Product differentiation: Winning playbook for fintechs

Product differentiation is a great way for fintechs to adapt to continually changing markets and set the charter for growth. This differentiation can center on feature richness, enhanced customer service quality, faster time-to-market, elevated user experience across channels and devices, effective pricing or more. Fintechs have realized that it is essential to build deep customer empathy and domain knowledge in addition to the technology stack on which their products are based. 

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Doing so will allow fintechs to go beyond building point solutions to designing a comprehensive product roadmap that creates a range of curated experiences. These may be aimed at delighting a broad customer demographic while building flexibility for personalization and real-time experience. 

Here are some elements to keep in mind while building product differentiation: 

1. Balancing the “Explore” versus “Exploit” Paradigms

It is critical to strike the right balance between “explore” and “exploit”. Born-on-cloud fintech startups are known for nimbleness, rapid experimentation, and iterative innovation – the “explore” dimension. They have significant potential to disrupt large organizations, but often face challenges to industrialize their ideas at scale with high quality. On the other hand, large established global fintechs are good at “exploiting” their products at scale. 

2. Mastering Ideation to Delivery at Scale

A key characteristic of a successful fintech is the ability to run sustainable programs from ideation to delivery. This is done for both radical ideas (“explore”) such as biometric-authenticated ‘pay with a smile’ at a merchant outlet as well as incremental ideas (“exploit”) such as pay by voice commerce or contactless payments at the point of sale using a wearable device. Fintechs often have flagship innovation programs that act as incubators and accelerators to leverage domain knowledge and technology assets to create differentiated value. Programs through which innovators produce market viable products (MVPs) and then scale them, backed by compelling business cases, often create patentable ideas that ultimately create differentiated intellectual property. 

3. Building a Culture of Experimentation and Innovation

When an organization has a true culture of experimentation, it celebrates failures and learns from them. However, it also holds the experimenting team accountable to produce quantifiable and commercially viable product innovations within the agreed timeframe. If the product design teams’ vocabulary includes A/B testing, randomization, time series, and cause-and-effect, it is likely the organization learns and perfects its products through well thought out experimentation with appropriate control groups. 

4. Avoiding ‘Tech Debt’

Fintechs can benefit by continuously and incrementally modernizing their platforms via microservices and APIs. They can reduce the potential for technology debt related to on premise data center-hosted platforms by developing solutions in the cloud, developing cloud native apps and migrating any on-premises platforms to the cloud. This facilitates the development of highly configurable rapidly deployable transaction-based platforms. Fintechs can deploy advanced system reliability engineering techniques to make their products and services are switched on and always available. There should also be a focus on designing products such that customers can utilize self-service for common transactions rather than raise service requests and inquiries.

5. Achieving High-Quality Engineering Maturity

Attaining high-level engineering development includes ‘single click’ DevOps maturity, primacy of design thinking, fluency of tooling based on the cloud platform of choice, embracing open-source tools and low code/no code platforms. This also requires agile ways of working, highly automated development environments, user behavior driven testing with high levels of test automation, breaking monolithic architectures into microservices and standardization towards a “golden path” to production. Further, building a robotic operations center that holistically looks at BOT licenses and optimum utilization while minimizing human intervention is key.

With growing focus on product differentiation enabled by emerging technologies, fintechs are bringing meaningful innovations for their customers at scale and pace. This in turn supports brand loyalty and further expansion of customer base, thus providing them a competitive edge.

The article has been written by Sachin Kulkarni, SVP - Delivery, Global Services, Fiserv