Five a day

For customer acquisition, trust beats distribution channels, tech-savvy and data.

Andrew Carrier

Apr 23, 2023

Read on to learn why:

① Trust is no longer the winning card up banks’ sleeve.

② You should obsess about performance, reliability, privacy, innovation, and delight.

③ Marketing active fund management is getting harder and harder.

④ The money of the future will be tokenised on a blockchain.

⑤ One of the world’s best known media companies isn’t a media company.

⑥ The illusive benefits of Brexit continue to elude us.

⑦ 2023 may yet still end up looking like 2008.

What's new

After launching its ‘buy now, pay later’ product last month, this week Apple unveiled Savings, a high-yield savings account, offering US customers a 4.15 per cent interest rate, 10 times the national average.

Source: The Financial Times, 21 April 2023

In short:

“The iPhone maker is playing a long game in finance and payments, say three former Apple employees, and its current moves are laying the technical groundwork for taking a bigger share of the market. […] The question for banks and other providers of financial services is how worried they should be about a tech company with 1.2bn iPhone users, a $2.6tn market cap and a history of disruptive innovation making moves on to their territory. Apple’s scale makes even the world’s largest banks look little. Its services division alone, where it earns recurring subscriber revenues and App Store payments, generated $55bn in profit last year — higher than JPMorgan and Citi combined. But it makes up just one-fifth of its total revenues.”
“For JPMorgan chief executive Jamie Dimon, the risk is clear enough for him to label Apple a bank. ‘It may not have insured deposits, but it’s a bank,” he said in June last year. ‘If you move money, hold money, manage money, lend money — that’s a bank’. Stephen Squeri, chief executive of American Express, admitted to analysts on Thursday that he too is ‘paranoid’ about Apple and Amazon, which he called ‘phenomenal’ companies with deep links to the consumer.”
“Others in the industry do not see Apple as an existential threat. Eva Wang, a former American Express executive who now heads partnerships at Firework, a video-shopping commerce solution, says Apple’s interest in payments and banking is mostly about extending the reach of the iPhone — to add convenience but also to keep users ‘locked in’ to the Apple ecosystem.”

Why it matters

Some suggest that Apple will beat Twitter to ‘the everything app’, but its ambitions are loftier than that. Established financial services brands are absolutely right to, in the words of Jamie Dimon, be “scared shitless”.

I don’t think Apple wants to be a bank. Which is to say, I don’t think it wants the burden of being regulated. But there is plenty of money to be made powering a slew of financial services and - crucially - being the conduit to the consumer, taking an Apple-like high-margin cut, while offloading tiresome underlying responsibilities like infrastructure and credit risk to the likes of Goldman Sachs.

① Apple enjoys a massive advantage over financial services brands. I’m not talking about distribution channels, mastery of technology, or consumer data - although it has the banks comprehensively beat in all of those critical areas too - but trust. Trust used to be the winning card up the banks’ sleeve. No longer. Consumers have been won over by Apple’s unparalleled user experience. The way its products and knowledge of its users enable it to be enchanting and useful to them in almost every aspect of their lives - from finance through health, to work and entertainment - has earned Apple a peerless bond with its customers.

The Apple brand is that trusted because it consistently delivers performance, reliability, privacy, innovation, and delight. Don’t you wish your bank, wealth manager or broker did?

What to do about it

Take action

② Put trust to the fore of your customer acquisition efforts. Distribution channels are important and customer data will be essential. But that’s all for nothing if you can’t build trust first. Earning it is more complex than it used to be and will require you to take a broad view. This week, check that your team is eating their five a day:

Performance: First and foremost, are you offering the very best product you can? Is it tangibly better than your competitors in ways that really matter to your customers?
Reliability: Are your customer touchpoints thoroughly consistent? Do people have the same experience when they visit your w ebsite to read your thought leadership as when they meet you at a conference? Is your sign-up process a frictionless extension of a journey that might begin with them clicking on one of your online ads? Is your brand present and your services available where you customers already are - in the real and virtual worlds?
Privacy: Are you scrupulous about guarding your customers’ data and respecting their wishes? Have you spared no expense to ensure your systems put your customers’ interest before your own?
Innovation: Does your team spend an extraordinary amount of time and effort improving your products and conceiving betters ways to deliver them?
Delight: Are you fanatical about impressing your customers in ways they are unable to anticipate? Are you going above and beyond expectations to a degree that makes it impossible for them not to recommend you to their networks?

Get help

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FINANCE

Active European funds deliver worst returns in more than 20 years

③ Marketing active fund management is getting harder and harder.

Source: The Financial Times, 17 April 2023

“In a research note on European asset managers, UBS analysts wrote that active equity funds domiciled in Europe generated, in aggregate, -4.13 per cent of alpha last year after management fees, the poorest annual result since their analysis began in 2000. Alpha can be defined as any outperformance, or in this case underperformance, of the market."
“The research analysts added that, amid the volatile environment that characterised 2022, they ‘would have expected active equity managers to have benefited from attractive alpha opportunities’. The analysts draw a comparison to 2020, the last ‘volatile equity year’, when alpha generation among active equity managers reached a 20-year high.”
“In 2022, active equity funds in Europe had their worst spell of performance in the first half of the year, when 96 per cent of the equity fund underperformance was logged, according to the report. Two-thirds of the underperformance came in the first quarter alone.”

TECHNOLOGY

More “radical change” for payments on the horizon, BoE deputy governor says

④ The money of the future will be tokenised on a blockchain.

Sir Jon Cunliffe. Source: Fintech Futures, 17 April 2023

“Sir Jon Cunliffe, the deputy governor for the Bank of England for financial stability, outlined the central bank’s role amid a fast-changing payments landscape. Cunliffe says payments and transactions were, until relatively recently, ‘dusty corners’ of financial services but are now evolving at speed. ‘And there’s good reason to believe that even more radical change is on the horizon,’ he says.”
“Until relatively recently, Cunliffe explains, the great majority of everyday transactions in the UK were made in publicly issued money – notes and coins. ‘However, as the cost of electronic money transactions has come down, as their functionality has increased, and as our daily lives have become more digitalised, cash use has declined, and commercial bank electronic money has come to dominate payments in the UK,’ he says. Now, only 15% of transactions used cash in the UK in 2021.”
“Perhaps most importantly, over the last decade, a set of new technologies have emerged which have been pioneered and refined in the cryptosphere, and which have the potential for further transformation in money and payments. Whether stablecoins, the tokenisation of commercial bank deposits, the digital pound or wholesale central bank digital currencies, ‘the potential tokenisation of money and the development of new ways of transferring it has major implications for the Bank of England’, Cunliffe says.”

MEDIA & MARKETING

Bloomberg is contemplating life without its founder

⑤ One of the world’s best known media companies isn’t really a media company.

Michael Bloomberg. Source: The Financial Times, 20 April 2023

“To many people outside finance, Bloomberg is a media company. That is a little like describing Disney as a theme-park operator or Google as an email provider. Out of Bloomberg’s more than $12bn of annual revenue, only about $500mn comes from media. The vast majority of its profits come from banks and investment companies renting ‘the terminal’, its clunky-but-powerful data and analytics portal. […] If data really is the oil of the 21st century, then Michael Bloomberg is today’s John D Rockefeller.”
“The company’s ability to charge for the privilege of renting a terminal is the envy of the data industry. Last year, Bloomberg raised the price for just one of its terminals by about 9 per cent to $30,000 ($2,500 a month) and the cost of multiple ones to $26,580 per unit. Because the company refuses to cut deals, even for its biggest clients, and because of how rare it is to get rid of one once they’re installed, that means the annual revenues thrown off by the terminals over the next two years are easy to calculate: at least $9.7bn.”
“In February, Michael Bloomberg turned 81. He is likely to transfer ownership of his empire to a trust that will finance Bloomberg Philanthropies for perpetuity. That would be one of the largest charitable donations in history. […] Bloomberg’s likely successor as CEO is Jean-Paul Zammitt, a company veteran. Yet some note that a new internal contender has recently emerged and that the mercurial Bloomberg might also look outside the company when he finally steps back, as he did when he left to be New York mayor in 2002.”

WILDCARD

Brexit a big factor in companies snubbing London for New York

⑥ The illusive benefits of Brexit continue to elude us.

Source: The Evening Standard, 17 April 2023

“Simon French, Head of Research at Panmure Gordon, said on Monday that UK stock market valuations had slumped since the 2016 vote to leave the EU. While US valuations were higher because of other factors such as its greater proportion of high value tech companies, the impact of Brexit could not be ignored.”
“French told BBC Radio 4’s Today Programme: ‘Some of it is compositional, some of it is the fact that there are more higher growth businesses in the United States markets. The depth of liquidity in the UK is much lower than it is in the United States. But we have to mention the B word. Brexit has been a big contributing factor here. This discount did not exist in 2016. And since then, valuations have moved lower in the United Kingdom, while they’ve moved higher in both the US most obviously, but also in Europe’.”
“Chancellor Jeremy Hunt has admitted that a trade deal with the US - seen as one of the great prizes of Brexit - would not be agreed ‘imminently’.”