[by Kaia Roquist]
Having a geeky fascination for analysis and digital performance, I can’t help constantly analysing and comparing the market penetration and performance of available Fintech products. With Ethology in mind I have seen two opposite approached regarding registration processes on mobile payment apps. Both approaches are defended by ethology, psychology and market analysis. Still the degree of commitment triggered in each scenario may lead to very different results.
I have tested Fintech products choosing the Easy Entrance strategy. This strategy is based on principles of Hyperbolic Discounting by making the first step easy – as we tend to choose what is easy and convenient now. The first registration steps are made easy, for instance first requesting email and phone number. Step by step the registration becomes more personalized, and consequently increasingly costly for the customer. By making the first steps easy, the goal is to lead the customer into the funnel towards conversion. By the time the customer must give away personal ID number and account information, the commitment is thought to be strong as the customer has invested time and energy in all previous registration steps.
However, other Fintech products I have tested go for the opposite strategy: Sunk Cost Trap. The first registration step demands personal ID number and account information. The threshold for giving away this information is high. However, when first having fulfilled this costly first steps of registration, the customer has a high commitment to the service provider as the customer has invested a cost that cannot be withdrawn. The power of personal investment is strong. It tends to be difficult to change direction or give up on a process where our investments are valuable and not recoverable.
Customers may be more easily lead into a registration process where the first steps are made easy. However, the personal commitment is stronger when you have invested more heavily from the beginning of. As a result of easy entrance, the customer may easily fall off during a registration process due to interruptions (phone rings / a message pops up) or inconveniences (slow processing / unstable network). Bearing in mind that these processes necessarily take on the customer’s mobile, the chances of interruption or inconvenience is high.
In the end – money transaction is based on trust, commitment and mutual identification. The dominant Scandinavian mobile payment apps are owned by retail banks, while in the rest of Europe – and even more in Asia – non-affiliated companies dominate the mobile payment market. Through trust, commitment, innovation and a strategy that benefits both customers and financial institutions, sustainable Scandinavian banks are in the position to conquer current and coming markets. But every detail, every step matters, in building this commitment to and trust of customers.