The X-Factor in FinTech: Customer Success
The flood of innovation coming from financial technology over the last 10 years has been remarkable. From challenger banks, investment platforms, business banking offerings, up to specialized services in geographic areas where financial services access did not exist — FinTech companies have been able to make financial access and innovation possible on a global scale.
As the FinTech industry matures and enters its next stage of evolution, customers have numerous choices when it comes to where they do their banking. Delivering an innovative product or service is no longer enough to maintain market share in a highly competitive landscape. Customers are looking for solutions that meet their long-term needs, most importantly in progressing towards the milestone of financial wellness. The FinTech companies that are able to consistently meet and adapt to individual and business customer needs in the long-term, will be the industry leaders of the future. The modern-day movement for firms worldwide to provide this level of client-centric focus and detail is through customer success.
SUMMARY:
The origin and emergence of customer success is a response to new Software-as-a-Service (SaaS) subscription-based models that have lowered customer switching costs and increased competition;
Defining what is and isn’t customer success, compared to other concepts such as customer experience and customer service that don’t focus on building and deepening an existing book of business;
Key metrics in customer success such as churn, and annual recurring revenue (ARR), which target retention and deepening, have become as equally as important as new customer acquisition;
Different client segments require varying levels of engagement from a company’s customer success team; various examples can be found in today’s well-known FinTech brands;
FinTech companies of all kinds need to apply customer success principles to strategically grow and stay relevant in today’s financial services ecosystem.
Enter Customer Success
Over the last 15 years, customer success has grown from a buzzword to an established component of companies of all sizes. From starting as an ideal at company culture seminars to mass adoption, firms have urgently embraced and executed on what it means to be customer-first through customer success. Having a customer-first philosophy means listening to clients and operating in ways that help companies proactively guide their own customers – in ways that didn’t exist on legacy sales or customer support teams.
Being truly customer-centric means having a deep understanding of your customer’s needs in being holistically successful.
Delivering increasing levels of success requires consistently checking in with customers and adapting products and service offerings based on their needs. In line with revenue targets, customer success aims to preserve a company’s book of business, open up doors for additional revenue opportunities, and create lifelong advocates in customers.
Why has customer success become critical now?
The growth of today’s customer success movement is tied to the emergence of Software-as-a-Service (SaaS). SaaS is a new business model, in which customers do not own software – they pay for its use on a subscription basis with a limited time commitment. Before the emergence of cloud technology, software was purchased and owned through an expensive, perpetual license that had an extended implementation process. The rise of the internet, cloud, and SaaS as a delivery model created the option to quickly lease and integrate software through subscriptions in which the customer not only leases the software but also part of the vendor’s infrastructure to run it on a monthly or annual basis.
The shift to SaaS as the new way of delivering software solutions led directly to the most important change of all – subscription-based licensing. Much of the power in a B2B (business-to-business) transaction has shifted from the vendor to the purchasing customer. For customers, the complexity and costs of changing software providers is moderately high, but it’s still possible (and more likely) today than in the past due to minimal switching costs — upfront expenses are lower, resource requirements and integration timeline are shorter, and the commitment level is reduced. Having grown in pure technology companies, SaaS quickly spread across multiple industries, such as financial services and banking.
Defining Customer Success
Customer success is a revenue driver for managing the installed base of customers in a recurring revenue business, directly impacting overall customer health — it is directly linked to:
Renewals– an implied sale that happens monthly if clients don’t switch providers; companies have customer success teams that analyze customer’s engagement in order to avoid or minimize any risks identified for an individual client or group;
Upsells – an existing customer buying more products or services from a vendor.
In order to exceed critical renewal and upsell targets, customer success teams must be built to be highly:
Proactive - being capable of determining which customers should be acted on, either because they appear to be at risk, there is an upsell opportunity, or because of a regularly scheduled event such as a QBR (Quarterly Business Review);
Success-oriented – staying focused on key metrics of success such as renewal rates, upsell percentages, transaction activity, and overall growth of customer base. Teammates who are efficiency experts are not likely to drive more revenue or new products from existing clients;
Analytics-focused - consistently driven by forward-looking analytics; leveraging the right kind of predictive data is critical to driving an effective customer success team;
Predictive - not only of the analytics and actual business analysis but also of the customer, specifically in figuring out which clients to talk to before receiving a customer inquiry.
Customer success is ultimately about the loyalty that is formed between the vendor and their client. Loyalty that comes from a company that never stops working to win their customers, having a relentless focus in their client’s success (not their own).
There are two forms of loyalty: attitudinal (emotional) loyalty is when a customer loves a particular brand or product (highlighted through references, positive reviews, word-of-mouth); and behavioral (intellectual) loyalty, which is out of necessity.
Customer success is designed more as an art to build attitudinal loyalty, as customers would be satisfied and willing to pay higher prices for products they love and become brand advocates (e.g. Apple). Out of the two, attitudinal is more expensive and difficult to maintain. Managing customer health and the overall success of clients diligently leads to long-term attitudinal loyalty.
What Customer Success Isn’t
With such a focus on the customer, it’s difficult to avoid customer success getting mixed up with older customer concepts that we have become accustomed to in business. Here’s some clarity on avoiding confusion:
Customer experience (CX): CX is usually measured or driven by survey results; because customer surveys are a component of overall customer health, there is a small overlap between customer success and customer experience;
Customer relationship management (CRM): used to define a market or system, not a specific role or discipline; describes a platform or solution such Salesforce, Oracle (Siebel Systems), or Microsoft Dynamics, which integrates with a company to provide data-entry and client record-keeping for an entire enterprise;
Customer advocacy: a source of health-related data to assess one aspect of customer health; can come in the form of client surveys or monitoring of service tickets submitted by a customer;
Customer support: focuses on something broken reported by a customer; customer support teams have similar skill sets to customer success, such as:
· Product expertise;
· Solid customer-facing skills (personality, patience, empathy, etc.);
· Problem solving.
The similarities stop there with clear differences in mindset, focus, activity, and goal (see chart above).
key metrics in Customer Success
One of the most-discussed measurements in customer success is churn, or when customers decide that they no longer want an existing vendor’s product or to be a customer. From a overall strategy perspective, a company can’t acquire enough (new) business into the top of the revenue funnel to sustain real growth, if customers are exiting out the bottom at a high rate. It’s a losing battle to try and out-acquire a high churn rate. Customer success is the vehicle for controlling churn.
The key to grow the overall value of a book of business is:
NEW CUSTOMER ACQUISITION + HIGH RETENTION RATES + POSITIVE UPSELL RESULTS.
Revenue has been replaced by annual recurring revenue (ARR) – also referred to as annual contract value (ACV), or MRR for monthly measurement. This is the annualized amount (monthly subscription cost x 12 months) that customers are paying on a recurring basis. In a perfect setting, customers pay more money annually either because prices go up, discounts go down, or they buy add-on products. In this way, a company can grow its ARR without new customer acquisition – by deepening the value of an existing client base (through retention and upsells).
Client Segments in Customer success
In the business world, there are three tiers of customers with unique delivery and approaches when it comes to customer success activities: high touch, low touch, tech touch.
HIGH-TOUCH is the most people-intensive model justified by the higher price the customer pays. There’s a pre-defined mixture of scheduled and unscheduled touch points, including:
A customized onboarding process;
Coordinated handoffs between vendor groups;
Monthly status meetings;
Executive business reviews (EBRs, bi-annually or quarterly);
On-site visits (frequent or annually);
Regular health checks;
Upcoming renewal (if subscription based).
LOW TOUCH is the tier of customers not quite big enough for the full red carpet treatment, but important enough to do one-on-one touchpoints. Being able to manage customers with “just-in-time customer success” by strategically meeting customers’ needs at exactly the right time is the differentiator between high touch. Some common activities include:
A packaged onboarding process;
Coordinated handoff only from sales to onboarding;
EBRs (annually);
Regular automated health checks;
Auto-renewal (if subscription based).
TECH TOUCH is the tier of customers that has no direct contact with individuals at the vendor. As an individual client, they don’t have strategic or financial value, but as a collective group, they play a major role in the company’s financial results. Being able to execute customer success at scale means:
All customer touches are technology driven (one-to-many channels);
Webinars, podcasts, communities (online portals for sharing ideas and talking virtually to other customers);
Smart email marketing based on demographic and behavioral knowledge of prospects to lead them down the buying path; needs to be timely and include useful information, using data effectively to determine when to contact clients and with what message.
Structures and processes become complex as firms may serve various tiers of clients with multiple offerings in their organization. Customer success divisions must be segmented accordingly, instead of a one-size-fits-all mold, to meet the distinct needs of each group.
Customer success in Fintech
With this high-level overview of customer success, defining what it is, metrics to gauge progress, and tiers of clients -- let's bring the discussion to focus on today’s FinTech landscape and apply these concepts to different segments within companies.
TECH TOUCH for B2C - These companies tend to be popular FinTech app brands such as Robinhood, Coinbase, and PayPal, which have thousands of individual retail customers. Losing a few clients throughout the month may not move the bottom line, but a large wave of these clients churning (and going to a competitor) does deliver an impactful blow to revenue.
Clients aren't assigned an individual account representative, with interaction from the company limited to tech touch methods, such as email, text notifications, or chat. Many companies don't include an option for clients to call and speak directly to a customer service associate. Due to this lack of interaction, tech touch FinTech firms must keep robust FAQs and open community portals that help address the common issues that come up for a user.
Effectively scaling communication, insightful resources, and proactively responding to widespread issues for this large pool of customers correlates to how strong customer success efforts are in growing ARR year-over-year.
LOW TOUCH for B2B - Companies here sell to other businesses, who have larger transaction volumes, higher revenue potential, and deeper needs than tech touch customers — but less complex than the high touch tier. Some examples are Affirm, Kabbage, and Ripple, who serve other companies with their platform or service. Having a few low touch clients churn quarterly would be an immediate concern to address.
Products and services here have a mixture of customization and automation specific to the business client. Account representatives are assigned to clients, but the frequency of touchpoints may be limited to semi-annually, depending on the likelihood of churning. Being able to connect with clients prior to issues developing is critical, especially since account managers won’t be able to spend an equal amount of time with each customer.
The right blend of automated and human touch is the most important factor for this customer segment of FinTech companies.
HIGH TOUCH for B2B2C - Some FinTech companies focus on providing their products to a small, handful of enterprise firms such as large banks, government agencies, and financial institutions. Each client provides a substantial revenue stream and large base of end users to the financial services provider. The white glove treatment is mandatory and involves a separate dedicated team per high touch customer, led by an experienced relationship manager. Some companies in this segment are TransferWise, and Stripe.
All touchpoints are completely customized to the client and occur as frequently as needed, depending on customer health dashboards. In-person meetings onsite take the place in lieu of conference calls, leaving no room for automated processes or messaging. Any issues that arise would receive immediate attention since the impact to end users would be critical, with high touch clients being able to directly call their relationship manager at anytime.
Working with impactful customer success advocates is THE key component for FinTech companies with high touch clients. Being knowledgeable, proactive, and predictive of the needs of enterprise B2B2C customers will increase the likelihood of contract renewal and upsells.
FUTURE OUTLOOK
As competition increases and the volume of FinTech companies for customers to choose from continues to grow, the differentiators become critical for firms to stay relevant in a crowded landscape. The clear x-factor that resonates with every FinTech firm for long-term sustainability, regardless of sector, is customer success.
The challenge is even greater for emerging startups that lack the funding, or early monetization to be able to build and train a customer success team. In these environments, sales and business development associates would need to play a wider role in focusing both on acquisition of new customers and keeping existing clients engaged on a regular basis. If a sales team is not present, it’s up to the founder and his staff to work diligently in performing routine customer health checks on clients.
Overall, customer success should be connected to the mission and culture of every FinTech company regardless of size, location, or niche. When properly supported and consistently implemented, its a way of doing business that truly places the client front and center. The term may evolve towards something very different in the future, but any activity that a company performs with the intent of enhancing a customer’s success will still lead to positive results today or in the next decade.