The Future of Fintech is Niche

By Matt Spoke, Founder & CEO @ Moves Financial

Think about the way people manage their money today. Nearly everything is done online, or through an app—or multiple apps. People transfer funds, pay bills, invest, and manage their portfolios all from the convenience of their smartphones. This is a far cry from the way that most banking was done even a decade ago—When was the last time that you waited in line for a teller?

The pace of innovation in the banking and financial sector is moving so quickly that it’s dizzying to try and track all of the changes. Digital banking products are launching and iterating on a weekly basis, giving consumers increasing autonomy to make the financial decisions that are meaningful to them. Today, challenger banks—small consumer banks that compete directly with larger, established banks—are on the front lines of innovation, and in many ways, hold the keys to a better financial future for everyone.

From my seat as the CEO of a fintech company, I can see a clear shift happening from the “one size fits all” approach of the past, to a more tailored approach in which smaller banks serve the needs of specific demographics. As product features such as free accounts, no overdraft fees, high-interest savings, and cashback become commoditized and commonplace, the real opportunity in banking is to “go niche.” How can large banks designed to serve millions of people actually meet the needs of any one particular person? They can’t. Every person has a different set of needs, and these needs must be reflected in the types of banking options that are made available to them.

The future of fintech is niche. But what, specifically, does this mean? There are two ways to think about “taking a niche approach” as a bank. The first, and most common example historically, is to build and market a company around one specific product feature. Venmo is the most obvious example here, as the founders built an entire business on instant transfers. The second case, increasingly common among today’s next-gen fintechs, is to focus on a specific audience and build for that set of people and their unique needs. Through this lens, the future of fintech isn’t just about product—the future of fintech is personal.

It’s clear that the rewards and features a bank can offer are no longer enough to stand-out, or retain customers long term. Banks need to strongly align with an individual’s identity—and those that do the best job will succeed. With this in mind, here’s how today’s fintechs are winning.

They build for a real audience

There are an incredible number of banking options today. With the rise of neobanks, the field has never been more competitive and customers need to feel like they are being met exactly where they are. In fact, customer service ranks first on what consumers look for when choosing where to bank, and more than 80% of young people today say personalization is a critical part of their banking experience. This is what will ultimately win customers.

As such, there is a major opportunity for fintechs to offer customized products that serve a particular set of needs. There are already many fintech companies that have built their businesses and products using a “niche approach” and have found incredible success. Take Greenlight, which offers a debit card for kids and allows parents to automatically set-up an allowance, or send money for doing chores. I also love Daylight, which is designed for the LGBTQ+ community, and offers rewards on spending at Queer bars and LGBTQ+-allied businesses. Similarly, First Boulevard has designed a Black business marketplace, which gives members incentives for buying at Black-owned businesses.

That said, companies always need to build with the future in mind. In my role, I’m constantly asking myself: what will my customers want next? How can I best anticipate their needs? And who else can I bring into the fold? As a bank’s core demographic of users evolves, so too should the product.

They speak to users through their brand

Product is critical, but it’s not everything. Studies have shown that purpose-driven brands achieve more than twice the growth of brands that focus strictly on profit generation. Translated into a banking context, this means that a majority of today’s consumers want their banking experience to align with their values and beliefs. Mission-driven companies—including banks—have quickly become the new standard.

From a branding and mission perspective, fintech companies have the advantage over incumbent banks. Most people would balk at the idea of stalwarts like JP Morgan launching a new product designed for niche audiences — it would likely come off as inauthentic. Conversely, fintechs have a clean slate and can build a product that directly meets the needs of the communities they are serving.

Many fintech companies are going beyond creating a core set of values, or even building meaningful features. Niche banks are also using their platform as an educational resource to demonstrate that their level of commitment to their audience goes beyond transactions and rewards. Daylight, for instance, provides resources to users on which businesses are LGBTQ+ friendly. At Moves, we have a program for gig workers to earn stock options in the companies where they work. And as more users join the platform, we want to serve as a kind of labor union for gig workers—we want people to join our network so that we can advocate for them. This layer of support that fintechs can offer goes well beyond what traditional banks have offered and is positively changing the definition of a “bank.”

They make a tangible impact

Users will go to the bank that offers the greatest number of benefits for them—whether that’s product features, mission-aligned offerings, or some combination of the two. The role of a bank is shifting for the better, from a place where a large number of people simply store their money and make transactions, to a place that empowers people to make thoughtful financial decisions that align with their values. This shift is being addressed by fintech companies, and those that do the best job of authentically meeting the needs of the audience they are working to serve will succeed.

In so many arenas, the big banks still hold the power. But these banks will struggle to connect with customers on a personal level, and will spend much more than their fintech peers to acquire specific subsets of customers. Because of this, I think we’ll continue to see the emergence of more and more fintech companies that take a “niche approach.” I hope this projection pans out, as millions of people stand to benefit from having access to banking options that are designed specifically for them.