Why fintech startups love advertising on the New York City subway

For the last two months, money transfer startup TransferWise has been trying to connect with people stuck on the train during the New York City subway’s “summer of hell.”

For a consumer fintech startup, it’s the perfect place to put some advertising dollars. TransferWise has built its business around the ability to let people send money overseas at a low cost. Sixty percent of its users are immigrants; 40 percent are American-born. Its employees represent more than 50 countries. Its user base and prospective customer pool looks a lot like the people of New York.

“We serve people who have a connection overseas,” said Kate Huyett, TransferWise’s North America growth lead. “New York has the densest population of foreign-born people.”

Even if they’re American-born, theres still a chance they moved to New York from someplace else. TransferWise wants to send the message that it celebrates that diversity.

“We wanted to show New Yorkers we understand them,” said Colby Brin, a senior writer at the company. “We had a message that resonated with people who weren’t native New Yorkers but had made themselves New Yorkers because they moved from a different state or different country.”

Skyline

 

The company didn’t specify the size of its marketing budget, but Huyett said it needs to stretch those dollars as wide as it can — and subway ads are the best way to do that. TransferWise bought the smallest package that the MTA offers, which gives the company 1,000 cards that are distributed across the trains. With that option, she said, the MTA doesn’t give the company any say in how the ads are placed or distributed.

TransferWise did, however, choose whether to run the ads on the trains or along the platform walls.

“We felt on the platform, the ad would be behind people,” Huyett said. “When you’re in the car you’re a captive audience for a longer time, so there’s the possibility that someone sees them and pays closer attention to them.”

The subway is a hot destination for startups in general, looking to stretch their marketing budgets. E-commerce startups like Thinx and Casper both love advertising on the subway, calling them “conversation starters” and a way to be in a city where “trends are set.” They’re also effective, say these companies: David Zhang, Casper’s CMO, told Tearsheet’s sister site, Digiday that subway ads are highly effective to target local audience because when riders get stuck on the train, they have nowhere to look except at those ads.

Three years ago Venmo ran an ad campaign around the New York subway featuring an everyday millennial called “Lucas” (who, it turns out, was a Venmo engineer). Venmo’s message to subway riders was the same (although less nostalgic and bittersweet): we do the same things you do, we understand you. The campaign sparked a lot of frustration and confusion for consumers — but the company was engaging with them. Venmo was unavailable to comment for this story.

Earlier this year SoFi, the financial everything provider for millennials, also ran an ad campaign on the New York subway for its SoFi at Work product.

“The subway is a really cost-efficient medium from a reach and frequency standpoint,” said Margi Brown, SoFi’s vp of marketing and media. “It has allowed us to amplify our message to a commuter audience with a very specific message — keeping it simple and easily consumable.”

TransferWise, based in London, has raised about $117 million in funding to date from VC heavy hitters like Andreessen Horowitz, Ballie Gifford and Peter Thiel. Earlier this year it launched its “Borderless” online bank account for businesses and freelancers.

TransferWise’s language and tone have changed a lot since it first launched its U.S. operations, in 2015. Back then, its subway ads were more combative against the banks.

transferwise2014-1

 

The change is in keeping with the broader shift among consumer fintech startups, which initially came out charging toward the legacy banks with the intention of disrupting them. That attitude has since calmed as both sides embrace a more collaborative approach bringing banks and fintechs together.

transferwise2014-2

 

When asked to comment about the change in tone, TransferWise highlighted the changing political environment in the U.S.

“Given what’s happening in the U.S. right now, we want to show immigrant communities that we empathize with their journeys,” Huyett said. “And more generally, we feel it’s important to begin communicating one of our core values, which is that we believe the world is a better place when people, money and ideas move freely. It’s something we will talk about more and more in the future.”

High Five! The top 5 fintech stories we’re following this week

5 trends we're tracking in finance

 1. Wall Street turns on the fintech heat

If 2015 was the year of fintech Star Wars, of the upstart firm taking on the big boys, 2016 could be the Empire Strikes Back.

The largest financial institutions are indeed rising to the occasion, developing new products, striking strategic partnerships, and advancing the ball.

Of global major banks, Spain’s BBVA is one of the most active investors and acquirers in the fintech space. Scarlett Sieber,who is part of the business development team for the bank’s digital business, joins us on the Tradestreaming podcast to discuss how (and why) she is building a financial technology ecosystem.

What happens when the largest credit card issuer partners with the largest gas retailer? JPMorgan’s Chase Pay landed a deal with Shell, giving the upstart digital payments platform access to 20 million daily customers.

Barclays revealed plans that showed serious intentions about banking Africa, bringing potentially 1 billion unbanked folks into the financial fold.

2. Fintech is competitive and, sometimes, destroys value
Wall Street has a lot of work to do – for example, today’s brightest are less likely to want to work at hedge funds. (That’s not deterring Goldman Sachs, though, from rolling out a new video format for on-campus recruiting).

Also, it can’t be easy heading up the largest player in the actively-managed funds space, either. BlackRock’s Larry Fink has a ringside seat, witnessing the outflows of actively managed capital, flowing into passive strategies. Active managers are feeling the pain of watching more productive revenue streams evaporate.

Right now, it seems servicing clients and protecting long term franchises is a good start.

3. Why video banking is the fintech trend to watch

More so than bitcoin or other sexy fintech technologies, video banking is already here and changing the way customers, and banks themselves, interact with financial services. We’re quick to (falsely) compare video banking to a Skype-powered teller, but it’s really so much more.

Video banking is about creating real experiences, putting a human face on digital banking. It’s good for customers and that shows — video banking still has some of the highest conversion metrics of all channels. So, in addition to creating operational efficiencies, video banking also has important security implications. Lastly, video banking technology is also helping some of the underbanked — like people with hearing disabilities — get serviced like other bank customers.

4. With new bank partnerships, TransferWise tries for transparency

As customers clamor for more from their financial service providers, small players of the big financial game are responding with their own versions of transparency. Transferwise is the horse to beat in the online money changing business with over 600 routes in 35 different currencies. The startup claims it has over a million customers conducting $750 million worth of transfers per month.

But that’s peanuts compared to the $5.3 trillion in forex transacted daily. Transferwise has big aspirations and to get there, the firm launched a new partnership strategy that would bring the company’s currency exchange tools to other online banking platforms. So far, it looks like that strategy is working.

5. The new virtual reality of shareholder communications

Berkshire Hathaway is known for its lively annual shareholder meetings, featuring everything from a ping-pong match between chairman and CEO Warren Buffett and Microsoft cofounder Bill Gates to discount jewelry shopping. A sign of the times, the firm live streamed its event this year. Communicating with investors has come a long way.

When it first launched its virtual shareholder meeting services in 2009, four companies held such meetings. This year, Broadridge Financial Solutions is expecting to facilitate meetings for 200 public companies, 80% of them virtual-only and 20% hybrid, or a mix of in-person activities and an online broadcast, like Berkshire Hathaway did.

 

With new bank partnerships, TransferWise tries for transparency

transparency in finance via Transferwise

As customers clamor for more from their financial service providers, small players of the big financial game are responding with their own versions of transparency.

Hidden inside the $5.3 trillion daily forex trading market are everyday people transferring money abroad to friends, family, or for personal use. Fintech startup TransferWise was founded in 2011 with the aim to eliminate margins and hidden fees that everyday people pay when transferring currencies through financial institutions. When an average person — not professional forex experts — transfers currencies, it’s not exactly clear whether they’re getting screwed on an exchange rate. By splitting the difference between the buy and ask price of currency exchanges and charging a nominal fee instead, TransferWise brings a breath of fresh transparency to a small corner of the forex market.

Transferwise differs from normal moneychangers in one substantial way: TransferWise facilitates transfers between users themselves instead of acting as the bank. For example, someone who wants euros in exchange for dollars is matched with another customer wishing to transfer euros to dollars. So, instead of a bank purchasing the funds at a premium and charging service fees, trades are matched with other users on the opposite side of the trade.

In data sent to Tradestreaming, TransferWise operates over 600 routes and in 35 different currencies, and claims it has over a million customers conducting $750 million worth of transfers per month. The fintech player charges a fee on every trade, visible to both parties before the transfer is complete. By letting users know the exact fees before transfers are executed, TransferWise attempts to eliminate hidden fees by injecting transparency to a small corner of the forex market.

Two studies in transparency

Transparency in the financial industry is an important topic- especially for millennials. According to Edelman’s 2014 brand share study, 87 percent of respondents said they want more meaningful relationships with the companies they do business with, including more transparent communications. “This includes with their money managers, advisors and banks,” wrote the authors of the yearly report that analyzes the changing relationships consumers have with brands.

Deloitte’s 2016 Millennial Survey also demonstrates the importance of transparency. 25% of millennial respondents said that trust, integrity and honesty were the recipe for successful businesses in our age. With this wind at its back, Transferwise has embarked on a distribution strategy that includes bringing its brand of transparency to partnerships with banks.

New banking partnerships

In February, TransferWise announced partnerships with two boutique banks: Estonia’s LHV and European digital bank Number26. Through an API integration, clients of these banks can access the TransferWise currency exchange service directly through their banking apps.

Through discussions with other financial institutions, it became clear that even smaller banks are looking for solutions that set them apart from the status quo, differentiating the services they offer.

“Transparency is very important to us,” wrote TransferWise’s Director of Communications, Jo White, in an email to Tradestreaming. “When you go and buy a pint of milk, you know exactly how much it’s going to cost… we don’t see why international money transfer should be any different.”

By partnering with banks, TransferWise is finding a way to reach more potential users. The company seems intent to sign more of these types of partnerships in the future.

“We hope to work with other banks and companies from other sectors, too. It’s about making international money transfer as easy as possible for people,” White said.

TransferWise Petition

 

Transferwise is also active socially with its theme of transparency and that comes through in the company’s marketing. The company created the nothing to hide protest against hidden bank fees, and currently supports a Change.org petition to stop hidden bank fees.

Not so fast on transparency

The desire for transparency is palpable, but change isn’t going to happen overnight. TransferWise represents just a microscopic share of the forex market– it’s existence affects less than .01% of currency transfers. Outside of forex, the partnerships TransferWise has made are with banks that already drank the transparency kool-aid. Furthermore, it’s unclear if the relationships TransferWise has made with banks will bear fruit. Number26, one of the startup’s first bank partners and touted as a leading digital-only bank, recently had to shutter a few hundred of its accounts when it found some of its early clients were making an extremely high number of ATM transactions.

Water on a rock

As TransferWise inks more partnerships, the transparency itch may slowly start to spread to other institutions. A total shift towards transparency isn’t going to happen tomorrow. However, like water drops on a rock, as more upstarts demonstrate that they can build bigger, transparent businesses, the possibility of greater transparency in the financial industry inches closer to reality.


Photo credit: Georgie Pauwels via Visual hunt / CC BY

Lemonade, insurance, and banking mashups

P2P Lending's Developing Debt Market

Insurance.

Lemonade, the hiring-like-crazy, raising-money-like-crazy, getting-PR-like-crazy insurance startup just added another big name to its roster. In addition to the minions of execs the company recruited out of AIG, the p2p insurer just hired behavioral economist, Dan Ariely. The Duke professor is probably best know for his wacky, creative experiments that populated the pages of the books he’s written about our irrational financial behavior.

Ariely’s role at Lemonade is technically titled “Chief Behavioral Officer”. So, ostensibly, his role will be to help develop the user aspects of the insurance platform to ensure it provides enough billion dollar triggers to get users addicted to the platform and turning to it for repeated dopamine hits.

“If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today,” Ariely said in a statement. “We’ve spent recent years deepening our understanding of honesty and trust, and our conclusion is that insurance is crying out for a makeover.”

While the hype machine is working overtime, we don’t have a lot of details yet what p2p insurance (or at least, Lemonade’s flavor of it) really looks like. We aren’t without clues, though. We do know that there is some type of reinsurance scheme (Buffett’s Berkshire Hathaway has its hands in it) and the firm has said that it won’t make money by denying claims. So, if in fact, the firm is collapsing the 3-tier insurance stack, it will have to allay fears that the company won’t be around to payout when a claim is made. The big funding round, the name-brand reinsurers, the executive migration — all may be necessary parts of the Lemonade gameplan.

Banks.

A couple of years ago, Simple (then called Bank Simple) was billed to be the future of banking. Simple was a really nice user interface that sat on top of the banking stack but never quite impacted the industry the way some had hoped.

Number26, a Peter Thiel-backed next generation German bank, is another attempt at creating the bank of the future. Instead of building a vertically-integrated bank, some banks like Number26 are taking the mashup approach: integrating with various services and product providers to provide more comprehensive service. Number26 is integrating Transferwise, a p2p currency exchange, so that clients of the bank can exchange currencies easily within their accounts.

Marc Andreessen, founder of Netscape and considered by some as smart VC money, once boasted that he’d fund anyone who wanted to start a full digital bank. That spurred a pretty vigorous conversation about whether a truly disruptive bank needed to be built completely from the ground up or a virtual bank could be produced by doing away with branches and just creating digital hooks into banking infrastructure.

Because of the costs and complexities in building a full banking technology stack from the ground up, many banking startups, like Number26, are taking the approach of integrating their money apps into other non-financial apps (like Qapital recently did by integrating on IFTTT). This can essentially take a banking app with limited functionality as a standalone and back it into being a much more robust offering.

Number26’s co-founder and CEO Valentin Stalf says its ambition is to create a single app that integrates the services of multiple fintech startups, providing an aggregated showcase for the best emerging alternatives to traditional banking services on a single screen.

The Startups: Who’s shaking things up (Week ending January 31, 2016)

fintech startups shaking things up

[alert type=yellow ]Every week, Tradestreaming highlights startups in the news, making things happen. The following is just part of this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming newsletter.[/alert]

Startups raising/Investors investing

Is VC the right money for fintech? (TechCrunch)

Citi Ventures invests in working capital marketplace, C2FO (Finextra)

College Ave Student Loans scores $20m (PE Hub)

Blockchain Capital raises $13m for second fund (CoinDesk)

Leftover currency converter TravelersBox raises $10m (Reuters)

Social investing startup SprinkleBit raises $10m (TechCrunch)

Dopay, payroll company for the unbanked, raises $2.5m (PE Hub)

MIT spinout Insurify raises $2m to replace insurance agents with robots (TechCrunch)

The Startups: Who’s shaking things up

NYT: How roboadvisers stack up against each other (NY Times)

How Robinhood became the first financial app to receive an Apple Design Award (Let’s Talk Payments)

Robo-advisor Betterment launches business platform (Finextra)
Betterment, the largest automated investing service, is launching Betterment for Business. This comes the same week as President Obama is expected to introduce a budget plan making it easier for small businesses to form retirement plans for their workers.

Broken TransferWise all “smoke and mirrors”? (The Memo)

Moven partners with loan refinancers, Payoff and CommonBond (Bank Innovation)

Spare change investment platform, Acorns launches education site (Bank Innovation)

Tencent’s WeChat Wallet lands in Hong Kong, beating Apple Pay to market for mobile payments (South China Morning Post)

The Startups: Who’s shaking things up (Week ending November 7th, 2015)

fintech companies making news this week

[x_alert type=”success”]Every week, Tradestreaming highlights startups in the news, making things happen. The following is this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming weekly newsletter.[/x_alert]

List of the top 10 roboadvisor CEOs (Tradestreaming)
Tradestreaming Tearsheet: Everyone’s talking @ #roboadvisors and automated investing platforms. Leading startups in the space have raised hundreds of millions of dollars in venture capital and are managing billions of dollars in AUM. But, who are the CEOs running these firms? Who are the people behind this whole industry? Here are 10 of the best.

What will be the most valuable fintech companies in 2020? (Disruptive Finance)
Tradestreaming Tearsheet: Who will be the most valuable Fintech companies of 2020? Here’s an (educated) guess. More importantly, will the largest Fintechs still be focused on niche areas or will they expand into other sectors (like the largest global financial services companies have done)?

Opening up access to new investors in litigation finance (Tradestreaming)
Tradestreaming Tearsheet: Online finance isn’t just making plain vanilla investing/lending more efficient and cheaper to the end users – it’s also opening up entirely new ways to invest and entirely new investable assets available to the average investor. Tradestreaming’s interview with Jay Greenberg of @lexshares – he’s opening up litigation finance to everyone. Can this be an asset class that eventually everyone holds in their retirement portfolios?

Interview with TransferWise’s Taavet Hinrikus and Kristo Kaarmann (Business Insider)
Tradestreaming Tearsheet: The international money transfer startup became one of London’s few ‘unicorns’ in January when Silicon Valley’s Andreessen Horowitz invested. “That makes us here think, ok, we’re probably also at a very special point in time where we’re seeing the birth of whatever number of new global financial services companies.”

Xignite Records 50 Billion Financial Data API Calls per Month (bobsguide)
Tradestreaming Tearsheet: Xignite announced that in July it served more than 50 billion API requests from its market data cloud platform, breaking all previous company records and making Xignite among the top API cloud providers in the world. As fintech enables further unbundling of data and services, Xignite and others in the space are riding the trend.

The fintech Silk Road – what we can learn from China (Jessica Ellerm)
Tradestreaming Tearsheet: “Banks often look at disruption in terms of product impact, in other words, how general FinTech (including distributed ledger technology, P2P lending, third-party payments, etc.) will disrupt. In reality, the biggest threats lie in the changing structure of global markets.”

Kickstarter surpasses $2 billion in pledges (The Verge)
Tradestreaming Tearsheet: Kickstarter announced that more than $2 billion has been pledged in total on the platform. It took the company nearly five years to hit the mark but revenue growth is ramping. Has crowdfunding become a standard way companies finance new products in our age?

Invoice2go gets $15M to compete more directly with Square and PayPal (VentureBeat)
Tradestreaming Tearsheet: Invoice2go has provided small businesses with one tool—a simple way to create an invoice and send it to clients. Now, with $15 million in new funding, the company is preparing to expand more deeply into the small business product territory. Square and PayPal should probably be paying attention.