Thread by @patio11

An underdiscussed thing in fintech: as firms get more sophisticated at precision marketing and onboarding gets easier, it has become easier to "skin the cream" of the top e.g. 20% of customers with the best margin characteristics.

This has lots of implications, for everyone.

It matters to banks/brokerages/etc, which previously did fight for AUM/deposits/etc from people who were in well-heeled stages of their lifecycle but which also generally expected extremely low churn rates and so could take a flyer on an account for years/decades.

It matters to marketers at fintecs playing the CAC game, because a channel which has low CPA but which doesn't get you the best customers can look like it is succeeding until it kills your business.

It's great news for customers who are sophisticated and a bit ruthless.

The amount of money the financial industry will spend on acquiring the business of two upper middle class professionals or retirees is denominated in "months of mortgage payments."

And because there are different marketing departments with different risk tolerances and quarterly goals, and because it is relatively difficult to determine whether someone is an inveterate switcher, one can go after the marketing budget ruthlessly annually if one wants to.

It matters to "traditional" financial companies, because even with a mortal lock on distribution ("We've got a branch in your neighborhood and are in your wallet!"), they don't have to lose many accounts from their portfolio to lose a blue-chip-incompatible portion of margin.

It's all fun and games for BigBank until your dentist starts picking their brokerage based on mobile app quality, after which BigBank has an urgent build-or-buy decision denominated in quarters rather than decades to worry about their digital transformation strategy (TM).

It matters for product teams at fintech companies, which probably started with the ambient belief "Eh we're in finance and we'll run a portfolio like everyone does; make a lot of money on some customers and lose a little money on some, etc."

That's going to get tougher.

Instead you're going to start seeing firms, and potentially brands within firms, specialize in affluence level/life stage/needs/etc to target a much tighter range of margin than financial services firms have historically targeted.

How this shakes out will be complicated.

e.g. There's an app which I love but which I'll avoid naming because of the social ramifications of being too direct about where they'll have most of their usage. They compete with bank accounts at BigBank.

BigBank has a phone number printed on your card where you can call and talk to someone who can help. This app... theoretically speaking that exists, but many parts of the experience will be monomaniacally optimized to have supermajority never talk to a human.

And you could cariacature this as “Wait, it’s a worse service for poor people.”

And it’s complicated! Because if your values include human contact with a CSR yep it is worse. But if they include “no bullshit insufficient funds feels” then it is better because NSF impossible.