In financial services and fintech, there’s no such thing as a free lunch. And while ‘free’ can be an effective marketing phrase for the purposes of boosting customer acquisition, you’d better mean it, or else. Because thanks to social media, if you promise and don’t deliver then the whole world is going to know about it in a heartbeat. And with more choice at consumers fingertips, they can be relatively unforgiving.
Fledgling digital banking startup Number26 found this out the hard way last month, after terminating a number of its free customer accounts with no explanation. Irate customers quickly took to Twitter and the company’s live chat, looking for answers. After initially refusing to disclose the reasons behind the closures, the growing momentum of the story forced a rethink. On June 5th the company made an official statement explaining that customers who’d had their accounts closed had made too many ATM withdrawals.
Under the original account plan, Number26 had been covering the €1.50 – €2.00 ATM withdrawal fee from German ATMs. As we can now see from their new Fair Use Policy, they were probably factoring in covering roughly 5 withdrawals a month. What prompted the account closures was that data showed some customers were making 15 withdrawals or more. It was these customers, Number26 indicated, who were the targets of the closures. But instead of educating customers or asking them to modify their behaviour, they simply decided to close the account, sending out a blanket termination email.
Now Number26 is a fantastic concept. Making cross border commerce and banking easier and more straightforward is a no-brainer. But what also makes Number26 appealing to those people signing up to the service is the fact they aren’t a traditional bank. That decisions for both design, use and customer interaction are driven by what the customer wants and how they behave, rather than by how Number26 (the bank) wants the customer to behave. Cofounder and CEO Valentin Stalf spoke to these principles well in a presentation he gave at a Wired UK event last year.
So you can imagine the disappointment multiple Number26 customers must have felt when they were relegated to the reject bin. Especially considering customers referring other customers onto the Number26 platform is the main acquisition channel for the business. To compound matters, a number of angry customers have now set-up a seperate Facebook page parodying the company’s PR handling of the matter.
Since the account termination saga unfolded, full credit to Number26 for creating the Fair Use policy and communicating this to its users. But there are several lessons here other fintech/banking startups would do well to heed.
Being transparent means being transparent about the good and the bad
Fintech startups like Number26 use the word ‘transparent’ like it’s going out of fashion. Why? Because it resonates with customers who for so long have banged their heads against the opaqueness of the banking system. But being transparent means also being honest, as much as you possibly can be, about the hard, uncomfortable stuff as well. Like your free account being not so free after all.
There is absolutely nothing wrong with changing your business model to stay in business. You just have to educate and take your customers on the journey of change. It’s a little more investment in time and energy upfront, but as Number26 are no doubt learning, saves you a wealth of heartache after the fact.
Start from a place of empathy
As the old saying goes, sometimes it’s not what you’re saying but how you’re saying it that makes all the difference. I’m sure if Number26 retro this incident, they’ll wonder why they didn’t just explain to the heavy users that they’d have to cap their withdrawal fees because it wasn’t commercially viable for them to offer this and support all the other elements of the product users loved.
Stepping someone through your reasons behind doing something says a lot about your esteem of them. Ultimately every single customer, big or small, wants to feel valued by the financial institution they entrust their money to. While one customer’s deposit might be a drop in the Number26 ocean, that same deposit is the whole ocean to the customer. I think banks forget this…a lot.
If a fintech startup doesn’t demonstrate transparency and empathy in their dealings with customers, then what bar ‘better technology’ will make them any different from the same old legalese enshrouded banking institutions they seek to disrupt? Banks will catch up on the technology front, meaning the battle for the customer will ultimately be won by the company that shows they actually care. Transparency and empathy are excellent topics to talk about. But putting into practice and walking the walk? Well, that’s another kettle of fish entirely.