3 Ways Startups Are Coming for Established Fintech Companies -- And What To Do About It

In the world of finance and financial technology, established companies are starting to look at the rearview mirror at fast-approaching startups, wondering just how true the phrase “objects in mirror are closer than they appear” might be. What is causing this acceleration in fintech startup traction? What should the incumbents be nervous about? And, more importantly, what should they do about it?
Alex Rampell, a16z general partner (and former fintech entrepreneur as the CEO and co-founder of TrialPay), joins a16z operating partner Frank Chen to discuss the changing fintech landscape. They discuss both lessons learned from the perspective of the the hungry and fast fintech startup, as well as concrete advice for execs in the hot seat at established companies.

[@cgoode1057]

A company in the UK called "Sheilas' Wheels" tried to offer car insurance that was only available to women. The logic was that, as average claims by female drivers are lower than average claims by male drivers (presumably fewer accidents and/or less serious accidents), by limiting policy holders to female drivers they could offer them better pricing. But the European Court of Justice found this breached gender equality rules - with the company quoted as saying the ruling was 'unfair' and would lead to 'premiums rising drastically for young female drivers'. The company's branding (name, colour scheme, graphics) seems to imply that it's just for women, so maybe they've been able to get around the judgment by just dissuading men from applying. The conflict between equality concerns and statistically significant differences between sub-groups seems like an interesting area to study. Thanks for the video - really interesting.

[@spinLOL533]

This is pure gold. Thanks a16z

[@daljohn6716]

Very interesting. Especially on how you analyse that these companies target the customers on their ‘positive’ personallity traits and offer them a better price. Just all the good customers

[@terryfox7427]

Super sane analysis by Alex. He's clear concise and knowledgeable in his area for sure best A16z video for sure.

[@tango110]

MA&A "Most people are measuring outcomes and not process"

[@edgarcerecerez1]

The idea of sub branding for a specific segment of the market is also seen in M. Christensen’s ideas. Using his theory of jobs to be done, we can see how segmentation could work in the insistence example.

[@RobinLespagnard]

Love these, keep 'em coming please :D

[@riesgoinversiones2732]

This is awesome! keep up the good work, great chanel

[@vanessapaolasotosoto7266]

Excellent! Psychology applied to business models. Boom !!

[@pablooalsahlani6557]

Alex is a genius. Thank you for sharing!

[@RealLeviWekesa]

Really impressive breakdown of basics. Loved it

[@user-jl1sz7su4p]

This was a really great conversation, thanks guys!

[@albertocamilo1420]

I guess im asking randomly but does anyone know of a tool to log back into an Instagram account..? I stupidly forgot my password. I would appreciate any tips you can give me.

[@tango110]

44:00 M & A Strategy is fascinating

[@karan10489]

Fantastic Discussion, thanks guys!

[@InvestOrama]

Brilliant, it's mainly about insurance but it explains a lot about big data across sectors

[@Diikutin]

I love it. Good stuff a16z

[@BYZNIZ]

You guys are always teaching.

[@YazinS]

Love this discussion!

[@f1993able]

Interesting take.

[@einsteindonascimentojunior440]

Awesome discussion, conversation and ideas sharing.

[@jordanjackson7171]

Fantastic - does a16z have any best in class behavioral finance resources?

[@azamai]

I was thinking about that. Very interesting conversation.

[@upplabs3480]

Found some useful insides. Thanks!

[@archiechiromo9946]

Nice conversation. I liked the analysis on how each incremental customer for financial services is a profit/loss decision unlike other industries. A couple of comments/questions. I would think the big insurers have already given incentives to their 'good pool', it wouldn't be that easy to steal them. Would the Grameen bank model created by Prof Yunus work in more developed countries where social security on loans would probably not work so well?

[@epaglimited2879]

Very insightful business proposition. The fintech disruptive solution is relatively 'simple. Develop 'new customers' at the industrial level along 'BIG DATA' based on individualized de-risking profiling evaluation and provide a commensurate individualized risk based premium. Change the rules of the game at an industrial-level and blow the competition away...

[@siavoshbahrami7408]

I'm curious if the idea of going after 'good' customers in these niche financial spaces can be generalized to the wider B2B space by identifying less-costly customers--those that will demand less of your support/features etc.

[@gambit1357]

Very constructive conversation. Thanks for sharing!

[@BiancaAguglia]

The idea of "best customer" is (mostly) fair and makes most sense financially, of course, but, ethics aside, it can backfire badly, especially nowadays when the public is less and less tolerant of companies focused on profit first (with no real care for social or environmental good). The alternative is to take on best customers and, at the same time, to give honest but rejected customers a chance to become best customers. Make the helping service part of your company, or create/partner with a non-profit that can do the helping. Rejected customers have to contribute somehow (skills or money) to make sure that the services they are provided with are not a financial drain on the provider (i.e. they don't end up being subsidized by the best customers). This way you are being financially smart but also truly fair. People who are rejected and take advantage of your offer prove that the situation that made them "undesirable" is a matter of circumstances, not character. The rest will call you unfair, but there's real proof that you did your part in creating a win-win partnership between you and them.

[@InvestOrama]

Patagonia has stopped doing those vest in April 2019 but the "midtown uniform" leaves on

[@snapching]

I noticed in this conversation, that the services of the company was not particularly relevant, but the focus was on Customers. Know your customers and then segment - like Gyco in the insurance space. Create sub-brands is a company that focus on the customer group, and based on what they learn, they create a sub-brand which has messages and branding to match that group. Is there a brand that only focuses on the Customer, and the intelligence of knowing the Customer?

[@Xirtap17]

The idea that you should go after the best customers is important; however, it is really about CRM. we need to make good customers better.

[@oliverjohnson2160]

Don't confuse a bad outcome with a bad bet.

[@BYZNIZ]

What do you mean amazon gets paid $1, and why does the customer habe to pay them? the book? So how does that work?

[@Mr.Anugraha]

Interesting... but they are already doing this in China aren't they? Monitoring everything, rewarding or punishing based on behavior? Damn...

[@johnnybegood9005]

The car insurance comparison is not correct. Every time you claim, insurance increases your premium, etc.

[@Locopecuniainc]

super - how do I pay my panadero with crypto- he works harder than anyone- how convenience take time to read- behavior manipulation-

[@bluesque9687]

The interviewer is irritating and then he seems happy after having asked a question as if his question is more important than the answer.

[@spinLOL533]

first

[@esuus]

I love your guys' videos, but this is so tone deaf. You KNOW that it's poor people who have worse health, poor people who are more likely to default etc etc... it's not a market failure to price them in with others. It's just not as profitable. It's nice that you're being honest about the kind of business you do in this video. But we live in an age where inequality is a key evil in society and you guys seem fine contributing to it.

[@Acumen928]

a bunch of ramble with no focus on the pertinent points.

[@esuus]

You're literally on the wrong side of history. Not profit wise of course. Had you worried there, hadn't I? No no, not profit wise.