Customer acquisition costs continue to rise. And as companies converge on banking and lending, everyone is after deposits and growing their loan books, further pushing prices up. So, acquisition in general is a problem but it’s particularly acute for lenders who have to turn away many of the applicants they receive because of credit criteria.
Even Financial helps financial institutions acquire new customers by connecting them to other companies and sites that have user bases interested in financial products. That’s all done through an API that provides search, comparison and recommendation engine for financial services.
Founder and CEO Phill Rosen joins me to discuss acquisition trends incumbent banks, lenders, and fintech face and how today’s consumers are challenged in finding the right financial products.
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The following excerpts were edited for clarity.
Even's origin story
Prior to my previous company Orchard, we were working off this thesis that financial services were involving in a way similar to the what happened in adtech. Direct relationships were becoming more programmatic and distributed and powered by APIs. As that happens, you need platforms to bring scale, efficiency, and transparency to the industry.
It was clear early on that there needed to be a platform for financial services that would sit between consumer facing touchpoints and the financial services companies looking to acquire and engage them -- something that could go beyond advertising to connect consumers with the financial tools that they need to achieve their life's goals. That was the original genesis of Even Financial -- this combination of financial services and programmatic connectivity.
It became refined over time as we saw all the inefficiencies that were happening in online lending that this applied to every major type of financial product -- like credit cards, checking accounts, and insurance.
Parallels between fintech and adtech
There's an overall trend in digital where you go from direct links between companies that become more network-based and programmatic over time. It happened in travel, adtech, HR and recruiting. We're now seeing it happen in broader consumer financial services. The Plaids and Yodlees of the world are very much in line with this idea -- a platform that could aggregate accounts and streamline access to them for other applications. We're not about aggregating account data at Even -- it's about connecting to all the different products programmatically and intelligently.
Why acquisition is so hard
CAC is going up as the space becomes more competitive. There are unique challenges for credit products when it comes to customer acquisition. You can advertise a pair of shoes and someone clicks on them and they buy them. With credit products, you're saying no to 80 percent of the consumers you might have actually sold your product to and can't close because of credit reasons.
Also, these aren't aspirational products. They're tools. So, to be effective, you have to reach the consumer at the moment of need. Consumers nowadays expect a very streamlined experience. So, simply putting an ad in an app or a website isn't sufficient. You actually have to give the consumer connectivity into the tool or product. That's created a very competitive environment with expensive regulatory structures and a complex product to develop.
Consumer acquisition has been dominated by four or five walled gardens like Credit Karma and Lending Tree who use their brand and scale to disintermediate the banks from consumers. It's really a conflicted relationship. Someone who Googles American Express is more likely to end up at Credit Karma than American Express.
So, finding new types of platforms that can distribute to a large number of new channels and pools of customers is really important for the big incumbents and to the new challengers.
Consumer psychology behind financial products
The primary mode of acquisition for cards and loans is the high-intent affiliate model. A consumer is post-research and they're looking on Google or on social. They're so in-market that they get put into a lead-gen funnel like Lending Tree or Credit Karma. And then they end up at a financial services company that's paid a premium to be at the top of a list at one of those walled gardens.
The psychology of that consumer is really educated and informed and is actively searching. There isn't a continuously growing pool of these people. The reality is there are a lot of other customers looking to do what they have to do that, with the right context and education, could be connected to something new that would meet that need. That's a different psychology.