The Beginning
I’ve been working in Financial Services (FS) since I started my career in 2015. I started at Citigroup, working on retail banking strategy for our Asian private wealth management clients. The name of the game there was rewards and incentives both for the sales people and the new customers. In that same role, I moved into our FinTech group where I studied Blockchain tech (“Distributed Ledger Technology” as banks love to call it) and neobanking. At that point, hearing the story of N26 where the founders saw how poorly created the banking infrastructure in Germany was and how their solution was to build a bank using the power of user-centric design, it was a revelation. Up until that point, I never considered that banking could be easy or fun or have moments of delight.
Fast forward a few months and I was working for N26, starting as part of a team of 3.5 (.5 because one of the team members was a US ex-pat who came back to the US and was on loan from the headquarters in Berlin). My first few jobs started with some financial modeling which I was not good at and eventually dug more into understanding the banking market. Specifically, who the customers within this market would be and what type of product we wanted to offer them.
Thinking through this problem, we had hundreds of interviews – I learned so much about what it meant to delve into research, “taste the soup” as Rands would say, and pick up product management from a team of very patient and incredibly helpful engineers. As we settled on a debit card, our sights narrowed and we began to look at neobanking competitors: Simple, Chime, Varo Money and what we called “incumbents”: Bank of America, Chase, Wells Fargo, etc.
The best part about all of this was that I had no idea what I was doing. As a new product manager, as someone shipping product for the first time, as someone working with teams I would never have interacted with at Citi, the concept of running a sprint was daunting but exciting. The inner workings of the business were fascinating and ultimately, I realized that there was no way in hell that N26 could possibly be making money. Combine that with a general lack of support from our EU-based headquarters to our US based team and I decided I was going to step away from N26 and try something else.
I joined a company called Fevo as a Product Owner on a whim. The pay was fantastic compared to N26 (by fantastic, I mean at/slightly above market rate). The team was nice, highly collaborative, about to jump into hypergrowth with a Series B and just like that, we were hit by Covid. Fevo, as a group ticket sales company, had to layoff a ton of staff, but I still commend the CEO and leadership for how it was handled. They took their salaries down to $0, they closed down the office, they did everything they could to prevent as many people from being let go as possible.
As a result, I was one of those let go – I continued my job search, buoyed by the additional income of unemployment and the bonus the government was adding and managed to find my next role as a product manager at BlockFi for the mobile apps. BlockFi had just raised their series B, they were doing something that I thought was a scam, but was very real: they were using crypto the way a bank would. They built their business on collateralizing crypto and lending cash. They expanded in both the B2B and B2C spaces, offering a mobile app (my product), eventually, a credit card, and offering an institutional product to let funds invest in crypto, as well.
This experience was incredible and I am still in awe by a) how much BlockFi as a business was built responsibly (from a cultural and business-savvy perspective) and b) how much money the company made. I think they started to slow as they became bigger and I left when they reached close to 1k people after starting as person ~#100 so seeing that growth was incredible. Ultimately, I was swamped – I had a team of 20+ engineers, 1 designer, all iOS and Android, and operated in a hub and spoke model where our Product teams all relied on our team to ship any products or features on mobile. Before I left, my last project was to complete a reorg that shifted the mobile engineers to each of the teams, but ultimately, I thought I would be better suited to a company that really focused on “the little guy” – helping people build wealth step by step rather than buying into as volatile an asset as Crypto.
Joining Acorns, I started on their banking team and this is when my line of thinking began to form: B2C consumer fintech is a homogenous.
Homogeneity
My idea that consumer FinTech becoming Homogenous stems from a variety of sources, both personal and the concept of re-bundling.
Personally, working on the banking product at Acorns has made me realize that not only are banking products across FinTech the same, but they’re solving for the same problems, the same customer base, and have the same financial concerns. It doesn’t matter how altruistic a company’s mission is or how differentiated the marketing is, anyone glancing under the hood can tell you that it’s all the same. KYC? Socure, IDology, Onfido, Persona. Banking linking? Plaid, Finicity. Banking partner? Banking as a service providers are everywhere from Cross River Bank to Evolve and more. Processor? Marqeta, CorePro, FIS, etc. How do you grow? Social media campaigns, but referrals are what you really push so you have to have a flexible referral program. Revenue? Interchange where the FinTech gets the bulk of the interchange, but make sure the bank partner is under the Durbin Amendment’s threshhold. Alternative revenue sources? a) Subscription – N26, Acorns, and more do this. b) Credit card – both interchange and interest revenue from this c) lending products as a service d) investment products in the form of ETFs that have a maintenance cost. How do we offer Crypto? GBTC and other ETFs let you offer this or just plug into a crypto as a service provider and allow trades (going back to the revenue piece, you can make money on the spread and still advertise “no fee” trading).
This stuff is textbook now.
Is there no more innovation? Of course some companies are iterating and doing things a little bit differently, but generally, even the innovators are conforming to the re-bundling of products that has been happening for a long time. Where the original premise for neobanking (aka challenger banking aka mobile banking) was that an entirely mobile-based experience would be so incredibly easy for the customer, the banks would go out of business – this was wrong. These neobanks are all following the same textbooks incumbent banks have which is to eventually offer the full suite of financial products. The only question is which order do they put their products out in and how do they market/brand these products?
For example, getting paid 2 days early is just a loophole in the ACH rules (I’ve read the NACHA rule book, for what it’s worth) where incoming credits never need a confirmation message on the network or to be returned assuming the account is open and in good standing. AKA any incoming credit can be assumed to be settled regardless of when the settlement date actually is. This was the biggest banking “innovation” in the last 5-6 years that wasn’t innovation, it was just interpreting the ACH rules literally so anyone can copy it. And everyone has.
Aight Imma Head Out
Ultimately, B2C FinTech solves the same problems for similar sets of customers with marginal differences. I love shipping products that have a positive impact, I love learning and trying new things, and I love being part of a team that genuinely wants to improve our customers’ experiences with whatever we’re working on. B2C FinTech is now an exercise in branding. Everything from the color, shape, material of the card to the app itself has become a method by which different companies can brand themselves better.
I can’t speak to crypto and the fun of Web3 just yet – I don’t know if/how they do any better in the long term, but I can tell you I will never invest in neobanks/neobank adjacent companies because they feel commoditized.
B2B and platform-level innovation is possible, but the entrenched players have a stranglehold on the market (e.g., Plaid) and it will be difficult to make changes for these companies at scale. I am simply not confident in this space anymore and feel it’s all been done.
Overall, I don’t see a future for myself in the neobanking or B2C FinTech space. I’d love to see more innovation and the space progressing via some massive step change, but without that, these neobanks will be doomed to mediocrity and chasing a finite number of people who already have the same set of products with a different coat of paint.
Amaan Lakhani 