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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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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81/ We're starting to see that from some challenger banks (e.g. Monzo), and the natural response from incumbents is to spend 3 years not noticing it in surveys, 2 weeks doing SQL queries, and 18 months doing a product cycle, then deploying it to 100 million people simultaneously.
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82/ There are substantial opportunities available both within traditional finance and within startups to become a domain expert at the other industry and explain/advocate/plan/etc within one's own industry. (Some folks will end up doing white elephant projects, but not all.)
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83/ Every startup offering financial services has both an integration with their partners and then named people on speed dial who they can call when the integration breaks. Sometimes this by necessity means a lot of people in a lot of places.
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84/ This goes in the other direction, too, and it's both terrifying and sort of beautiful. If a tiny bank in, I don't know, Ireland has a backhoe hit their Internet connection, it is moderately likely that the 1st person in outside world who notices is a little fish in big pond.
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85/ (The general contents of the first phone call would be "Hey, this is your account manager at $COUNTERPARTY. I was just checking and it doesn't look like we got the upload for today... any color for me? Resubmit window closes in...")
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86/ Because large financial firms have competing fiefdoms and organizational subcultures in much the same way that large tech companies do, it makes a lot of difference to strategy and day-to-day operations which fiefdom the CEO/etc came up in, just like in tech companies.
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87/
@cperciva pointed out that I missed two items and duplicated another one, which brings up an important point: despite being the canonical use case for ACID databases, almost all financial firms aspire for (and achieve) "eventual consistency, almost all of the time."Show this thread -
88/ Financial firms are likely to slightly, but not much more than slightly, lag enterprise SaaS with respect to adoption of sales and account management via webinar and 1:1 videoconferencing. This can 5X utilization of advisor while having them be in a cheaper city than client.
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89/ The most interesting thing which is widely deployed in Japanese banks that I haven't seen in US banks, but which will inevitably be deployed in US banks, is phonebooths with videoconferencing software and ID-reading hardware connected to a call center.
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90/ This will be generally good for customers who want more human touchpoints, and will bring down the OPEX of account opening and servicing substantially. It will, less fortunately, further cause deskilling of the branch-based bank employee, which has been ongoing for decades.
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91/ (The availability of backoffice doesn't by itself make branch bankers less capable; it means a business process which historically trained them to answer the range of everyday to sophisticated financial problems encountered by anyone in their area doesn't need to exist.)
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92/ There are many problems in startup financial services which are technical problems, but there are virtually none which are uniquely solved by adoption of an architecture, language, stack, etc. Most of the technical problems are "How do people/organizations work together?"
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93/ You might sensibly say that "'How people work together' is more a management problem than a technical problem" but in this case the controlling abstraction is sometimes *very literally* where you draw the API boundaries.
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