42/ Effectively the conceptual negotiation, which critically never takes expensive human thought because all parties have pre-committed to their position, is: Bank: "I can't take all this risk to build restauraunt." Town hardware store: "They're my customer. I'm good for a bit."
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53/ There is, as of 2019, more paper, and more *required* paper, than you would think in financial services. This is decades after frontpage stories about Paperless Offices. But there has been substantial improvement, even in the last few years.
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54/ The same goes of phone calls, faxes, API-via-secure-FTP, harddrive-over-FedEx/couriers as an encrypted API transport, etc.
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55/ Costs of customer acquisition in financial services are routinely in the hundreds to thousands of dollars for *retail-facing* accounts, because they anticipate customer lifetimes measured in decades and growth in the value of those accounts over times.
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56/ When e.g. Chase paid $1,000 apiece for signups to their new top-tier credit card, there was widespread chortling by competitors, not because they thought that was unfair or unseemly but because they thought it was *unwisely calibrated*.
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57/ This is unfortunate for competitors to financial services, which want to grow explosively but want to do it on extremely light marketing budgets, relying on e.g. product quality, social amplification, and better understanding of App Store SEO to drive adoption.
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58/ Startups don't want to spend hundreds of dollars on customer acquisition with razor thin margins because then sustaining their growth ramp will cause them to lose more money every year, costing them more dilution every year.
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59/ This is as true of e.g. mattresses as it is of financial services, but startups in finance have a problem that other startups do not: in finance you can pay the cost of customer acquisition *directly to the customer* without this looking like accounting shenanigans.
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60/ Ever wondered why "Silicon Valley preferentially makes products for rich people in the bubble" is widely believed and yet Chase and Amex probably have 90% wallet share of SV participants? This is basically why.
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61/ When AppAmaGooBookSoft think of financial products they think of ones which can be distributed virtually universally over their userbase (e.g. Apple Card). When startups think of them, they often are forced to look at customer groups that Chase et al don't want.
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62/ The toothbrush test is approximately as applicable in financial services as it is for marketplaces. (The toothbrush test: no marketplace you don't use twice a day will be a massively viable business. Uber for X is a lot worse than Uber for Uber.)
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63/ The exception to the toothbrush test is originating extremely, extremely valuable set-it-and-forget-it transactions, ideally ones which are hugely backweighted. Unfortunately these are limited in number by nature and switching costs are extremely high.
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64/ I think you will find many more interesting startups in financial services either at the toothbrush test or at the "giant, compounding transaction with multi-decade time horizon" than you will in the No Man's Land of e.g. credit card refinancing.
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65/ In the No Man's Land you have to pay essentially your entire customer acquisition cost over again to reacquire customers you already won, while not having them increase in value in interactions with you, and also not materially decreasing in risk or operational costs.
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65/ Wealth management historically sells a small amount of very expensive labor (portfolio allocation math, done by expensive professionals) with a large amount of medium expensive labor (counseling delivered by a salesman with greater facility with numbers than most clients).
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66/ Computers will entirely replace the first bit. The big question for the industry is to what degree the second bit ends up being provided by an app, by brand positioning, etc, and to what extent it gets provided by an actual human.
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67/ Many startups bet that there has been a fundamental shift in buying behavior around the thermocline created by "Did you grow up with the Internet?" and that people on one side of that thermocline have preferences which are *unrecognizable* on the other side re: sales.
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68/ The incumbents believe something closer to "Well, our cost base assumes that we put modestly expensive professionals in expensive real estate whether we like to or not, plus we've met young people before and heard Oh God They're Nothing Like Past Generations before, so."
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69/ Good sales people in retail-facing financial services are paid tiddliwinks by comparison to good sales people in tech, and almost everyone capable of selling mutual funds at a wirehouse should be selling B2B SaaS instead, ironically often to the same demographic.
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70/ "That won't happen, they don't understand software" say some commentators, who probably overestimate how competent in distributed protocols one needs to be to sell workflow SaaS and who underestimate the intelligence of people who have passed the Series 7.
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71/ Much like in other B2B services, at certain tiers of sales in finance, people stop calling you a sales representative. Now you're an investment banker / consultant / etc. Their productivity likely improving due to both CRMs and business processes which augment capabilities.
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72/ A large theme in investing is bringing capabilities which used to require bespoke, artisanal work and making them available to the mass affluent. Tax loss harvesting is one example. One question is whether, if you build it, they will come.
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73/ A trickier question is whether all products of the financial services industry can be offered to substantially everyone, in a way described publicly, without attracting extreme adversarial attention or causing excessive amounts of brand risk for too little revenue.
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74/ In financial services as well as in adtech, the accusation "sells your data" is made extremely frequently and accurately descriptive of a transaction extremely rarely. Imagine the meeting. "Interesting idea, but could we just take their money instead? We're set up for that."
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75/ Scaling computer systems is scaling computer systems, but an interesting limiting factor in scaling of computer systems in finance is "Does this system have rate limits controlled by human interaction?", in which case scaling from a technical perspective rounds to trivial.
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76/ That didn't used to be the case. Visa volumes used to be big numbers requiring some of the smartest engineers on the planet to use the biggest iron available. But Moore's Law compounds faster than the global birthrate does. By a lot.
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77/ There are still extremely non-trivial scaling challenges in financial systems where computers talk to computers, such as e.g. adtech (which isn't a parallel system of financial exchanges but isn't not a parallel system of financial exchanges), stock exchanges, etc.
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78/ A prediction for something you'll see in the future and think is really weird, but which is virtually inevitable given the economics: Internet celebrities are going to start offering Durbin-exempt debit cards to their tribe, enabled by an underlying platform and bank(s).
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79/ The reason this doesn't happen in the status quo is because it requires too much bizdev by too many people but fundamentally the financial industry wants to facilitate this transaction if you can move 100k of anyone or 10k of the right people to use plastic with you on it.
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80/ Settlement times, much like interest rates, have a natural lower bound of zero... and we will quickly discover that that lower bound wasn't real. In the case of settlement times, it is because you can use T-X settlement as a marketing differentiator w/o all that much risk.
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