🧠Brain Food - 19th July 2020

Never a dull week in #fintech. As always here's 4 fintech's that caught my eye this week as well as a round up of stuff I've seen or heard that tickles the neurons.

4 Fintech's 🤑

  • Bond.tech - the Bank as a Service space is WHITE HOT, and Bond.tech have been on the horizon for a short while. Having just raised $32m from backers including Goldman, Coatue and Mastercard this team is exceptional. The CEO was the former COO of the Twilio cloud platform. So we now have a16z in Synapse, Deserve, Galileo and Marqeta all playing in the USA bank as a service or "every company will be a fintech company space. Insider speculation: I reckon the Goldman investment could become interesting. Goldman of course are the Apple Card partner and intends to become a Bank as a Service provider itself...

  • Snoop - describes itself as a free app that 24/7 is on the look out for ways to save you money. It does a lot of things "other apps do", like helping you switch utility providers, round up bills etc. Also, it personalizes ways to save money to you, based on your spending history. Plum and a few others have been doing this for some time, but there's something about the execution in snoop. The branding, it has a charm that appeals beyond the early adopter, and into your mum and dad's iPhone. There's so much to learn from how they've achieved it. Also insider tip: Snoop was built in part by a really cool little creative agency.

  • Reccurency - Automating and optimising the pricing and sales process sounds about as exciting as listening to paint dry. Yet, I'm obsessed this whole "CFO / COO" tools space is ripe for disruption. Digits, Modern Treasury and a whole slew of startups are emerging in this space.

  • Clearbanc - Most tech nerds have heard of Clearbanc, but when I mention it to bankers the response isn't as common. Clearbanc lends based on future revenues. i.e. If you have a Shopify page and you sell widgets, Clearbanc will lend to you to spend on advertising. It then takes your accounting data, your stripe payments data and takes a % of your sales revenue. It's hugely successful. It looks a bit like old school factoring, but automated. So this week they launched an automated valuation tool, and that's just HANDY for any business raising. Valuations are such a dark art, especially for first time founders etc.

Good reads 📚

Fintech Battles - Snoop vs Yolt

My Analysis 👋:

Absolutely love this format. They take two leading fintech brands, do a screenshot slide show, and provide a mini break down of the key screens. "Personal Finance Management" (PFM) is a key battleground for brands and fintechs in customer acquisition in retention. You can tell as much from how much Apple promoted the inclusion in the Apple Card. For so long bankers so user experience as "look and feel", and didn't get the difference between good and great. The difference between good and great is in the details. Snoop if you've not come across them are a fintech to watch too.

Monzo Plus Launched - It's about the details - from Good to Great

My Analysis 👋:

Some of you may remember Monzo tried to launch a paid tier about a year ago, only to roll it back after users complained about the lack of value from the service. To their credit Monzo pulled the product and went back to the drawing board. Competitors like Revolut have established a successful paid tier, and Monzo does have a profitability gap to plug, so this makes a ton of strategic sense.

If you don't follow UK fintech, then more than a few people pointed out the Monzo Plus card and it's feature list is eerily similar to Revolut's. Others are disappointed it doesn't "do more".

But look a little closer at the details. The ability to auto export all of your transactions on a regular basis allows for some incredible power users tool (e.g. this where a Monzo staffer has exported their transactions into Google Sheets and is running Big Query across it). Little delightful animations as well as how virtual cards are explained. As ever with Monzo, it's not what they do but how they do it.

Although I still think they could benefit from a business model beyond freemium / premium!

Lenny's Newsletter - What is good retention?

This is a blog post I've used more than 11 times since I bookmarked it a month ago, so it deserves it's own spotlight.

What is GOOD and What's Great retention?

  • Consumer Social: ~25% is GOOD, ~45% is GREAT

  • Consumer Transactional: ~30% is GOOD, ~50% is GREAT

  • Consumer SaaS: ~40% is GOOD, ~70% is GREAT

  • SMB / Mid-Market SaaS: ~60% is GOOD, ~80% is GREAT

  • Enterprise SaaS: ~70% is GOOD, ~90% is GREAT

My analysis 👋:

  • UK high street banks average 1% to 2% customer referral rate, and customer cost of acquisition (CAC) is between £150 and £250

  • Challenger banks report ~50% customer referral rates, and a customer acquisition cost (CAC) of between £10 and £20.

What digital challenger banks have done really well is figure out and nail the types of viral growth big tech digital businesses have excelled at. Many of those digital challengers are fighting to hit profitability (do they choose the banking business model, or something else)? But the ones that have (Oaknorth, Starling, Revolut) have proven they can acquire and make profit per customer.

The bankers still have a large customer base, and are seeing the major deposit base and high profit products (like Mortgages) still come through them. So they're comfortable, for now.

The first threat from digital challengers was to change the customer expectation of digital user experience. This meant incumbent banks had to increase their tech spend on mobile on top of their legacy systems.

The next threat from digital challengers will be in re-bundling the "universal bank" offerings as the more complex financial products are brought to market. When challengers can lend, from lower cost bases, with better, real time data. Things will get interesting.