We (Don’t) Want Your Business!

3 Fintech News Stories

#1: One-Click ID Verification 

What happened?

Plaid introduced a new feature within its ID verification product:

Identity verification is a necessary step for anyone using digital financial apps and services – whether it is opening an account, applying for a loan, buying a car or renting an apartment. Now, a user has the option to save their verified identity data securely with Plaid. When they sign up for additional apps powered by Plaid, we can accurately detect they are a returning user. Once we confirm the user is who they claim to be by conducting security checks on their phone number and mobile device, we fast track their experience by allowing them to quickly review and submit their saved identity information for verification.

So what?

Neat!

I have three questions:

1. What ID data does Plaid have? The value of this new feature correlates directly with the amount of work Plaid can save a consumer from doing. The more work you help them avoid, the better the experience for the consumer and the more likely they are to successfully complete the onboarding process. Prefilling basic information like name, address, and SSN is nice but not a game changer. I’m assuming that the big lift comes from allowing the consumer to reuse their scanned ID documents. Plaid does provide an ID document scanning and verification product, but my sense is that this is not a huge business for them (yet), and, thus, the supply of potentially-reusable ID data may be relatively sparse. How many customer ID documents are already in the Plaid network?
2. Will consumers opt in? The other half of the challenge here is getting consumers to opt in to saving their ID data with Plaid. This may be a bigger challenge than folks think. My guess is that consumers are aware of Plaid, in a vague way, from seeing their logo during the sign-up flows in various fintech apps. However, I’m not sure that vague awareness will translate into a specific comfort with saving critical ID information and documents with Plaid. Apple (which is also building stuff in the realm of digital ID verification) has spent a lot of time and money making consumers aware of its focus on privacy and data security. Plaid hasn’t (yet).   
3. Will Plaid reimburse clients that add new verified ID data to its network? If I worked at a bank, I’d love this feature. I want to acquire younger, underbanked customers, but I don’t want to spend a lot of money to do it because they aren’t going to generate a lot of revenue for me in the short term. This feature allows me to draft off all the hard work that fintech companies are doing to onboard these customers into the ecosystem. On the flip side, if I worked for a fintech company that used Plaid’s ID verification products, I’m not sure I’d be thrilled about my competitors taking advantage of all my heavy lifting. I wonder if Plaid has contemplated some type of revenue-sharing arrangement (kind of like royalties in the music industry) to compensate clients that are adding new verified ID data to its network?

#2: We (Don’t) Want Your Business!

What happened?

Chase launched a new credit card:

Monday’s launch of the Chase Freedom Rise card offers a new opportunity to build credit with a credit card, and it’s specifically designed for new-to-credit consumers like young adults and college students.

This no-annual-fee credit card earns 1.5% cash back on all purchases, and if you enroll in autopay within the first three months of account opening, you’ll earn a $25 statement credit.

So what?

At first glance, this looked really compelling. An actual credit card for new-to-credit consumers, with 1.5% cashback and no annual fee or an up-front deposit. Wow!

Then I read a little more:

To apply for the Chase Freedom Rise℠, you must fill out an application at a physical Chase bank branch. There’s no way to apply online right now, but Chase says digital applications will be available in early 2024.

Chase says to increase your likelihood of approval, you should have or open a Chase checking account with a $250 balance within two days of applying for the card.

This is big-bank thinking at its finest.

Executive #1: Fintech companies are offering credit cards to young, new-to-credit consumers without requiring a deposit or making those consumers feel like losers. We should do that too!

Executive #2: Totally totally. Let’s do it. Let’s build a card for young consumers that they have to visit a branch in order to apply for. And let’s not require a $200 deposit; let’s just tell them that they *may* have a better chance of getting the card if they open up a checking account with us and put $250 in it.

Executive #1: Brilliant!

Honestly, if Chase wanted to tell young, new-to-credit consumers that they don’t care about earning their business, they should have just run some ads on TikTok. It would have been cheaper.     

#3: Chat With Your Money

What happened?

Monarch, a personal financial management app, is experimenting with generative AI:

75% of Americans don’t have access to financial planners. Today, we launched Monarch AI Assistant, which allows users to ‘chat with their money,’ getting personalized financial advice faster and cheaper.

So what?

The new Monarch AI assistant is in private beta, and it sounds like this is more of a true experiment than a settled-upon roadmap for the product, but consider me intrigued.

I’m a fan of Monarch and, as I wrote a while back, I feel like PFM is a very natural use case for generative AI:

Breaking bad financial habits and forming better ones often requires emotional support to recognize the triggers that drive these habits and reflect on the unique relationship that we have with money. This is the entire concept behind financial therapists and coaches, and it represents a substantial amount of the perceived value that more traditional financial advisors provide to their customers.

Given generative AI’s demonstrated and groundbreaking ability to communicate as humans do, I don’t think it’s a stretch to think that its largest positive contribution to the financial services industry might be emotional, not functional.  

I’ll be curious to see how far Monarch lets its AI assistant stretch its wings in this direction.

2 Fintech Content Recommendations

#1: UK Fintech is Back! (by Simon Taylor, Fintech Brainfood)

Simon has written the definitive piece on the recent history and immediate future of fintech in the UK. I didn’t realize how much I didn’t know about what is going across the pond. Carve out some time for this one.

#2: Payments Plus (by Jared Franklin)

This is a wonderful overview of five hugely successful fintech companies – PayPal, MindBody, Bill, Square, and Toast – and the central role that payments has played in their growth and maturation. 

Find someone who talks about you the way that Jared talks about generational fintech companies. 

1 Question to Ponder

Inspired by Plaid’s new offering, who do you think will win the race to create a solution to enable portable digital identities? And why? 

If you have thoughts on this question, ping me on Twitter or LinkedIn.