January 28th: Apple Card & Financial Data — Fintech “Metrics” — Kobe

Hey everyone. Feeling pretty somber this week—as you probably heard, Kobe Bryant, his 13 year old daughter Gigi, and 7 others passed away in a tragic helicopter accident outside of LA yesterday. So hope you don’t mind this sports heavy intro:

Hearing the news took me right back to my childhood: basketball’s been a massive part of my life since I was 10. If you don’t know me well, I’m an extremely passion-driven person, and before fintech, basketball was my obsession. 

My younger brother and I were inseparable as kids. We practically lived on our driveway during the summers, playing basketball sometimes till 10pm because we couldn’t leave the court without someone winning bragging rights. 

When we played on the same team, I was Shaq (cause I was taller) and he was Kobe (cause Ryan was better.) We’d have two on two tournaments with family friends, and Ryan and I would be practicing plays a week in advance. We learned the value of preparation and hard work through Kobe and basketball. 

So, yeah, Sunday was a difficult day. Kobe’s death has led to a lot of people my age to contemplate the fraigility of life, and our own mortality. It gets even harder thinking these kids, who were really just starting their lives.

The one lesson I’m trying to take away is something I heard Shaq say on his podcast yesterday: when he was asked if he has any regrets about his relationship with Kobe, he said he just wish they talked more. There are certain people in my life I haven’t intentionally kept in touch with—some over 10 years. But I’d rather move on than have the same regrets as Shaq in 20 years. 

FTT+ This Week

New issue of FTT+ going out later this week—it’s gonna be Alex Cohen’s wonderful piece on the potential of fintech products for Airbnb. I’m excited for y’all to read it. We’re probably going to move to a bi-monthly structure for this product in the short term—more details around my thinking on this in the FTT+ issue later this week.

We’re also looking for more expert analysis—if you’re interested in writing, have a deep knowledge of the intersection of finance and tech, and are looking to write for a publication with an audience of highly engaged and passionate fintech people, please feel free to email me at ian@fintechtoday.co.

We’re planning two member-only events over the next few weeks; one in SF and one in NYC. More details in the newsletter.

Subscribe for FTT+! ($15/month)

For FTT Readers:

We’re also headed to Salt Lake City this week to host a discussion about Venmo with Matt Hamilton, currently the VP of Product for Novo and one of the earliest members of Venmo.

If you’re an FTT reader, Plaid’s having a happy hour on Thursday night, we managed to snag a few invites for ya: RSVP here

RSVP for Plaid’s Happy Hour!

Unpacking “Growth” and Public Metrics for Fintech Startups

N26 announced a fantastic milestone yesterday: 5 million customers globally. The even more eye-popping stat? 250,000 US customers in 5 month. 

As a friend put it to me “if any takes that stat at face value, lemme know cause I have a bridge to sell them too.” 

Because here’s the question: what is a customer? Most fintech startups I know have multiple, varying, definitions of what a user or customer is. Is it someone who has money in a N26 account? Or is it someone who just downloaded the app? Did they create an account or is it just downloads? Did they create an account and move funds in? Did they use the N26 debit card? Did they only use it once and then never use it again?

I’m a part of this 250,000 US N26 customers. I have the N26 app and have the debit card. But I never moved money in—they needed a routing & account number and...I don’t even know where to find that in my banking app. (Free product advice: Please just use Plaid!) My assumption is that the 250,000 is total downloads or some high level figure like that, which is still a great figure but it doesn’t mean that a quarter of a million people are using N26 cards in the US daily.

(Sidenote: I don’t want to make it seem like I’m picking on N26—most fintech consumer startups do this. I recommend asking about engagement numbers too—a better indicator than signups in my opinion. And I didn’t reach out to N26 but my homie Max Friedrich from Ark Invest pointed out on Twitter that N26 declined to define the term to German media. And also you should 100% follow Max if you’re into fintech stuff—by far one of my favorite fintech analysts on Twitter.)

One issue around these murky definitions is that it creates a transparency barrier between fintech startups and the rest of the banking industry. It’s a cultural issue: a lot of banking folks take these announcements as a proxy for how fintech is taking over traditional banking, which they find annoying. Especially considering these fintech stats around metrics like total accounts and assets under management could be blown out of the water when compared to even smaller banks outside of the top 25. So the disconnect creates a lack of trust in the fintech and startup community. 

But what these banking industry folks don’t get is that these stats are mainly for one audience: investors. Most later stage consumer fintech startups are either raising or have raised in $100 million plus funding rounds—last year, just Chime and N26 alone raised over $1.1 billion in venture funding.

This is a lot of effing money going to a very few number of companies. These startups need to convince investors that this is a real industry with long term potential. So when they talk about these figures publicly, its much more about showing sustained growth and that things are working well right now, and if we had more money they’d be going even better.

Another issue, and one without a clear solution: I think there should be industry standards around these terms and definitions. These publicly announced figures are widely used—not just in pitch decks. The more these numbers and unclear terms get tossed around, the more inflated expectations around fintech get too. In the long term, it’ll hurt the industry if we don’t have some clear standards around what we mean.

If you’re an industry that prides itself on openness and transparency, like fintech has since the beginning, that actually requires openness and transparency—not just marketing-speak around it.

Apple Card and Financial Data

Noticed an interesting piece from Matthew Panzarino in TechCrunch the other day—it looks like Apple has made it easy for Apple Card users to export transaction data to customers. 

As Panzarino notes, this was a big question for potential users when the Apple Card launched, because transaction data powers services like Mint.com, Clarity Money and other personal financial management tools. But with transaction data for other financial products—like cash flow underwriting, which recently got blessings from regulators—becomes more popular with fintech startups, I wonder if this can become a bigger problem down the line. 

Apple’s letting customers access their financial data and upload it into apps themselves. But because Apple or the startup have no connection between the two of them, obtaining that transaction data goes from being a background task for the startup to do, to a tedious task the consumer needs to do. This adds friction to the onboarding process, which is the last thing you want as a fintech startup. It’s hard enough to get people to sign up for a financial product when you do everything for them. Imagine asking affluent Apple Card users to export and upload their transaction history too? Hard pass. 

This could become a growing issue for startups. Apple’s supreme focus on privacy kinda implies that they don’t want anyone else besides the user and the customer to touch the data. That can change down the line, and there are ways to do this securely through API’s of course, but that’s a longer term solution. 

I wonder if other big tech companies will follow Apple suit—use their existing data set on customers to make onboarding easier, sign them up, and let them control their own data. 

If Apple Card and big tech financial products that are coming down the line start to capture more spend and market share from traditional card companies like Citi and Chase, Apple and these tech companies start to become the data hubs for consumer financial data—NOT the banks. That’ll make it harder for startups. And big tech might not even be incentivized to do so—these companies actually know how to creating useful consumer products by leveraging data. When it come to creating useful consumer products by leveraging data, banks nor startups have a chance against the Apple’s, Google’s, and Facebook’s of the world. 

Financial data is important, we all know that—Visa just bought Plaid for $5 billion just this month. As Plaid, banks, and startups start to work more closely to make it easy to move data between different stakeholders, I wonder if big tech companies will go the opposite route by focusing only on the company, the user, and no one else.  

Funding of the Week

Teller, a UK based fintech startup, announced a $4 million round and a US launch earlier this week. Teller’s focused on providing access to customers banks accounts through API’s—similar to Plaid, which sold to Visa earlier this month. 

Job of the Week

Stripe is hiring an engineering manager for Stripe Checkout. Checkout is based out of NYC, and the goal is to reduce friction for “buying online, globally.” Check out the description below:

If you’re interested, email sgerstenzang@stripe.com (and please mention Fintech Today!) or apply here.