Fintech and Social Media - Judopay

Fintech and Social Media

Written By Siobhan McGinley, Head of Marketing, Judopay.

A large topic, Social Media in Fintech.

So, I’ve narrowed it down to a particular focus and have chosen to talk specifically about Challenger Banks. Now, I know that’s only one particular segment of the fintech world, but I hope you’ll agree that it does illustrate some spectacular insights that can be used in your own business.

It shows how the intersection of finance, technology, and social media can be used to enable businesses and services that were just unthinkable only 10 or 20 years ago.

In order to move forward, you have to look back. So let’s start with a brief look at history. Challenger banks are not a new idea.

Back in the 1990s, there was a wave of new challenger banks created in the UK. Challengers meaning they wanted to take lucrative banking business away from established high street banks like Barclays, Lloyds, and Natwest.

Some of these challenger banks included Tesco Bank which opened in 1997, Sainsburys Bank also opened in 1997, M&S Bank opened in 1999, and Virgin Money opened in 1995.

Twenty years ago, these new challengers followed a particular formula to establish and grow new business. The business goal is pretty obvious, take a sizeable slice of the huge financial services pie.

They all followed the same formula to get up and running. Basically, they avoided all the heavy lifting involved in setting up a financial institution including systems, regulations, data centres by partnering with an existing bank that already had all that infrastructure in place. Tesco Bank formed as a 50:50 joint venture with RBS, Sainsbury Bank was JV with Bank of Scotland, M&S partnered with HSBC and Virgin Money worked with RBS.

With any new business, you need a way to attract and win customers. For these companies, it was a bit of a no-brainer: we have customers, let’s sell them some profitable financial products.

You can just imagine the scene in the Tesco Boardroom when the pitch was made:

‘We’ve got 3,400 stores in the UK where we can get people’s attention. We do about 40 million shopping visits every week so there’s a huge audience and we see them regularly. We have one of the top and most respected brands in the country, people trust us. Now, what if we could offer our shopping customers a range of financial services – loans, insurance, credit cards….’

Virgin was a bit different. Virgin had the brand, but instead of in-store marketing, it invested heavily in TV advertising on the astronomical strength of the Virgin brand to reach an audience of millions.

Last but not least, new businesses need funding. In the case of these banks, that funding came primarily from the deep pockets of the parent companies. These were literally the first of what you could call ‘banks of mum and dad’.

Turn the clock forward 20 years and let’s look at what we have today. A lot of challenger start-ups of which almost all of these were founded in the last 4 to 5 years.

As before, we can ask, do they follow a recognizable formula? In terms of the goal or purpose, it’s no different. Financial services is a big and profitable market, so they are trying to get a slice of that massive pie. But that’s where the similarity ends because the modern challenger start-ups follow a very different approach.

The way the businesses are being built, the way they’re funded, and the way they reach customers are all very different. Let’s look at each in turn.

The modern fintechs are using technology to create organic solutions and I’ve picked out what I think are some of the key trends in this. For a start, it’s entirely feasible nowadays to assemble the banking processes and systems you need by using readily available software solutions in the industry, and this is what the start-ups are doing. It’s a DIY approach, rather than relying on partnerships with the big incumbents and because it’s new and doesn’t come with all the baggage of legacy systems, the challengers generally can move faster and be more agile.

The next pillar is that the customer experience is mobile-first or even mobile-only. The smartphone technology is at the core of pretty much everything the challengers are doing, with the focus on intuitive, convenient and flexible solutions. These days, you take the bank with you everywhere you go.

A third key factor is access to cloud computing services. Back in the day, to get operational you had to find a physical data centre, buy the servers, set them up and install the software. That all cost a lot of time and money, and you had to guess how much equipment, space and capacity you would need. Cloud computing avoids all that using state-of-the-art services like Amazon. You simply dial up what you need instantly and then you can ramp it up or down as your business scales.

It’s a very different landscape from 20 years ago. One of the reasons I believe there are so many entrants in the ‘challenger’ category is the ease of deploying technology to get up and running as well as the flexibility and power of the technology to enable you to differentiate yourself.

Now, these are not the banks of mum and dad, but, they are the banks of the founders, the investors, and the employees. Despite the number of players, there’s clearly a large appetite and a lot of capital available to fund them.

(I do wonder if quantitative easing has anything to do with this. For example, in the UK the Bank of England pumped £435Bn into the economy through QE. Is this what’s finding its way into VC funding for fintechs?) There’s a lot of high-value companies in this space now, and they don’t seem in any rush to go public.)

(Out of interest, Instagram was valued at $1Bn when it was bought by Facebook, and Google bought Youtube for $1.6Bn. These challenger banks are already in that valuation territory.)

Unlike the new banks in the 1990s, none of these challenger start-ups have a big well-known brand in their structure, none of them have thousands of retail outlets and they especially do not have millions of customers to leverage from an existing franchise. So how do they get an audience of millions to know and use their solution?

Social Media is the main lever to bring them up to that high level they want to be at. It’s not the only element of customer strategy, other digital and marketing tactics are available too. But for now, I want to concentrate on social media and talk about 3 aspects of it. These aspects are acquiring customers, branding, and mobilizing your customer network. These 3 have some overlap and interaction, and when you do all 3 effectively and with consistency, you create a kind of virtuous circle that is self-reinforcing.

The goal here is finding and winning customers. For challenger banks, the social media platforms today provide what Tesco and others had in their store network namely access to millions of potential customers, and a way of targeting them. It’s then a case of utilizing the platforms to optimize results, as outlined here, and you see examples of this in all the challenger banks to more or less degree.

For example, Starling have integrated the Facebook API to give them more control over their management of ads and audiences. An example of a recent campaign is Monzo’s #Nobarrierstobanking on Twitter.

Several fintechs have used social media influencers to extend their reach. You can actually apply directly on the Revolut website to be an influencer for them. This can be a double-edged sword. On the one hand, the influencer may have a following that matches pretty closely to your target demographic. On the other hand, an effective influencer really ought to have these characteristics. Choose your influencers carefully.

But in case you doubt the impact of influencers, a single tweet by Kylie Jenner is said to have wiped $1.3Bn off the value of Snapchat’s stock.

(Some dispute it was the actual cause, but even so it was so widely reported it just brought even more negative publicity and probably made it even worse for Snapchat)

There’s a second distinct purpose for social media, which is about creating and reinforcing your brand through social channels. To get this right, you’ve firstly got to get the basics in place:

  • Consistent visuals
  • Clear, crisp company profile
  • Promote your social channels
  • Post regularly
  • Mixed formats, rich content

More importantly, you need to develop your brand voice as the foundation of everything you communicate through social channels:

  • Culture – what are you all about?
  • Audience – talk their language
  • Authentic – be honest about what you are, and what you’re not, and communicate what you believe

You can see that Monzo for one is all over this. They’re saying what they stand for, they know who their audience is and how to talk to them, and they’re being authentic by making this open and public.

It’s also important to steer clear of the ‘shotgun’ approach on social media. Don’t try to be all things to all people. Know what your key themes are as a business and stick to them. Another popular technique is to get yourself a celebrity ambassador, ideally a rapper or hip-hop artist.

These are some of the techniques that companies use to create social media impact:

  • Active blogs
  • Community forums
  • Support social causes
  • Showcase company milestones, achievements
  • Seek feedback on products launches

You can see how these serve to deepen the relationship between the company and its audience. It builds the trust and affinity that turns users into advocates, and it helps position the company as an influencer that people look to for trusted information and guidance.

This shows just a few examples of these techniques from some of the challenger banks. Most have blogs and community forums, Revolut also have what they call an ‘academy’. It seems clear to me that the challenger banks are doing this pretty effectively. For example, Monzo says that 80% of their growth comes from word of mouth.

To summarize, the fintech challenger banks are using new technologies and a range of modern digital marketing techniques, including social media, that simply didn’t exist 10 or 20 years ago.

So is it working? Hell to the yeah!

If you look at the customer numbers, they are already at the level after 4/5 years that have taken 20 years to reach for the likes of Tesco and Sainsbury’s Bank.

So the growth trajectory of the new fintechs is clearly much higher. It will be interesting to see how far they can sustain that growth in the future.

So, basically, be more fintech.

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