- This week in fintech
- Alternative costs of business features
Alternative costs of business features
Also: SME-investments, Meetings are work and the hidden complexities of bank cards
Alternative costs of business features
If a company becomes large enough, it can earn money no matter what they do. It doesn’t even need to be a great idea. Yes, I’m talking about Vipps digital gift paper again. Last year Vipps sold gift paper for over 10 million NOK. In itself, the amount is huge, but considering the rest of their revenue, the amount is a rounding error.
Product-wise, adding small features with side income for products is a slippery slope. For example, I’ve worked with banks that didn’t add push notifications to their mobile app because they earned a couple of millions in fees from SMS notifications every year and couldn’t get paid for push notifications. A feature that would benefit the users but would guarantee a small loss in revenue.
Another example regarding product cost is Bulder from Sparebanken Vest mortgage loan, which automatically adjusts the interest rate as the loan-to-value ratio goes down. This is not new, as many banks give out different interest rates based on your loan-to-value ratio. But no one would automatically adjust the interest rate down until Bulder came. The banks hoped people were lazy and that they could benefit from that. Bulder could add this feature because it was a new product entering the market. But implementing this in an existing bank is next to impossible when you compare the numbers. Since the launch of Bulder three years ago, no one else has implemented it.
Adding new features always has a cost, but remember that it is even harder to remove features that earn you money even though they are not features benefiting most of your users.
Speaking of adding and removing features. DNB and Aprila Bank ended their collaboration project before Christmas, which involved redirecting SME customers needing a credit line to Aprila's automated loan application. The stock exchange announcement revealed that interest in the offer was not great, with only 139 customers accepting the offer out of approximately 100 000 SME customers exposed to the loan offer from Aprila during the pilot project. The total amount lent out was 15 million NOK, representing about two percent of both customer numbers and loan balance for Aprila.
When asked about the collaboration by Shifter, DNB says: "The reason why we decided to end our collaboration with Aprila Bank is that data-driven credit has been promoted as an important focus area going forward at DNB. In that context, it is important for us that we develop our own solutions, rather than relying on third parties."
Testing out a feature with a third-party instead of developing their own solution internally to test the market was a smart move by DNB. But in my book, creating their own solution and focusing on data-driven credit for SMEs seems like a strange choice when the Aprila-pilot clearly showed that the interest in the offer wasn’t that great for DNBs customers. The real reason might, however, be that Visma (a DNB SME solution competitor) has partnered with Aprila Bank. Or maybe DNB saw more potential in the numbers from the pilot than they let on?
At the same time, Sparebanken Møre is testing the waters by partnering with Conta and challenging Folio. They will offer company establishment, banking, and accounting in one and the same package and aims to halve the time it takes to start a business for customers. Company establishment has always been a slow process. By reaching potential customers early, Sparebanken Møre and Conta could get a lock-in-advantage in the following years considering moving business banks and accounting systems is a hassle. It is, however, a very long bet since it usually takes quite some time before new companies become very profitable for banks.
The hidden complexities of bank cards
Built for Mars has again come out with required reading for people working within fintech. This time they are writing about the hidden complexity of bank cards and one of my favorite topics when creating user flows: that number of clicks isn’t an important metric as long as you quickly get to where you want.
Meetings are work
How often have you heard: “We’re canceling this meeting so we can get some work done”? Elizabeth Ayer has written a thought-provoking article asking the question: “What if the *only* work that matters in a knowledge economy happens when we are together?”