Last Week in Lending: Tuesday, 6 August 2024
From fintech innovation strategies to the impact of IT bugs on banking operations, here's my roundup of the lastest insights in the lending world:
1?? Simon Taylor on spotting the next big thing in Fintech
I really enjoyed Simon’s latest piece on spotting the next big thing in fintech, which involves recognizing the growth of small, niche markets often driven by innovators.?
One key aspect of this framework, currently a focus for many Taktile customers, is cross-selling new products to existing customers. These companies initially target new customers with innovative products but later shift to cross-selling to enhance revenue growth. This strategy leverages established customer relationships, boosts engagement and maximizes value.
From my recent work with fintech lenders and banks this year, I see one of the biggest keys to success with maximizing customer lifetime value (quickly enough) is having a superior testing environment for rapid product experimentation using historical customer data.
Check out Simon's framework here ??
2?? Matt Brown on pricing & shaping risk that others can’t or won’t
I’m always drawn to articles that take lending economics back to the basics: Risk versus Return.
In his recent article, "How to Make Money Selling Money," Matt Brown argues that traditional advice like "make something people want" isn’t enough for fintech companies. Fintechs sell money, so their primary concern must be getting it back, not just selling it.
Matt emphasizes the importance of companies being able to price risk in a way that gives them an advantage over their competitors. Fintech companies must be able to "price and shape risk that others can't or won't.”
Matt provides several great examples, but I strongly agree with the key role that unique customer insights play in being able to do this well. This is a theme (which Simon also highlighted in his article above) that’s increasingly evident in the market right now – especially among embedded finance players. But I think it doesn’t stop there; there are multiple industries poised to leverage their wealth of proprietary data to assess customer risk better than others, such as telco providers. I’ll be watching this space ??
Check out Matt's deep dive here ??
3?? Patrick McKenzie on why the CrowdStrike bug hit banks hard
A recent bug in CrowdStrike's Falcon software caused big problems for banks, leading to system crashes and the infamous Blue Screen of Death on Windows machines.
Patrick's deep dive into this issue was super insightful, highlighting the need for resilient IT systems to avoid such disruptions. Since many banks use Falcon for security, the bug shut down operations like teller services and cash withdrawals. The error came from a configuration update, showing the risks of running crucial security tools in kernelspace, and led to significant challenges in handling transactions.
Highly recommend checking out Patrick’s overview of what happened ??
4?? Experian releases average credit card debt by age in 2024
The rising cost of living is driving people of all ages to lean more on credit cards, with millennials and Gen X’s seeing the biggest jumps in their balances, according to Experian data. Even Gen Z’s balances are creeping up, though not as dramatically.
Credit card debt is the most common type of debt in the U.S., with 45% of households carrying a balance each month. Gen X's average credit card balance has skyrocketed by nearly 50% since 2012, now topping $9,000, while millennials' average debt has more than doubled to just over $6,600. On the flip side, baby boomers and older generations have actually managed to reduce their average credit card debt.?
I think it’s crucial for fintechs to keep an eye on how economic conditions continue to shape spending habits, especially among the younger generations. I’m already seeing many companies respond to these trends by embedding more transparent and educational elements around credit into their products – take Crew for example!
Check out all the stats here ??