Unlocking New Revenue Streams in FinTech: Data-driven Advertising

First it was JP Morgan. Followed by Revolut.

History offers valuable lessons. Look no further than the American auto industry in the 1970s. Focused on short-term competition with each other, Ford, GM, and Chrysler missed the bigger picture: the looming energy crisis and rising popularity of fuel-efficient foreign cars. Their tunnel vision left them vulnerable, ultimately leading to a massive decline in market share. From an export surplus of $60 billion, the industry became import deficit in 20 years. Foreign imports went from 1% in 1955 to 45% in 2013.

This is a classic case of an industry that just failed to observe the changes around them, developed tunnel vision and consequently failed to be dynamic enough to withstand the onslaught of foreign competition. By seeking static advantages, the three large automakers simply lost sight of the need to be dynamically capable in the marketplace.

In the words of Dr. David Teece “Dynamic capabilities enable the firm to integrate, build and reconfigure internal and external resources to address and shape rapidly changing business environments”. The operating key words here are “reconfigure” and “resources”.

Fast forward to 2024, in the first week of April’24, JP Morgan announced it “is getting into the ad-selling business. A new unit, Chase Media Solutions, will help brands target the bank’s customers based on their spending history.”

This makes JP Morgan the latest non-traditional player to convert user data into advertising revenues. Competing with established brands like Google and Meta whose primary source of revenue is advertising and going neck-to-neck with other non-traditional players like Uber, Marriott, and Walmart, JP Morgan will seek to capitalize on the petabytes of user data sitting in the form of credit card transactions in its data stores.

Not to be outdone, Revolut, the London based neobank and financial technology company, announced its intention to monetize customer data by sharing it with advertising partners.

Both companies, JPM and Revolut, expect to derive significant revenues from the newfound idea. Revolut went so far as to say it plans on bringing in $375M USD by 2026 – which will constitute approximately a third of its revenue by today’s standards.

The private fintech sector is going through a rough patch, to put it mildly. Companies are actively seeking new revenue generation opportunities by way of business opportunities in adjacent markets, new geographies, not to mention M&A, privatization and related avenues. At a juncture like this, it is imperative, rather brilliant, of these companies to capitalize on an asset that has henceforth been dormant and idle.

Even with all the data science and number crunching capabilities, these fintechs can come up with only so many new products and services. Putting the very same data to a totally new purpose will make for a fantastic side hustle that will help them augment revenue streams which otherwise is not going to perk up on its own.

The ability to pivot and continually reinvent itself to stay ahead of the competition, make money for one’s shareholders, and remain competitively capable is an absolute necessity today, more than ever. It is a Dynamic Capability in the true sense of the phrase - ?“build and reconfigure internal and external resources to address and shape rapidly changing business environments”