The cutting edge of Fintech is in trust, not technology

A common discussion we have with investors concerns our customer acquisition costs (CAC). It's understandable given this is the largest single contributor to the costs of running a challenger bank and consumers are famously reluctant to move banks - so lots of money being spent and no return is the implicit problem being raised.

There are now so many "challenger banks" (see this article) and so many people have invested or worked at them that there is a lot of data now swishing around the Fintech and Investment community) about CAC and it's effectiveness in attracting active customers with meaningful levels of use. The picture is not pretty - CAC is incredibly high - market gossip puts some challengers as high as $800 to get an active customer!, on the other side average deposits at some of the largest challenges as less than $10 (ten United States Dollars - not a typo). A strong warning here this is coffee shop gossip so please take it as no more than that.

The question we ask though is why this industry has to buy customers at all? The conventional banks spend an absolute fortune on marketing - the largest US banks spent over $10 billion in marketing last year. With limited differentiation between bank offerings, banks are now having to compete on how big their marketing budget is rather than how well they serve customers. The bet here is that once they capture a customer the barriers to exit are so high that they will have over a decade to monetize the customer regardless.

This has led to banks using marketing practices that are at best questionable and at worst downright deception. Introductory offers, headline rates and returns that are unachievable or only applicable to a limited amount of overall funds or spend and hidden fees or costs.

It looks remarkably like the travel industry in its worst days. The result of this is an erosion of trust between consumers and the institutions that purport to serve them. And we should not expect this to change - its very profitable indeed for the banks. Of the top 10 most profitable companies in the world, 2 are US banks.

What is really a shame is that many Fintechs are following the same model.

It may sound naive but we at unifimoney think that the biggest opportunity in Fintech is to build trust and change the model in the market, not propagate market conventions. We should not have to buy customers, the product should be enough. At unifimoney we will not pay for referrals - would you trust a vacation recommendation from a friend if you knew they were paid to provide it? We also intend to never use traditional paid media. It's expensive and ineffective in attracting quality customers. Every $ we waste in marketing is a $ less we can share with our consumers.

We treat our customers like we would like to be treated. We believe if we create a business that puts our customer's interests first then that will be sufficient and the company can share in their success. If that sounds like you then please check us out at www.unifi.money and sign up for the waitlist.