3 FINTECH NEWS STORIES
#1: The Subscription Problem Is Worse Than We Think
What happened?
Visa launched a new tool for issuers to help their customers manage their subscriptions:
In the era of subscription overload, consumers are grappling with the complexities of managing multiple subscriptions across a web of apps. Navigating through each platform’s unique terms can potentially lead to unnoticed charges, even after a subscription is cancelled. Visa’s new Subscription Manager streamlines key aspects of recurring payments in one place, allowing cardholders to see where their card details are stored, view which recurring payments are attributed to their card, and stop recurring payments.
This follows on the heels of a similar announcement from Mastercard:
Mastercard today unveils Smart Subscriptions, an open-banking powered subscriptions management solution that financial institutions can easily plug into their consumer banking applications. Beyond basic management functions, Smart Subscriptions delivers individual spend analysis, expenditure categorization, and personalized offers all in a single user-friendly experience. It leverages Mastercard’s Subscriptions Control solution, introduced in 2023, that allows consumers to cancel, pause and resume their subscriptions.
So what?
At the beginning of this year, I begged for someone to build this – a subscription command center.
In that essay, I speculated that one of the reasons why card issuers haven’t done much in this area is that subscriptions represent a category of spend that they have already captured (unlike bills):
Banks tend to look at it in terms of capturing and retaining payment volume. They see subscriptions as small recurring payments that they’ve already captured (through their debit cards or credit cards) and that they have no incentive to help their customers reduce or eliminate. They see bills as large recurring payments that they don’t directly control (the vast majority of bills are paid by consumers working directly with the billers) and that are increasingly being paid using less profitable payment rails (the wireless carriers have been particularly aggressive about this lately).
Thus, banks have little interest in building better subscription management capabilities but a lot of interest in building bill payment solutions (which they’ve been trying and failing to do for decades).
Put simply, issuers want to capture new spend. They don’t want to make it easier for their customers to reduce their existing spend.
Visa and Mastercard have the same incentive problem. Subscription payments mostly run through the card networks today. Two of the three other parties in the networks – issuers and merchants – have absolutely no incentive to make it easier for their customers to reduce their subscription spend.
So, why are Visa and Mastercard doing this?
The card networks’ superpower is balance. They have an incredible feel for exactly how far they can push the other parties in their networks before they break. That’s why they tend to win every legal settlement, even the ones that they lose, why they protect reward programs at all costs, and why, in this case, you know that the subscription problem for consumers has to have reached a tipping point.
I’m not sure what Visa and Mastercard have been seeing lately. An uptick in subscription-related chargebacks? The growing use of single-use virtual cards for subscription management? Whatever it is, it seems to have convinced them to prioritize consumers’ needs over the needs of issuers and merchants.
#2: Chase Jumps Into Advertising
What happened?
Chase is launching an advertising business:
The JPMorgan Chase bank on Wednesday said a new unit called Chase Media Solutions will let marketers tempt Chase customers with targeted deals and discounts related to their spending history.
The company already offered customers less-targeted deals through a program called Chase Offers, which will continue to house the more-relevant offers brokered by the new media unit. Chase hopes the souped-up carousel of discounts on its app and website will add a little more shine to its credit card division as it looks to hold its position as America’s biggest credit card issuer. The new unit is born out of the company’s 2022 acquisition of card-linked marketing platform Figg.
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So what?
Lots of interesting angles to this story:
- If you operate a large consumer-facing business and are reasonably savvy about data collection, you basically have a fiduciary responsibility to launch an advertising business in a post-Apple ATT world. Companies with large amounts of first-party data are now marketers’ best friends, and they have been cashing in on their new-found popularity. According to eMarketer, global spend on retail media networks will account for 22% of all digital ad spending in 2024, up from 15.% in 2019. Amazon, which operates one of the biggest retail media networks, made $14 billion in Q4 of 2023 on advertising, which is now the company’s most profitable business unit.
- As my open banking friends have been pointing out, it’s pretty rich of Chase to be launching an advertising business (built on the massive amount of data it collects on its customers) while, at the same time, strenuously arguing against any and all secondary data use under the CFPB’s 1033 rule on open banking. Another reason why Chase was the right pick for the inaugural ‘I contradict myself (I am large, I contain multitudes)’ Fintech Takes Advocacy Award.
- It doesn’t appear that there’s a lot of built-in integration between Chase Media Solutions and the bank’s financial products, apart from an automation that will apply cash back to the customer’s account after they make a purchase based on an ad. I wonder if Chase will go further in integrating its consumers and merchant-facing payment and lending capabilities into this new advertising business, in a similar way to what Klarna does?
#3: The CFPB Is Getting Into Gaming?
What happened?
The CFPB published a research report on the intersection of banking and video games:
As video games and virtual worlds have become more and more popular, gaming assets have become increasingly valuable. Gaming assets are stored on a player’s accounts and used as a medium of exchange for all sorts of transactions within these worlds, including the purchase of goods and services and person-to-person (“P2P”) transfers.
Banking and payment services that facilitate the storage and exchange of valuable assets generally provide consumer protections, including recourse after unauthorized transactions. Yet operators of gaming and virtual worlds typically emphasize a “buyer beware” approach. The Consumer Financial Protection Bureau (CFPB) is monitoring markets—regardless of the infrastructure used—where financial products and services may be offered, including video games and virtual worlds.
So what?
I know that part of the CFPB’s job is to stay ahead of trends that might, one day, pose a threat to consumers, and the way that part of the job most often expresses itself is through research. And obviously, what the CFPB publishes research on isn’t directly correlated with its rulemaking and enforcement priorities.
But it’s a little correlated, and I gotta say – I find it bizarre that the CFPB is choosing to spend any time on this at all.
Do you know how many complaints in the CFPB’s consumer complaints database (which goes back to 2011) are about Fortnite?
3
Do you know how many complaints are about Coinbase?
4,481
And yet, over the last three years, the CFPB has published the same amount of research on crypto as it has on video games, and the research it published on crypto was a direct response to an overwhelming amount of consumer complaints it had received rather than this a16z-inspired academic exploration of a potentially troubling trend.
Can we please keep our eye on the ball?
2 FINTECH CONTENT RECOMMENDATIONS
#1: Take Me to the River: BaaS Pushback Should Be a Moment for Banks and Regulators to Readjust Priorities (by Matt Harris, Bain Capital Ventures)
This is like my recent essay on BaaS, except it’s smarter, snakier, and with a broader focus.
There’s a reason why Matt is the fintech GOAT.
#2: Why Cash App Pay is a big deal for Block (by Jevgenijs Kazanins, Popular Fintech)
Jev’s take on Cash App Pay (Block’s version of the PayPal button) as an underappreciated growth driver really got me thinking.
Picking up Square merchants, which Block is already working to integrate with its Cash App ecosystem, should be doable. Integrating with a large number of non-Square merchants will be more difficult. I’ll be fascinated to see if the Cash App team can do it.
1 QUESTION TO PONDER
What’s the best book to read on the history of mortgages, both the product and the industry, in the U.S.?
Recommendations that don’t skew too political (one way or the other) or center too much on 2007/2008 are preferred.
