Intel Report Digital Banking - Flipbook - Page 12
not every few months. The tech companies, in other words,
Leimer of Unconventional Ventures says he’s seen inves-
can adapt quickly in the age of the internet, improving the
tor decks where consumer-oriented deposit and payment
customer experience in real time. They can also access large
platforms project as little as $20 to $40 to acquire a new
datasets to extract meaningful insights on their customers,
customer, although such estimates may be unreasonable.
as long as they have the staff to come to good conclusions.
Traditional banks range from $250 to more than $400, he
Those insights can fuel important updates, and products and
says.
services that cater to their specific customer base.
A business-oriented bank’s customers typically cost more to
“It’s hard to overemphasize how important that is,” says
acquire. A business bank without branches would be attrac-
Citi Ventures’ Purushotham. “The agility that that gives you
tive for an investor if it could acquire a new customer for
actually is a very powerful advantage for the upstart.”
about $150, half the cost of a traditional business bank with
branches, Patriot Financial Partners Managing Director
In Purushotham’s view, financial services traditionally
focused on products such as a mortgages or CDs. Now that
Wycoff estimates.
financial products and services are delivered increasingly on
The simplest way to calculate customer acquisition costs, or
mobile apps and websites, the customer experience delivered
CAC, is to divide sales and marketing spend by the number
through their devices becomes part of the product offering.
of new customers acquired in the same period.
A superior and compelling experience also helps drive down
the cost of acquiring customers. Viral social media networks
help build the brand, as demonstrated through companies
like Square and Current.
have a lower cost base and can translate these cost savings
into more competitive banking products and services for
customers,” Barry says.
“I download a product, I use it, I send it to my friends and
then it spreads,” Purushotham explains. Initially, startups
can acquire new customers at low costs. That translates
into financial advantages in the business model, sometimes
driving down the cost of acquiring a new customer 10 to 15
times, Purushotham says.
“Without expensive physical networks, digital-only banks
As a company matures, the cost to acquire new customers
on a national basis can rise, as getting from 1 million to 2
million or even 3 million customers requires sizeable sales
and marketing budgets.
Consumer-oriented digital banks and platforms tend to drive
One Rule of Thumb to Judge Value in a Digital Bank
LTV
CAC
>4
Lifetime value
Customer
acquisition cost
More than 4
10 | FINXTECH INTELLIGENCE REPORT
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