Avocado Money

Fintech : More tech, Less fin

I like following the fintech space closely. Chime and Empower, two front-runners of the “millennial focused banks” trend made big announcements recently. Along with a several other well capitalized players, most of these startups are trying to making banking cool and great again (Sorry, I had to make this reference. SCOTUS nomination is top of mind this AM).

While those announcements are promising signs of progress being made directed towards a generation (yes, “millennials” is a generation, not a state of mind or age group. We grow older too sadly!) I’m a part of, I continue to think that the highly regulated market of consumer banking (and several other adjacent categories in fintech) has been a very tough nut to crack for Silicon Valley.

There are lots of similarities between consumer fintech & DTC retail. In online DTC retail, startups starts off by unbundling a CPG (ie. one product line, great messaging, beautiful aesthetics etc.) and try to do everything that a legacy CPG wouldn’t do (digital marketing, no stores, heavy focus on social etc.). They keep keep at it until they get to a point where they have to inevitably start doing what CPGs do (start selling in big box retailers, set up physical stories etc.) and start re-bundling (multiple product lines etc.). Business is about making boring numbers work, after all.

We are seeing this phenomenon in fintech too (I recommend clicking through these tweets to read the threads).

Sar Haribhakti@sarthakgh

Lots of similarities b/w consumer fintech & DTC ecommerce.

So many beautiful user interfaces w old systems under the hood. VCs keep them afloat while traditional CPG & banks groan until we see shopping spree & market correction. https://t.co/UrdThtXDHO

September 9, 2018

Sar Haribhakti@sarthakgh

What would be cool though is if bunch of these DTC brands come together to leverage CAC and cross promote. Right now, most DTC brand across verticals are going after folks with high disposable incomes who can afford to pay a premium for a "good experience" & are burning VC money.

August 8, 2018
The fintech parallel to this DTC evolutionary trend is that a major chunk of startups are trying to become “banks”. Startups starts off unbundling the behemoth banks by choosing one thing and trying to do it well.

Image result for CB insights banks unbundlingIn consumer banking specifically, some start with investing products. Some start with checking and savings accounts. Gradually, most are progressing towards a common steady state. I don’t think that’s a bad thing. It isn’t a surprising either.

One major difference between DTC retail and fintech is that fintech is heavily regulated. This makes it much more difficult for the new players to work like the old players in a more relatable, hipster, consumer friendly fashion.

This is very sad :

“Mobile payment users were also more likely to make withdrawals from their retirement savings accounts and engage in high-cost borrowing activity.”

“41% of Americans who earn over $200,000 a year have cried because they didn’t have enough money.”

“[Young adults] who use [mobile apps] to track their spending are 25% more likely to overdraw their checking account.

We have a long way to go in terms of technology helping us control our worst avocado, coffee and kombucha impulses when it comes to money.

I think we absolutely need a suite of products that counteract the human tendency to fall prey to temporal discounting (ie. tendency of disregarding term consequences of our actions and decisions). This is an unexplored design space. And, thats for a big reason :

Sar Haribhakti@sarthakgh

This is a 🔥 convo b/w @i2pi & @felixsalmon. They dunk on blockchains 🙌🏼 (h/t @JohnnyHVan)

Great insights on how lack of write access via APIs restricts banking startups

“I don’t think centralization is the major problem to be solved in payments” https://t.co/7RAn4S9bao

June 21, 2018

For those of you interested in diving a bit deeper to unpack the potential, challenges, categories and players in fintech, I highly recommend the following :

Fintech Frenzy: Hype or Reality? A Closer Look at 6 Key Sectors

App-Only Banks Rise in Europe and Aim at Traditional Lenders

Fintech Apps in 2017: What Changed, What Didn’t

Sar Haribhakti@sarthakgh

This convo b/w @eriktorenberg @maiab & @pitdesi is a very comprehensive podcast equivalent of CB Insights fintech landscape!

They cover startup opps & challenges across lending, insurance, personal finance, capital markets, banking, financial planning. https://t.co/7UDcfh8UTh

June 28, 2018
All of this said, I am very glad that VCs are pouring money into this space. We need more experimentation. We will see a buying spree from the big banks and traditional financial institutions. Assuming regulations don’t get much more friendlier to level the playing field for the upstarts, at the very minimum, the new players will shake up the old players.

Until then, lets stick to Square cash boosts, Robinhood investing, Wealthfront passive investing and Uber credit cards! Please avoid upcoming shitcoins on Coinbase though! Buy Bitcoin!

Sar Haribhakti@sarthakgh

It’s such a great time for someone who wants to build a career in finance to join tech. Everyone from the giants (Apple, Square) to fintech startups & crypto projects are attacking finance.

May 10, 2018