Below we'll review the history of Financial Services, the explosion of Fintech and how they both influence digital marketing.
Without fail, the Financial Services industry is the leading ad spender across digital advertising year after year. When we dig deeper, is this really a surprise?
The concept of banking dates as far back as ancient Greece and the Roman Empire. The system was further developed during the Renaissance in Italy during the 14th century with the infamous Medici bank. We see another boom, my personal favorite, in the mid 19th century during the California Gold Rush, where people from all over the world came to California to mine, sift, and steal the ore in hopes of gaining riches. A major outcome of this historical event was the origination of Wells Fargo, a banking and express (stagecoach) business in California. Their goal was to protect, transfer, and save the newly found riches, later to be used as a means to fund the economy and supercharge the further development of the United States.
What about insurance? Early merchants in the Mediterranean developed the Code of Hammurabi, which protected shipment payload against unforeseen circumstances like fire, pirates or getting lost at sea, where an additional charge was paid to a lender to avoid complete loss of goods for the merchant. Highly risky routes meant high loan rates for merchants. This code continued to evolve to include agents which would travel with shipments to ensure their safety and to mitigate risk.
This marine insurance concept of coverage was adopted first by personal insurance and then by business insurance in the 16th and 17th centuries.
Today we see another boom in the evolution of Financial Services, Financial Technology or Fintech.
What is Fintech?
In short, it is technology used to support or enable any banking or financial services. Typically we see Fintech built to compete with the more traditional and many times, aged, financial activities industry.
Think personal finance, payments, insurance, investment and more - Companies and Apps used in our daily lives like Venmo, Coinbase or Credit Karma.
With the Fintech maturation in our economy and inclusion in our day to day lives, 2019 saw a boom in VC and investment bank backing: “Last year saw a double record of $46B invested across over 2,800 deals to Fintech startups — a 92% uptick in funding year-over-year.” according to CB Insights.
A massive influx of money to a young company typically leads to scaling headcount, R&D, product, or marketing (or a combination of each). But, for those of us outside the boardroom, marketing dollars will be the best indicator on product announcements, growth areas, and target markets, identified by these upstarts.
Let’s take a look at how some of 2019’s biggest backed Fintech newcomers are taking on the aging heavyweights.
Chime vs Big Banking
Chime, raised $700m in 2019 to steal customers and share of wallet from the likes of Wells Fargo and Bank of America. Chime’s focus, mobile banking and debit cards with no fees and a nifty round up that feeds your savings account without you needing to.
From a customer acquisition perspective, this steady increase in ad spend over 2019 says one thing, the return on advertising spend (ROAS) is positive. Full steam ahead!
Chime’s marketing team has found success with their strategy on Facebook. The recipe:
- 99% Link Posts - to link new customers directly to the signup page
- 60% Targeting Female vs Male - historically women pay 18% more in fees per year than men, according to a recent study published by Stash, a banking and investing App
- 80% Buying Android vs IOS owners
- Top 3 States - Texas, California, New York - these 3 states hold approx. 30% of the entire US population
But how does a newcomer like Chime stack up against our friends from the gold rush and a behemoth like Wells Fargo?
From a creative distribution perspective, almost identical - Spend is where we see the major difference.
No surprise here, Wells Fargo has the bankroll to outspend the new kid on the block by over 6 to 1, and 5 to 1 on Facebook advertising alone.
Again this points to an extremely focused and conservative strategy from the Chime team, focusing ad dollars to a return they are confident in, rather than spending against unknown and expensive waters like Desktop Video.
As their brand grows, expect to see spending in video increase (as we see towards the end of 2019 ;)).
Lemonade vs Big Insurance
Lemonade raised $300m in 2019, their goal, to deliver claims and policies via artificial intelligence and chatbots. That’s right, they’ve eliminated insurance brokers . Lemonade, touts speed, engineered to get clients claims solved faster, with better rates and quicker returns.
Lemonade has been ramping spend throughout 2019 with their focus on the open enrollment period of November to mid-December. Lemonade’s #1 Video creative of the year literally begins with, “Old insurance kinda sucks, but Lemonade is different.” Bold! On top of calling out their “old” competitors, they continue to focus on their 21st century solution of “bots over brokers” and “algorithms instead of paperwork.” Double bold!
How does Lemonade compete with an industry leader like Geico? Geico’s dominance is real, with a Facebook ad budget 2x bigger than Lemonade’s entire digital budget for 2019.
Again, no surprise as Lemonade is testing the waters for a ROAS solution that fits their customer acquisition strategy. Based on their spend strategy, over 60% of their 2019 digital ad budget focused on Facebook. The recipe:
- 60% Video Posts - Video allows the viewer to hear and see immediate differentiation from the aging competition - ie Geico
- 65% Targeting Male vs Female
- 60% Buying IOS vs Android owners
- 22% of Facebook budget targeting California - the most populated state in the US and 7th youngest median age
Geico has an established brand name, millions of clients and one recognizable gecko. In their attempt to dethrone Geico, Lemonade is going after them directly, calling out their major product differentiation.
There’s no one size fits all approach to customer acquisition, but if there’s one industry that has been fine tuning their strategy since day one, it’s Financial Services, which now includes Fintech.
Keep your eye on the influx of investment in the Fintech space and how these newcomers strategize their uphill battle to take down these century old industries in 2020 and beyond.
Interested in some other players in the Fintech space - Acorns, Kabbage, Klarna, Opendoor, Oscar, Robinhood, Root Insurance, Stash, Stripe etc. - and want to understand how they are strategizing their David vs Goliath battles against the financial service juggernauts? Reach out for a free insights analysis now.
A lover of fresh air, live music, sport & high performing teams. After the University of Colorado @ Boulder, Sam began his career improving the relationship between major digital advertisers & independent publishers. Currently Sam leads the Operations and Sales Development teams @ Pathmatics with a focus on pipeline growth, process optimization & market strategy.