Why building a sustainable fintech business requires more than marketing

Fintech and the dawn of purpose

By Theodora Lau and Bradley Leimer

It was the best of times — then suddenly, it was the worst. Nothing quite like a global pandemic to recast the lives of billions. Yet the fintech money wheel keeps turning. Q1 2020 saw $10.6 billion of venture funding, according to FT Partners. Megadeals continue, including a Series F round of $280 million for Robinhood and $112 million for Stash, and a Series D extension round of $100 million for N26. Elsewhere, Alpian, raises a $12 million Series A round to launch a digital private bank targeting Switzerland’s 2.6 million most affluent.

We can’t help but wonder out loud — has fintech lost its way?

Let’s start with Bó, a stand-alone digital bank which was once touted by RBS as a response to challenger banks such as Monzo, Revolut, and Starling.

“Bó represents a new breed of financial institution – a greenfield digital bank owned by an existing incumbent.” Mark Baille, ex-CEO Bó

Reportedly, RBS initially approached Monzo with a potential buyout offer, but thought it was too costly. So they decided to build their own. With a debit card, instant spending notifications, and fee-free spending abroad at Visa exchange rates, Bó’s goal was to help customers manage their money butter and live a more financially sustainable life. Mark Baille left two months after its launch in November 2019. And just last week, merely five months after launch, RBS pulled the plug with 11,000 users (mostly friends and family of bank employees).

Bó’s fate followed that of Finn, a digital bank owned by JP Morgan Chase, which was shut down after a year. A costly experiment, one might argue. And as it turns out, building a sustainable business requires more than marketing — you can’t just build a bank with friends.

Speaking of building a bank, Switzerland-based Alpian is planning to launch a digital-first private bank in 2021, aiming at the country’s mass affluent. It promises a “modernistic digital interface” with proprietary technology to develop scalable, personalised private banking, according to a report by Finextra. In today’s competitive market, and unfavorable economic environment, where digital banking is the minimum entry requirement, is being “the Cadillac of banks” really the best they can do? Couldn’t they at least imagine themselves as the Maserati of banks?

As we have often said, innovation does not mean throwing spaghetti on the wall to see what sticks. Creating a successful digital bank requires more than just digitizing existing services. In a crowded market, customer centricity is more important than ever. It is easy to create an attractive user-interface and hire influencers to market your brand; but it is much harder to understand what your customers want and deliver a solution that can truly help them.

Unfortunately, buying a travel aggregator and selling plane tickets might not be the best path forward either, as what Revolut seems to be looking into. Who is getting on a plane anytime soon? While we get the point they are trying to make, does this truly add value?

Building sustainable business requires more than marketing

Be it challenger banks, or digital-only offshoots owned by incumbents, it is time to think about what truly sets you apart from the others. Being digital is table stake; merely providing information based on historical data is no longer sufficient.

Especially in a post COVID-19 world with millions of people unemployed, where an increasing number of households are making tradeoffs between paying off their bills versus putting food on the table or taking care of their pressing medical needs, how will the financial services industry respond? How can we put tools in the hands of Main Street small businesses and consumers to help steer them out of uncertainty and back on track?

As more work transitions to contingent employment, how can we better support this growing class of workers who lack access to benefits and whose future is growing more uncertain day by day?

And that is the future we must focus on. A future with purpose — where we seek to maximize value for all stakeholders, every community. We are all citizens of this one big world.

We must unite as one or perish as all.

Listen in via iTunes, Spotify, or your favorite player as the four original hosts of this series reunites — for the first time in the show’s history — under one fintech banner, and under one mission, to make banking better.

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