Customer Segments

Before creating a customer profile analysis, the thesis seeks to identify any boundaries of the value proposition arena by Osterwalder et al., in order to highlight limitations to the value proposition discussion - four value propositions categories are established by Osterwalder et al. (2014:53):

Ø Financial: Services such as: Insurances, investment funds, or financing of a purchase.

Ø Digital: Services such as: Music downloads or online recommendations.

Ø Physical/tangible: Products such as: Manufactured products.

Ø Intangible: Products such as: Copyrights, services before, during and after a purchase.

Based on these categories, the conclusion must be that the Danish financial service industry exists both in the financial, the digital and the intangible arena. However, as some financial services (loans) would allow for the subsequent purchase of tangible goods, the outcome value for a customer could arguably be of a tangible nature. Moreover, banks also offer a “physical” product in the form of debit and credit cards. The fact that the financial industry to some extent work within all four categories emphasises the reach of this business, and as such the all-inclusive nature of the customer segment.

As we deploy the theoretical framework of Osterwalder et al (2014) – the VPC – the first focus is creating the customer profile:

1. Identifying Customer Jobs

- Identify the tasks that the customers are trying to complete.

2. Identifying Customer Pains

- Identify the obstacles and risks occurring when customers are trying to complete customer jobs.

3. Identifying Customer Gains

- Identify outcomes and benefits of completing customer jobs.

Schematic 7 – Customer Profile for Financial Services

*For a full-scale schematic see appendix 5

Although the thesis acknowledges that fintechs, to some extend, target customers that are more technological knowledgeable than the average customer, the thesis will argue that the future customer for banks and fintechs, respectively, will share the same customer profile. The argument for fintechs targeting specific demographics within financial services will expire, as future generations - brought up in the digital age – will make up the mass market (Appendix 2, IP4:Q5). In addition, digital developments in the financial industry will force a transition into digitalized services. Finally, the Danish customers have proven very transition-ready considering large-scale launches such as Mobilepay and Swipp (“Jeg går lige i fremtidens bank”, 2017).

Financial products and services are, or will be, targeted at everyone participating in financial service system – which is basically everyone. Consequently, what might be considered fintech-specific target groups today, likely represent the mass market of the future, as an increasing number of customers demand and chose the digital solutions (ibid). Yet, the thesis appreciates that some discrepancies might prevail between the actual customer profiles of traditional banks and pure fintech businesses. However, the customer profile is based on the notion of potential customers. In that sense, the customer profile in financial services is somewhat universal. However, in spite working with the customer profile on an industry level, we must acknowledge that not all services and products have an equal importance to every customer.

As the thesis does not entail primary data from the customer segment, but rather focuses on experiences from industry professionals. Thus, the creation of a “universal” customer profile in financial services is mainly constructed in an outside-in manner. As the interviewed fintechs and banks continuously work with customer development - and their services seek to be founded in solving essential customer problems/jobs – a backwards assessment of their value propositions, provide an accurate depiction of the customer profile. In addition, personal experiences from being customers in the financial service industry, contribute to the understanding of customer jobs, pains, gains.

Identified Customer Jobs:

4. Paying back debts

5. Control of personal finances (savings, accounts, security and self-esteem) 6. Feedback (VOC – voice of customer) and personalization

The main customer jobs identified entail combined qualities of functional, emotional/personal, and supporting jobs, as defined by Osterwalder et al. (2014). A main functional job is to gain control of personal finances, which closely links to the emotional and personal jobs of feeling financially secure and exuding self-esteem. Functional jobs as enablers for such control are identified as; saving schemes, and easy access to- and overview of accounts. Finally, customer expectations are shifting, demanding personalized solutions, enabled by supporting customer jobs (Appendix 2, IP4:Q4). These include feedback loops implemented by companies, in order to integrate VoC in the product/service development processes. Additionally, feedback can also take the form of personal customer reviews and testimonials (Appendix 2, IP6:Q10).

Identified Customer Pains:

7. Cost (rigid assessments, fees, financial struggles)

8. Low customer engagement (lack of education and involvement, inconvenience) 9. Low transparency (inertia, risk aversion)

There are several customer pains connected to solving customer jobs within financial services. First of all, financial services are often connected with costs - especially high fee-levels. This is a consequence of the traditional banking business model, where fees constitute a main revenue stream. These fees are often linked to basic financial services, as well as money management. Consequently, customers do not reap the true benefits of their financial efforts, especially in an environment with low interest on

deposit accounts. In addition, the complexity of financial products makes it difficult for customers to address or change these conditions.

The complexity of financial products and services also leads to low customer engagement. Most customers see the use of financial services as a necessity, but not as an opportunity for bettering their personal finances. The reason might be that customers do not seek out, or receive much practical financial education. And in a financial environment where quick high-interest loans are accessible by just a few clicks on a smartphone, people might get themselves into financial distress - IP6 especially recognizes this trend amongst the younger generation:

Millennials would rather visit their dentist than their bank (Appendix 2, IP6:Q5)

The root of this problem might be the inconvenient nature of personal advisory, combined with a general lack of encouragement from the financial service sector. This closely relates to risk aversion and inertia – very common traits of the financial industry. As the VPC suggests, there can be a lot of emotions connected to personal finances (self-esteem, despair etc.). Therefore, it is normal to avoid risk or not change one’s financial circumstances, even though better alternatives exist. Besides, a common denominator in the financial industry has been a low level of transparency, which could further fuel these customer pains:

We enclose all the data we have, which is not common in this industry (Appendix 2, IP2:Q8)

The final area to cover, in order to create a customer profile in the VPC structure (Pigneur et al. 2015), is customer gains. This area entails the specific benefits, emotions, desires and accomplishments the customers seek through the customer jobs.

Identified Customer Gains

10. Financial security (education, financial enablers, advisory, physical presence, trust) 11. Social status (purchases, brand association, self-esteem)

12. Transparency and convenience

As customer gains indicate the positive outcomes that people seek through their customer jobs, as well as the benefits the jobs will derive, some are more explicit than others.

Evidently, creating transparency and convenience is of priority to customers. Most people do not want to spend a long time going through their finances on a weekly basis, and these factors will relieve that task. As well, transparency will enforce the feeling of financial security. The feeling of financial security is arguably the sum of many customer gains, as it speaks to the overall attitude of the customer. And when financially secure, customers will often seek positive emotional outcomes from their jobs through gains such as social-status purchases or self-esteem endeavours; real estate, cars, travels etc.

A physical market presence in the form of physical bank branches can empower brand association, which is often related to professionalism, trust and customer confidence (Appendix 2, IP6:Q5).