In the last 10 years the amount of money that was invested in Fintech startups was massive.
This produced a lot of innovation, many great companies were born and they significantly improved the way people interact with financial services. Their innovations took mainly two avenues: distribution/access and financial incentives.
Fintech startups essentially raised the UX bar in these two ways: providing a modern mobile interface to financial services and making their services/products cheaper than those of the incumbents. No one really excelled in terms of engagement or emotional attachment, changing the perception of financial service from a utility service to something cooler.
The argument of this post is that the Apple moment for financial services will come and the new generation of fintech startups will have to work on engagement first, building a very compelling and cool proposition in order to do to finance what Apple did to consumer technology.
The Apple Moment
Today Apple is arguably one of the coolest brands on Earth. Apple products represent a status symbol like no other brand in technology, but also more broadly speaking.
This coolness and luxury factor that Apple managed to create around technology products is something totally new for the tech industry. Before Apple, technology was perceived as a utility, essentially commoditized or easily commoditizable, definitely not as something beautiful that successful people would show off and be proud of.
Apple revolutionized this paradigm, reinvented consumer technology and destroyed many stereotypes in the process. The epitome of this groundbreaking approach is the famous ‘Get a Mac’ ad, where PC users are associated with the “unpopular nerd” cliché, while Apple Mac users are presented as young, creative, attractive, ultimately way ‘cooler’.
I believe consumer finance is ready for its Apple moment, and that consumer startups that really want to make a dent to traditional banks will have to go beyond access, financial incentives and utility, to actually become lifestyle products with high engagement and emotional attachment.
Today traditional banks are highly commoditized products: they all offer the same functionalities and it’s very hard to distinguish them only based on their product offerings.
They typically tend to offer a prepackaged proposition, not really customizable on the users’ needs, which gives access to some fairly standardized sets of features.
Their data model is built around individuals, with no real space for different social aggregations and money management experiments.
The interaction model is identical for every bank: they all have very heavy apps and websites and many users are still relying on branches. Their competition is generally based on cost.
Neobanks are not so commoditized yet, but their features’ sets are getting more and more similar: most of the neobanks are building an ecosystem of mobile-first services, from checking accounts to lending to trading, targeting different demographics but with very similar experiences.
A new paradigm
To stand out from this crowd, a different approach will be needed: a new product concept that merges product and marketing together. Product people will have to come up with some unique product features that can contribute to build brand equity and that would help to find less saturated distribution channels.
Signs of this new trend are already visible: one of the assumptions that neobanks validated so far is that people are willing to pay more for a cooler credit card. N26 built a solid proposition around premium cards (which represent one of the main motivations for buying a subscription) though this alone is not yet enough to differentiate it massively from other neobanks…
Other startups are exploring different territories.
Step and Stir are building banking propositions for very specific niches (Teens and creators) developing a much closer and intimate relation with their customers. Step went even further, tailoring its search for investment on its brand identity, and managing to engage in this Charlie d’Amelio, a worldwide famous influencer extremely popular in their target audience. This can be initially written off as a marketing initiative, but in a world where the main distribution avenues are crowded and expensive, this is not a trivial move.
Bella is going even further: even though they don’t position themselves as a bank (look at the screenshot below), they are building a conversational banking experience blended with a strong sense of community for their customers, something that goes much beyond the current banking experience, even for neobanks.
Yotta is using the dream of making money effortlessly to acquire and retain new customers: every customer by default enters a weekly lottery and can win up to $10M, a super compelling incentive, more powerful than the classic 15/20$ referral rewards.
On the investing side, Commonstock and Public are building networks of investors that can be followed, contacted and mimicked. They are adding a social flavour to investing, something extremely powerful and engaging that we saw in an embryonic way through the WallStreetBets community, but that can be scaled up much further, especially in times of meme-stocks and stonks.
Both solutions are obviously trying to achieve network effect dynamics, something that doesn’t exist in current trading solutions.
The ones presented above are different propositions, but they all show a few common patterns: they are financial products trying to compete not just on easier access or better UX, but they are trying to build competitive advantage based on engagement and, at the same time, using their product to accelerate distribution and find effective alternative to cash-burning Facebook and Google ads.
Some of them might seem products relevant only for some niches, but also Apple started off as a brand for creators and creative professionals….