Competitor analysis is innate in the growth strategy of every bank and fintech. Its primary goal is to keep the company’s trajectory forward by understanding how to better serve customer needs through actionable feedback of the competing banks in the market.
If done systematically and efficiently it will allow to adjust the growth strategy and product development process and stay on the forefront of competition.
Rarely, though, is comparative analysis absolutely effective. More commonly is surrounded by issues that don’t allow banks to reap the full benefits of what comprehensive competitor market analysis can offer.
We have drilled down and listed some of the biggest obstacles faced when you are trying to conduct digital banking competitor analysis in your market. Our aid in this blog post was ’s analysts. Here are the most common issues that can derail your competitor analysis efforts.
Not really knowing your competitors
What is extremely common and a serious mistake in competitor market analysis is not having a clear overview of who are your market competitors. Many banks narrow down their competitions to only include the biggest players according to their proximity in the market. Due to lack of time, insufficient knowledge they miss to incorporate banks alikeness with others or with similar traits as theirs, smaller regional and niche banks. Then, they go on naming and indicating specific banks as their direct and at times only competitors, bypassing the necessity for deep market research of which their actual competitors are.
This can have negative results for banks’ and fintechs’ growth strategy. On a primary level they fail to conduct systematic market analysis, factoring size, market value and market share of all players. They also fail to notice important structural and dynamic changes in the market. To cap all this, not paying sufficient attention to who your real competitors are in your market certainly leaves you unprepared to compete with promising up-coming challengers and neobanks on the rise.
Alex Kraiger says it best in his article for The Financial Brand:
The rapid implementation of digital technologies, accelerated by the pandemic, has led to the disruption of the market monopoly of incumbents. Creating and launching a digital financial product has become relatively easy, and thousands of fintech startups have emerged or grown.
Excluding a segment of the banks of the market can be disastrous. Trying to only compete with a specified cluster of banks that might have falsely named as your sole competitors, certainly puts you at high risk of becoming obsolete to target audiences catered by other banks and might have been optimal for you to target.A narrowed lens for competitor analysis will never be as effective as a broad understanding of which bank does what in your market.
No customer-needs focus
Considering the customer feedback and insights into your competitor analysis is paramount for effective comparative market research. While gathering data about your competitor's digital products and their offerings is important, you should also include information about how customers perceive that competitor and their products. Not factoring in ‘voice of customer’ can be a crucial misstep of your competitive analysis. Understanding what your competitors’ customer pain and satisfaction points are allows you to visualize how your product can fit into that market.
With the arrivals of more and more convenient digital services the user experience and expectations of financial products are poised to follow in their footsteps. Customers are asking for easier and more convenient ways to bank. And they are being vocal about it. Social media has amplified their voice and enabled them to share their opinions and needs. Thus, unbiased and pristine customer insight is right at your fingertips.
Ignoring this feedback will only ensure that your product might not be well-targeted or all-out unsuitable for your market. As a result, many banks and fintechs find themselves producing offerings that are not well-adjusted and receive little love from customers.
Quantity of data
Comparative analysis is at its core a data-driven research. Yet many banks and fintechs face impeding issues with their data. Surprisingly, the problem here faced by many banks and credit unions is not the shortage of it but the mountain of information they have. Valuable information whether from research or customer surveys that is misused. Instead of trying to dilute this information into actionable insights banks and fintechs continue to gather more information causing themselves informational fatigue.
In addition the data they have for their competitors is heavily based on financial statistics offered at a high price by databanks. Many banks and fintechs gather information about various financial aspects of their market, such as their competitors' customer acquisition, branches expansion and stock. This essentially applies to 85% of people and is not applicable to the digital banking development teams who influence product development. They are unable to use such data to make the decision they need to make about the digital product and its production. They are being bombarded with financial data when they desperately need product comments and customer feedback for their competitors offerings. The result is tons of data that do not reflect what customers actually need from their banking providers.
Insufficient research tools
Another reason banks and fintechs suffer through their competitor analysis is the tools they use to conduct it. More often than digital banking competitor analysis is conducted by a team of people, the members of which one by one research and analyze a single competitor. This tactic is besides being extremely costly, as the more the competitors the more manpower needed, it also time-consuming. By the time the analysis is complete, changes in the market and customer needs might have forced competitors to rethink their strategy and make significant changes that will need to be examined again. Furthermore, this method does not provide banks with an analytical overview of the competitors but with sporadically gathered information that will need much time to draw conclusions from.
There are, however, a few tools used for this research process that often prove to be ineffective as they are broad and not constructed for a particular bank. These are competitive research white papers/reports which usually come at a document format at an increased price. They are often rigid, discussing a specific portion of the market, for a specific time without considering fluctuations. What the recent pandemic has definitely proven is that circumstances can change in the blink of an eye. No more than ever banks and fintechs need to invest in tools that are “alive” and will allow them to have actionable insights at their hands that are updated as the market changes. Tools that can be tailored to their specific market and customer needs.
Competitor market research is of the very first steps that define your product development planning and strategy. Poor data quality and quantity, limited view of who your real competitors are and lack of proper research tools can negatively impact your product planning and derail the whole process. It is of paramount importance that you understand how these issues deeply influence your overall digital banking development and how resolving them can lead to a more fluid process for all.