Emotional finance is the next step for embedded payments

A few years ago, it was fashionable to talk about ’emotional banking’, but this concept seems to have been quietly dropped. Perhaps we need to rethink the idea—the key is embedded payments and their role in ‘emotional finance’. Fintech has made the staid financial services industry infinitely more exciting, at least for those who watch the sector. But has this excitement filtered down to consumers?

By Alex Reddish, MD, Tribe Payments

People are driven by emotions, even when they don’t realise it. As consumers, gut instinct and personal preferences can play a huge part in our purchasing decisions.

The power of a brand can have far more influence on purchasing decisions than many other factors. If people feel warmly towards a brand, they are happier to engage with it. There are many reasons why Apple is one of the most successful companies in the world, but it’s undeniable that the brand is a big part of it. People see the Apple logo as a sign of quality and innovation and are happy to pay a premium for their goods. The iPod was not the first mp3 player, yet it became synonymous with the technology. Consumers (in general) love Apple. Who else could they learn to love?

Can people learn to love financial services?

A few fintech brands have made a particular effort to engage with their customers. Zopa posts regularly to Instagram with easy-to-follow, friendly advice on money matters. Business provider ANNA has developed a range of child-like illustrations and Klarna churns out a combination of zany creativity in its adverts and a steady stream of helpful tips in social media.

For all this, including the slick apps, welcoming graphic design and friendly customer service, financial service providers are still going to struggle to be as beloved as, say, Nintendo or Nike. People need to trust these providers. They need to know that they can have faith in their systems and services. Once this trust is built, can it really be developed into genuine brand affection…?

Embedded payments and the rebirth of emotional finance

Embedding payments means more convenience for customers. By making payments ultra-convenient and invisible, consumers are happier because everything happens with zero fuss or effort, and businesses get to reap the benefits. There’s also the opportunity for businesses to offer financial services that reinforce the relationship between the business and consumer, as well as delivering potential new revenue streams.

Embedded payments link merchants directly with their customers, enabling them to be part of that transaction or moment. These payments allow providers to build customer relationships at that point of need, helping build trust and develop a meaningful relationship.

But we shouldn’t see embedded payments as the endgame. It’s tempting to think that, once the payment is invisible, there is nothing more that can be done. There is the potential to create better links with customers—and perhaps even create the sort of emotional connection that other brands enjoy. This is emotional finance.

Creating better relationships is contingent on having a better understanding of the customer journey… but not the customer journey as we usually mean it. Rather than the customer’s journey through a payments system, we mean their journey through life. Priorities shift and change, and even minor decisions can mean big changes in spending. A new child, a new home, or even a new hobby can mean an abrupt shift in priorities–understanding these changing preferences and reacting to them can open the door to building better loyalty.

Right now, certain music streaming services offer deals for two people at the same address – but consumers have to proactively adopt these and link their accounts. What if a service could do this with a certain level of automation? What about other services that would be helpful to adapt without changing needs? The most common embedded payments example is paying automatically when taking an Uber or another taxi… but what about the other journeys (real and metaphorical) we take in our lives?

The key to this is, of course, data. Data means that we can create better services – more personalised, more convenient. But it’s not just about making sure we tap into the broadest range of data available. Timing is very much a factor, perhaps the most important. Instant access to data is required to make the fairest, most accurate decisions.

When we consider how much change we’ve all gone through in the last year or two, financial data that is 18 months old is likely to be very outdated, and the quality of customer data will degrade quickly over time. We need to work with the freshest data to make sure the end product is one that consumers will want.

Ultimately, consumers will pull us in the direction they want to go, no matter how much we think we can ‘push’ new products and services to them, adoption is down to the customer. Creating emotional finance – a connection through loyalty and context is key – embedding finance to make things convenient is not, on its own, enough.