Fintech On Benzinga: What Does "Top Of Funnel" Even Mean Anymore?

Last week, Benzinga reported on NerdWallet’s filing in preparation for IPO.  NerdWallet originally known for comparing credit card reward programs now compares student loans to travel to taxes. The anticipated valuation is $5 billion.  Let’s assume that valuation is supported by the market. There are two conclusions we can draw for fintech overall.  First, it underscores (once again) how valuable the top of funnel is for consumer products, particularly financial services. Second, it highlights the value of scale versus depth. 

Scale because NerdWallet has broad reach and appeal; NerdWallet does not collect all that much consumer data.  Meaning while NerdWallet will allow estimated or self-provided data, the majority of NerdWallet content and site recommendations are not based on actual consumer accounts.

The future of fintech (and fintech valuations) depends on how consumers respond to the growing proliferation of single focus or even single use fintech apps.  

One such fintech popped into my Instagram feed recently – Aspiration Bank. This deposit and debit account ensures “fossil fuel-free” banking and rewards that benefit eco-friendly investments, including a tree planted for every roundup. That’s just one recent example. 

Other examples are fintech platforms that serve a specific & underserved communities. Communities of color are long overlooked by traditional banking systems especially when it comes to physical locations.  Greenwood Bank is a fintech designed to serve Black and Latinx communities. MoCaFi is also a black-owned fintech thoughtfully created to be used and integrated into the community services of major cities. MoCaFi turns any retail kiosk at places like 7-11, CVS and dollar stores into an access point.

With more and more fintech apps speaking to specific consumer segments, the top of funnel is now dispersed across social and personal networks.  

The trend begs the question – will fintech become the primary banking tool for most people or will people continue to use a variety of tools and solutions each for a portion of their financial lives?

In one path – dispersed fintech – fintech apps follow the way of credit cards. 

There are some base platforms or rails but otherwise credit cards tailor to your lifestyle – airline, hotel, cash, charitable cause, etc.  The cards have some variation but for the most part direct 1-3% rewards toward your preference.  Two differentiators may be annual fee and access to additional offers or deals, but choosing a credit card is much more about aligning with some other priority in your life.  What’s more, most people have 2-3 cards.

Fintech apps are trending toward the same model. One app for high yield savings (to the degree it still exists) - Ally, Marcus. One app for investments – Robinhood, Acorns.  One app for budgeting or planning – Mint, Credit Karma.  One app for crypto – Coinbase, Robinhood, FTX. One app for each loan (could be anywhere from 1-3 more) – car loan provider, student loan provider, mortgage company.

Managing fintech apps is becoming it’s own challenge regardless of how you select your core banking services. 

In another path – dashboard fintech – one app with actual data could add incredible value.

The three factors that most impact a credit or financial product approval are credit score, income and reoccurring debts. Credit score & other debts are available on the credit report.  Income is available in the direct deposit account (typically the primary or only checking account).  Fintechs are designed to target a specific audience with a specific purpose and so can grow into this type of full service.  No fintech is there today.

Right now, consumer options are suboptimal. 

One option: enter your personal data into a calculator, lead gen site or some other comparison tool and get quickly spun into the whirlwind of calls & emails & social targeting from potential lenders and fintechs.   

Another option: contact a potential lender and subject yourself to long interview process, high pressure sales experience and/or additional delays while they make a decision (depends on the complexity of the product). 

The next generation of fintech may be (should be?) delivering the consumer a proactive review of their eligibility for certain products in an objective, real-time outcome in one spot.  The tough question is whether it is realistic that it would be one app.

Consumers have not aligned one way or the other…yet.

Fintech apps have not developed robust analytics on income & credit underwriting.  On the other hand, many consumers are unsure whether to trust any one company or even advisor to have all their financial info. 

It’s possible that the answer will actually be a little of both.  

Though perhaps more boring to those of us trying to make decisions about the future, it means that the market could sustain the wide variety of fintech apps we are seeing pop up now.  Personalized fintech ecosystems aligned with each person’s preferences and values. 

If diversified fintech is the future, the play for NerdWallet may be to catalog the fintech app universe now before it gets even more numerous.  

In the next post Fintech on Benzinga will look at consolidation potential.  Thanks for reading and continued success.
Fintech on Benzinga