Bring In The Social… FinTech Is Getting Wavy!
There's a cultural generalization that talking about money should be taboo, but the reality is that the topic of finance fires up curiosity and conversation. Social dynamics shake up and accentuate interactions around money in younger generations between friends or within communities. Fintech, which has been witnessing this social upheaval in recent years, now offers new community experiences.
A Mindset Reset
Apart from those who have been initiated in the family cradle or have done graduate studies in the field, finance is generally not very well understood, if at all. According to a FINRA Investor Education Foundation study, there is a clear trend of declining financial literacy among current populations. On average, young Americans couldn't answer most financial literacy questions correctly, yet each of us must make financial decisions daily. From managing a budget, consolidating savings, financing a purchase, or preparing for retirement, our lives are paved with financial decisions that are still poorly informed.
Talking about money is unusual. In families, the subject is touched on for some children when they receive allowances or receive gifts. Among friends, financial discussions with roommates or at the end of a weekend boil down to sharing expenses in Venmo.
Yet, there are many signs that there is a growing change in mindset about money :
In recent years, Twitter has been the platform where many people have been talking about their salaries (huge buzz of #KnowYourWorth), family expenses, student debts (viral spread in the US at the end of 2020), or income obtained through side projects (Snowball). Money is gradually becoming a majorly popular topic of conversation.
Challenged by the 4th cycle of the cryptocurrency boom and the delirious returns on investments (e.g., Bitcoin achieving +117.2% from December 8, 2020, to January 8, 2021), young and old alike have inevitably questioned the role and profitability of their precautionary savings.
As a sign of the market's enthusiasm and real expectations, viral waiting list strategies have been successfully replicated by numerous fintech startups: Robinhood (investment platform: 1M pre-registered), Kard (neobank for young people: 80k), Helios.do (green neobank: 12k).
Taking on financial challenges is now commonplace. Tools such as TillerHQ promote 30-day challenges to regain control over your finances, while others such as MoneyUnder30 encourage savings or advise on how to avoid future financial risks.
Whether for the youngest or the eldest, investors are betting massively on startups targeting financially unacculturated audiences. GoHenry, for example, is teaching children with its card and pocket money management application, while Eversafe fights against confidence abuse/scamming, leading to financial exploitation of the elderly.
Rock your (Finance) Community
So, how do I buy a stock? Where should I invest my money? What is a bull market? Why is compound interest so powerful? What on earth is DeFi?
Neophytes ask themselves a lot of these questions, and those unknowns are often a significant barrier to getting started. And yet, little by little, people with common interests have started exchanging advice online. Driven by social networks' algorithms, these Internet users converged, and communities began to form around different financial topics: investment, retirement, trading, cryptocurrency. Real wells of knowledge, now at your fingertips, are democratizing access to finance.
Personal finance management communities have been taking off even more since the beginning of the pandemic. Podcasts, articles, Slack, newsletters, Instagram accounts, and other formats are multiplying to answer these questions for newcomers (So Money, Snowball, Financial Freedom) and professionals alike (Agicap's Cash is King community). Given this dynamic, it’s no surprise that Stripe acquired Indie Hackers a couple of years ago.
The same is true of Reddit, where SubReddits such as r/wallstreetbets have increased dramatically (778k Jan 2020 to 8.6M Jan 2021), even now being presented as a Bloomberg terminal.
Discussion groups on Telegram and Discord are discreet, but they are on the rise! You can go to InvestingStock to discuss trading concepts, EarningsFly to analyze a company's financial statements, or chat on Discord servers to identify the signals that explain market movements.
Some are pushing personal finance management to the limit, such as the development of the FIRE (Financial Independent Retire Early), for example, which has seen its number of followers increase considerably (r/Fire 3k in August 2019 to 84k Jan 2021). The concept? Achieving financial independence and retiring early. To do this, one adopts a frugal lifestyle by reducing expenses to a minimum, then saving an amount at which the investments' interest provides enough money to support living costs.
Fintechs have clearly identified this craze and are now positioning themselves as cool players on the market, as opposed to traditional players. From marketing familiarization to message simplification to a seamless and frictionless digital experience, startups are transforming our relationship with money.
The service is no longer just transactional; it is now also emotional by way of new interactions with the user and between users. For instance, French startup Kard distills memes on Instagram, mingling the experience with the product and the cultural references of the youngest. Result: an offbeat marketing strategy.
This social angle, which is gradually penetrating fintech products, is extremely powerful because it increases product engagement, reduces churn, and virality drastically reduces acquisition costs. Beware, however, of any drift. While supposedly rational economic agents generally fill financial markets, easy access to knowledge and markets through Fintech can lead to unexpected situations:
The ease with which people can now talk about investments has the perverse effect of imitating strategies. But imitation is not understanding, and many Robinhood traders have blindly followed advice, unfortunately to their loss.
Very recently, we have been able to note the community power of the social world in the fintech universe with GameStop's soaring share price (x20 in 1 month at the max) at the beginning of 2021. R/wallstreetbets Reddit users enthusiastically shared their recent positions, which suddenly provoked frenzied purchases of the GameStop action. The stock posted the highest trading volume (197 million shares) in last Friday's session. By comparison, only 144 million Apple shares were traded that day.
Meet the Fin-Fluencer
This community power is gradually infiltrating the social landscape through existing or dedicated networks, or even in a hybrid way by creating strong synergies.
Laguna is an OnlyFans for investment portfolios, allowing users to generate a dedicated page that can be shared on different social networks, especially on Twitter.
Stockwits is the stock market equivalent of Twitter, allowing users to share goods plans and investment ideas between traders, companies, etc.
eToro presents itself as an online broker. Reputed to be the leading platform in social trading, it allows users to exchange, assist others, and above all, to copy the best of them.
Public is a social investment network where members can hold fractions of shares, also known as ETF shares, follow popular creators, and share ideas within a community of investors.
Ensydr, still in beta, presents itself as an "e-sport of finance". This site invites you to predict, play, and win coins for accurate predictions. The objectives are intended to be fun and educational.
Meemo is a personal finance application launched by former Snap employees. It is essentially a gamified digital wallet that provides personalized insights and rewards. It also provides recommendations and social validation from your friends by collecting their purchase history and sharing it with you.
There is no shortage of examples, which testifies to the subject's growing appeal. This is contributing to the rise of a new type of star: the fin-fluencer. For example, Emilie Bellet, a former Lehman Brothers employee, who shares her financial advice on Instagram, or Rahul Rai, with no less than 462.2K subscribers on TikTok! And yet, it weighs little compared to the 1.6 billion pieces of content circulating on Gen Z’s favorite aforementioned social media platform with the hashtag #finance. This data underlines the craze for this field. Let's face it: finance is getting cool, and brands understand this very well and use it as a lever to diversify their activities. They do not hesitate to adapt and review their marketing and communication strategies to whet the appetites of millennials and Gen Zs.
One example is Cash App, Square's mobile payment application, which periodically sends users free money when they share their account usernames. This app now operates on the Animal Crossing gaming platform. A colossal marketing stunt, but it doesn't stop there, and it has also launched - like startup Fast - a trendy and fashionable apparel line designed for Gen Z.
Another example is the teens’ bank, Step, which repeatedly calls on TikTok superstar Charli D'Amelio to carry out dedicated marketing operations. The latest one: a Q&A show called "Burning Money Questions", where the star discusses the fundamental subjects related to money and answers teenagers’ frequent questions.
You Ain’t Seen Nothing Yet…
Pretty cool, right? Well, there’s much more. The rise of the Passion Economy is also proving to be a game-changer, bringing in its wake the development of new fintech tools (stand-alone or embedded) to enable creators to become more professional and better monetize their know-how.
Some tools are particularly interesting, being social before being utilitarian and designed for anew generation of people-brand. Some examples: MoneyMail (read their manifesto here for an avant-goût), and Karat, a bank card reserved for top influencers that has the particularity of being granted according to one’s social metrics (likes, followers, etc.) – something never seen before!
It's advisable to take the measure of this phenomenon. Indeed, it is not just a question of new tools - however innovative they may be. The revolution that is about to take place will profoundly change our business models.
This movement is gradually extending to traditional businesses, which are themselves rethinking their models to engage their audiences and consumers. What used to be participatory financing (e.g., crowdfunding on Kickstarter projects) is gradually transforming towards co-ownership models. This is the case for Fairmint, which allows a startup/creator to offer its users the possibility to support the company by investing in it. Imagine if Wikipedia was partly owned by its publishers, or if Reddit rewarded its moderators with company shares.
Bundles are now making their way into the Passion Economy. The road to the creators' 1000 true fans is built by merging communities. This is what Divinations and Superorganizers are trying to do with "Every" by offering a common newsletter. The product thus benefits from adjacent groups of readers while reducing the entrance fee to consume the same content.
Although the signal appears weak for the moment, it is nevertheless perceptible and hints at the rise of Human IPOs – investment in people! In concrete terms, a creator is perceived as a stock that gains in value as it becomes more well-known. Will the investments of tomorrow be in people with potential? VC Rex Woodbury is convinced of this and argues the subject in an article that is well worth reading.
One company, Human IPO, has pioneered this emerging market by offering a marketplace of people to invest in. Mind-Blowing? Too disruptive? Perhaps unrealistic? If that’s what you think, wait until you witness the democratization of the "Direct-to-avatar" economy that is driven by Digi-sapiens who are "trendsetters, trend hunters, and early adopters of any technology that upgrades and frees up their existence". Be assured that the fintech scene, as well as many other sectors (however corporate and low-key they may have been in the past), are breaking free, driven by a robust community and creative dimension. We are at the dawn of a social revolution that goes beyond any given social network, any framework, including that of your imagination.
Marie & Clément
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👋 thanks for the manifesto shoutout on Social 💸 Money and Moneymail. Big updates coming soon. Including a rebrand. Going to be 🔥 hot. You heard it here first.