Finovate Blog

On 8 Oct Ron Lieber’s NY Times column Your Money discussed alternatives for consumers looking to move from major banks (thanks, Wells Fargo). He started with credit unions, touched on community banks and then finished with a major shout-out to an unlaunched fintech startup Zero Financial.

Not being familiar with Zero (other than its recent $2.5 million funding), I visited online, taking the bait to sign up for early access. This is a now-familiar ritual for me. During the past four or five years, startups have made a game of the launch process. Here are the primary elements:

1. New visitors willing to provide their email address (and sometimes more) are entered into the queue and informed of their numerical spot in line. In my case, I was #26,405 on Friday afternoon (shortly after the Saturday column was made available at NYTimes.com).
2. Newly wait-listed customers are invited to move up the queue by tweeting, posting on Facebook or otherwise driving signups. I posted a message to Facebook and was immediately moved up 18,000 spots to #8,506.
3. To supercharge the viral nature, prospective customers are given something of value to incent them to drive referrals. Coin famously offered $10 off the price of the hardware (which otherwise cost $50) for each referral. It worked almost too well as Coin amassed a 6-figure wait-list that grew pretty feisty as the hardware was delayed for a year. Zero’s twist is to boost the level of your cashback rewards. Everyone starts with 1% (called Quartz level), but if you tweet or post the offer on Facebook, you move to the 2% cashback level (Magnesium level). Then, if you get 3 people to sign up with your referral code, you move to the maximum 3% level (Carbon). Apparently, my posting on Facebook drove one referral, because today I’m up another 4,000 spots to #4,099 and have to get only 2 more to move up to the 3% cashback level. (Side note: The total number in the queue rose 6,600 over the weekend, to 33,023 as of 2:00 p.m. Pacific Time, Monday, 10 Oct 2016).

Lessons for FIs:

• Gaming is a great retention device: Across all demographics, consumers like to win. And it’s been proven time and time again, they’ll go out of their way to earn points or even extra chances to get points. FIs have a built-in scoring mechanism, the dollar value of accounts or transactions, so it’s pretty easy to build games with those inputs.
• Scarcity/exclusivity are powerful marketing tools: Although your FI is unlikely to be a startup, you could play the same game with a snazzy new account or special offer.
• Pay attention to Zero’s credit/debit card hybrid. Unless (until?) this type of interchange arbitrage is outlawed, look for credit-card sweepstakes-type accounts to gain popularity (read about it near the bottom of last week’s post).

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Note: Looking for more inspiration for your technology stack? Don’t miss our third annual FinDEVr Silicon Valley next week (18/19 Oct 2016).