Last week I wrote about two types of fintech strategies. Diverse fintech is the trend for any app serving a specific cause, specific goal, or specific community to sit at the top of the record bank and serve the customer in a more personalized way. Dashboard fintech is the need for consumers to have all their data in a single and large dashboard allowing better insights and decisions.
Either way, there will be potential for consolidation.
Diversified fintech: making decisions
Diverse fintech is looking for new ways to serve new or underserved consumers. Common to consumer fintechs are the need to make underwriting decisions and host a deposit account in the background.
Diverse fintech applications have partnered with innovative small banks or a network of banks and credit unions to be the bank of choice for liquidity holding. A sporadic network of community financial institutions is vulnerable to a large (r) bank that provides a back-end system to access deposit accounts. Some banks, like Cross River Bank (CRB), have become leaders in providing tools and solutions to emerging fintechs and big brands that want to host payment solutions. Some white label platforms, such as Cambr, provide access to the network of community banks and credit unions. CRB aggregates APIs. Cambr aggregates deposit accounts.
Any bank that needs or wants name recognition can become the account holder for all the diverse fintech apps on the web.
The other service that all of these diverse fintech applications need is subscription.
Many serve consumers who do not meet typical FICO credit criteria. Therefore, whether based on alternative credit modeling or alternative data, every application or card requires real-time decision making. Right now, there are many (hundreds?) Fintech companies creating subscription engines and there is potential for consolidation here.
Fannie Mae and Freddie Mac offer it to mortgage companies and call it an automated underwriting system (see, AUS). Call it AUS or subscription as a service; no reason for all of these creative startups to need to recreate the wheel when a dynamic service could support all the different approaches.
If banking as a service (BaaS) got its start and gained popularity several years ago, subscription as a service could become a consolidation option.
As the trend towards diverse fintech uses the front-end to serve a myriad of themes, solutions, and communities, the potential for consolidation of the services (drivers) fueling these fintechs will increase.
FinTech dashboard: one app to rule them all
The “dashboard” in the fintech dashboard refers to the visibility now available to consumers through data import and aggregation. Increasingly, these data sources allow you to see all of your financial information in one place.
One issue I wrote about last week in Fintech on Benzinga is the access issue. Consumer data lives in a variety of different places. Unfortunately, the best consumer credit decisions are made when the full financial picture is available. Today, most consumers have this “picture” hosted in separate apps for each service: direct deposit account, high yield savings account, investment account, crypto wallet, student loan, auto loan or payment. , mortgage.
Yet one thing consumers want is proactive information, recommendations, and specials or perks. These are limited in value without the full picture. The full image is not available unless there is a place for the data.
The two important aspects of data consolidation are objectivity and proactivity.
Objectivity is essential.
No one wants to be offered a full fintech picture of a company that is also the product and credit provider. More frankly, you don’t want to download all of your accounts at a bank or mortgage company and feel like you’ve lost the ability to shop before you even start.
The platform for empowering consumers must truly empower consumers regardless of the product offering. Lenders and financial institutions are not well placed to offer objective recommendations. Good for fintech. Bad for traditional financial services.
Proactivity is important.
Traditional financial services are also historically responsive. The whole model is app-based. Apps are by nature responsive. The entire system was therefore put in place in response to a customer request.
Apply for a loan and we’ll see.
Apply for a mortgage and we’ll let you know.
It’s not just pride. For a long time, it was a lack of information.
Lenders and banks didn’t (and couldn’t) gain access to consumer data, so proactive recommendation was even possible. Data aggregators and fintechs have made sure that consumer data is available with the proper permissions and disclosures. Now, financial institutions, such as those with direct deposit revenue visibility, can provide consumers with proactive offers of real credit products.
Consumers value personalization and personalization.
Increasingly, we also know how valuable our data is.
As these two trends intersect, consumers will expect any service with access to their data to deliver actionable insights and offers that are only possible as a return on investment of downloading the service to begin with. . Companies like MX are trying to consolidate insightful tools. In this model, fintech pays for the tools and offers them free to consumers.
That’s not to say consumers wouldn’t pay for valuable information and offers, we would. The only requirement is that the return is genuinely valuable to us. To date, most of these fintech promises have not been kept.
The future of fintech
There are attempts – you might think – that I don’t mention. Mint. Improvement. Wealth front. Budgeting, robo-consulting and investing are all important fintech solutions and tools, but do not constitute the diversified fintech approach and are not complete in objective recommendations. The consolidation underway at the level of existing solutions is not back-end cash flow support or personalized financial management. Still.
Having said that, I’m sure I’m missing the app you use that does it all – great! Place it in the comments and let’s chat.
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