When Will Fintechs Sell What Customers Want To Buy?

by

As soon as my daughter was born, I opened a bank account in her name. As a minor, her account was held jointly in her parents’ name all these years.

My daughter turned 18 recently.

I went to the bank to change the account status to “major” and apply for a credit card in her name.

This is what happened.

Majority

My daughter and I had to make several visits to the branch. The bank – a Top 3 private sector bank in India – kept on asking for the same set of KYC documents each time. I got frustrated with the pathetic CX and escalated the matter to the office of the bank’s Managing Director. Finally, after two months, there was some movement.

While I don’t have any confirmation from the bank, I’m inferring that the majority status updation has happened in the bank’s systems because my daughter has recently started receiving account-related SMS alerts on her mobile phone.

Credit Card

I inquired about a credit card for my daughter.

The branch operations manager summarily rejected my request, saying my daughter wasn’t eligible for a credit card because she was still a student.

I asked him to look her account up before hastily offering his expert opinion.

He did that on their core banking system – supplied by my ex-employer BTW – and, as I’d hoped, realized that there were a few fixed deposits in my daughter’s name. I pointed out that banks could issue a credit card to non-earning people as long as they were 18+ and offered collateral like FD.

This is an old banking rule but the guy acted as though he was hearing it for the first time in his life.

I urged him to consult his senior colleagues. After doing that, he sheepishly agreed with me and assured me that, as soon as the majority status updation happened, the bank would issue the credit card.

Weeks after the majority status updation went through, there was no movement on the credit card application. I escalated the matter to the Relationship Manager Head of the branch. She promised to send someone over to my daughter to discuss various credit card products.

Months later, my daughter is still waiting.

In parallel, I decided to shop around with fintechs. Unlike me, my daughter has no attachment to this – or any other traditional – bank and would’ve gladly signed up with the first fintech that offered a credit card.

But, alas, we couldn’t find a single one that did.

And it’s not just in India.

I’ve found fewer than five fintechs offering credit cards anywhere in the world.

While consumers are open to buying competitive offerings from fintechs, fintechs offer stuff that lacks compelling value e.g. yet another mobile wallet, silly PFM / MoMMA apps urging customers to skip that $5.00 coffee, etc.

What an irony!

Not surprisingly, fintechs have garnered less than 1% market share of bank accounts (Source: Cornerstone Advisors) despite being around for nearly a decade.

Just to be clear, when I say “fintechs”, I’m referring solely to direct-to-consumer financial technology startups that started life by threatening to disrupt traditional banks. I’m not referring to “fincumbents”, which is the term I use to describe B2B technology companies that supply IT products and services to financial institutions e.g. my aforementioned ex-employer. While fintechs have lately changed their tune to bank partnership, it doesn’t take away from their original raison d’être of killing banks.

To answer the question in the title of this post, I think we’ll have to wait for the VC-funded fintech valuation bubble to burst. Only then will fintechs give up their delusions of killing banks and divert their attention to offering what consumers truly want.

But, going by my take on the VC investment model – a VC-funded startup is merely an asset class – that day may never come. I hope fintechs prove me wrong.

UPDATE DATED 26 JANUARY 2022:

Credit products from fintechs like credit card and BNPL are booming. The fintech bubble has burst, at least in public markets.