Intel Report Digital Banking - Flipbook - Page 13
revenue and new customer accounts through massive marketing campaigns, including a sophisticated use of social media and influencers that
get Gen Z’s attention. Chime spends $60 million to $100 million per
year on TV advertising, says Shevlin of Cornerstone Advisors. “Show me
a community bank that spends anywhere close to that kind of money,’’
he says. “You can’t find one.”
But investors don’t look exclusively at CAC when determining where to
invest fintech dollars. Purushotham says he looks at lifetime value of a
customer, or LTV. If LTV divided by CAC is four to six times or more,
Percentage of Consumers Who Consider
a Digital Bank to Be Their Primary Bank
By generation
Gen Z
(Ages 21-25)
4%
that’s potentially a good investment. He also looks to the payback peri15%
od, the amount of time it will take to make a profit on those customers.
Shevlin also looks at the lifetime value of customers. If 100 digital-only
customers have a lifetime value of $10 each, for example, it would be
better to get 10 customers with a lifetime value of $1,000 each. For
many investors, it’s not the number of customers that matter, but the
Millennial
(Ages 26-40)
4%
lifetime profitability of each one.
15%
Once the digital bank or platform attracts customers, the big challenge
is to make those customers bring in profits, of course. Banks that focus
on consumers tackle this problem by ensuring customers make the bank
Gen X
(Ages 41-55)
their primary bank account. This is done with clever incentives that
make it hard NOT to give the app a direct deposit of a paycheck every
4%
month.
11%
Nearly a quarter of Chime customers say they chose the fintech as their
primary bank because it offers two-day early access to their direct-deposited paychecks. Chime also offered early access to government stimulus and tax refunds, according to Shevlin’s report, “Embedded Fintech.”
Others, such as Current and Aspiration, offer similar benefits.
In the past, digital banks have struggled to get primary checking
Baby Boomer
(Ages 56-74)
1%
3%
accounts. But that seems to be changing. At the beginning of 2020, only
3% of U.S. consumers considered a digital bank to be their primary
bank. By the end of the year, that had grown to 11%, according to the
Cornerstone Advisors report, “Competing with Google Plex and Digital
Banks: How Community-Based Financial Institutions Can Regain Their
Mojo.” A full 15% of Gen Z and millennial adults said at the end of
January 2020
December 2020
Source: Cornerstone Advisors surveys of
U.S. consumers, Q1 2020 and Q4 2020
2020 that a digital bank was their primary bank.
DIGITAL BANKS: PROFITS AND PURPOSE | 11