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FinTech adoption: strategy for customer retention

Arun Kumar Tripathy and Anshul Jain

inTech is an emerging industry, which develops technologies to improve the delivery Arun Kumar Tripathy and

F of financial services, while enhancing customer experience as compared to

traditional delivery models. Retail customer facing industries, or B2C players, have
Anshul Jain are both based
at Management
Development Institute,
adopted FinTech innovations to improve the customer purchase experience by using it as
Gurgaon, India.
customer retention strategy (Buckley and Webster, 2016).
Globally, USA and China are the world leaders in FinTech with India coming a close third
(ETBFSI, 2020). A large population spread across diverse geographies with low financial
service penetration provides Indian FinTech companies a tremendous market and
opportunity to grow.

FinTech Enabled Payment Solutions

Financial transaction is an important part of any digital transaction, and making a
payment is the final and critical step to closing a transaction. E-commerce players
provide a variety of payment options and gateways to their customers but any
inconvenience caused in completing the payment transaction may lead to loss of
customers. To ensure a good customer experience leading to customer retention, e-
commerce players have started to own the payment system, along with having
partnership with others.
Owning a payment system provides several advantages to e-commerce players. Aside
from saving on transaction charges, convenience in terms of easy account setup, less
documentation, quick settlements, and secure payment, it provides an opportunity to serve
customers by:
䊏 Reducing the time required for making payment and reducing the probability of
payment failure.
䊏 Better understanding individual customer needs and engaging with them according to
their preferences and personality based on Artificial intelligence, Big Data analytics,
and visualization to deliver personalized services.
䊏 Increasing customer switching cost due to value added services provided by e-
commerce players based on past transactions.
䊏 Building loyal customers by integrating a rewards program with FinTech enabled
innovations.

According to Forbes (Wertz, 2018), it costs five times more to acquire a new customer than
to retain an old one. Increasing customer retention rates by 5% increases profits by 25%
to 95%.

DOI 10.1108/SD-10-2019-0188 VOL. 36 NO. 12 2020, pp. 47-49, © Emerald Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 47
 Indian Corporates Adopting FinTech Innovations
Increased penetration of mobile services, combined with the ease of transaction and the
choice of products provided by e-commerce companies like Amazon, Ali Baba, Flipkart,
etc. are changing the buying behavior of people (Soni, 2019). Ways in which large Indian
corporates are currently adopting FinTech innovations to strive for better customer retention
include:

Wallets
These are prepaid payment instruments operated via a mobile app. Money can be
transferred and stored in these apps and then used for purchase transactions. Companies
can allow customers to open a wallet within their app, which can be then used for
purchases via the same app, ensuring a share of the customers spends. BigBasket
(Largest Online Food and Grocery store), Jio and Vodafone Idea (largest and second
largest mobile phone networks (PTI, 2020)), Ola (Transport Services) are some of the large
corporates who have integrated wallets in their apps.

Prepaid Cards
These are prepaid instruments similar to wallets but instead of a mobile app based
presence, the accounts are linked to cards. Customers can load these cards with money,
which can then be spent in the stores, which are on the card network. Discounts, offers and
quick payments are the facilities offered on these cards. Patanjali (fastest growing single
brand FMCG franchise) issues and utilizes such cards, which can be used across its
various branches all over the country.

Payments Bank
This is an evolved wallet with some features similar to a savings bank account such as
interest paid on balance and associated debit card. Reduced KYC requirement compared
to a savings bank account and higher interest rates along with wallet like features makes it
attractive to customers. Airtel (third largest mobile phone network) and PayTM (Largest
wallet provider) (Rai, 2017) are amongst the corporates, which offer Payments Bank
accounts to their customers.

Co-Branded Credit Card

Amazon Pay ICICI Bank, Flipkart Axis Bank, PayTM Citibank (ETech, 2019) are three e-
commerce and Bank tie up co-branded credit cards. These offer extra discounts when
used on their respective sites and fixed rate cashbacks on all other spends.

Microcredit
PayTM Postpaid and Ola Postpaid are two prime examples of online microcredit
being offered online without any KYC, documents, collateral or credit score to be
shared by the customer. This allows customers to use these services beyond the
balance in their wallets and pay back within a month. Similar to overdraft facility on
bank accounts, these can also be compared with a low limit virtual credit card with
no fees.

Conclusion
Given the increasing adoption of FinTech enabled innovations by large B2C players, others
in the same business can no longer ignore such innovations. Increasingly, as many large
businesses have adopted various FinTech innovations, customers have become habituated

PAGE 48 j STRATEGIC DIRECTION j VOL. 36 NO. 12 2020

to the convenience provided by these innovations. Businesses not offering any of these may
see customers moving toward competitors. Companies also need to be careful about the
technological comfort of their customers. For example, innovations, which are smartphone Keywords:
app only, may end up alienating rural customers, where smartphone penetration is low. On India,
the other hand, prepaid card based innovations will be a major success amongst rural FinTech,
customers. Customer Retention

References
Buckley, R.P. and Webster, S. (2016), “FinTech in developing countries: charting new customer
journeys”, Journal of Financial Transformation, Vol 44, pp. 151-159.

ETBFSI (2020), “China high on FinTech deals, India on funds”, available at: https://bfsi.economictimes.
indiatimes.com/news/fintech/china-high-on-fintech-deals-india-on-funds/72141456 (accessed 8 October
2020).

ETech (2019), “Flipkart joins other internet companies in launching a co-branded credit card”, available
at: https://tech.economictimes.indiatimes.com/news/internet/flipkart-joins-other-internet-companies-in-
launching-a-co-branded-credit-card/70177954 (accessed 25 September 2019).

PTI (2020), “Jio gains largest subscriber base on account of Voda Idea loss: Ind-Ra”, available at: https://
economictimes.indiatimes.com/industry/telecom/telecom-news/jio-gains-largest-subscriber-base-on-account-
of-voda-idea-loss-ind-ra/articleshow/73672841.cms?from=mdr (accessed 28 January 2020).

Rai, S. (2017), “Paytm aims to create world’s largest digital bank - with 500 million accounts!”, available at:
https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/paytm-aims-to-create-worlds-largest-
digital-bank-with-500-millionaccounts/articleshow/61844087.cms?from=mdr (accessed 5 October 2019).

Soni, S. (2019), “Every second online shopper in India is a new shopper; thanks to growing smartphone
usage”, available at: www.financialexpress.com/industry/sme/ecommerce-market-size-in-india-indian-
ecommerce-marketplaces-amazon-flipkart-nielsen-smartphone-penetration-online-fashion/1799001/
(accessed 20 December 2019).

Wertz, J. (2018), “Don’t Spend 5 Times More Attracting New Customers, Nurture The Existing Ones”,
available at: www.forbes.com/sites/jiawertz/2018/09/12/dont-spend-5-times-more-attracting-new-customers-
nurture-the-existing-ones/#792aedf45a8e (accessed 4 October 2019).

Corresponding author
Anshul Jain can be contacted at: anshul@mdi.ac.in

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