a staple of the entertainment and media sectors that use subscriptions as a business model, and we will see this continue in the coming year.
Businesses are looking to SaaS to create more value for their customers, providing more expertise, more reporting and more analysis. Viewing the client-SaaS relationship as a partnership rather than purely transactional builds on growing trends within the industry and prevents customers from going elsewhere for their digital requirements.
Make red tape your 2024 accessory
Regulatory compliance is a continuous process and one that fintech companies are well aware of. The level of scrutiny from governments on the financial sector across the world is set to increase significantly in 2024, fuelled by concerns about ethical and fair applications of sophisticated fintech. In the US and nations within the EU, the regulations are set to be widespread, highly technical and likely unique from one jurisdiction to the next. For example, the Digital Operational Resilience Act (DORA) introduced by the EU has far-reaching implications for the fintech sector and requires full compliance by January 2025, a looming concern for those looking to expand into Europe and those already here.
Staying ahead of these impending changes and forewarning customers will become increasingly integral to the SaaS providers’ relationships with their clients, safeguarding against major service outages and minimising cross-border tensions. This type of best practice will become the gold standard for the industry, ensuring that customers feel supported.
A return to loyalty and personalisation
Increasing sophistication of fintech allows for greater personalisation of services for both businesses and consumers, making what were once off-the-shelf products into bespoke services. One situation where this will be employed is the return of valuing customer loyalty – with software facilitating discounts or incentives for longtime customers. The general view of the market today is that customer loyalty goes by unrewarded, and in some cases even punished, with existing customers excluded from the best deals and services.
Following on from the importance of retention in 2023, 2024 will build on this to maximise customer satisfaction, requiring sophisticated fintech capabilities to underpin the efforts.
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