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Advertising & AI: FinTech Growth Depends On It

In the FinTech space, from scale ups to unicorns, companies are banking on the notion that traditional financial institutions are not only struggling to retain Gen Z clients – who remain wary of traditional markets – but they actually assume these institutions will never figure it out.
Candice Wu
Candice Wu

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Or simply, Zoomers do not want third-party actors controlling their financial futures. While the realities are a bit more complex, the surging FinTech space has shown exponential growth over the past decade. The future of the financial industry relies on engendering confidence in a maturing customer base for the promise of sustained performance.

In a recent report from October 2023, McKinsey predicted that revenues in the FinTech industry will grow almost three times faster than those in the traditional banking sector between 2023 and 2028.

In 2022 alone, FinTechs accounted for 5 percent (or $150 billion to $205 billion) of the global banking sector’s net revenue. The management consulting firm is estimating this share could increase to more than $400 billion by 2028, representing a 15 percent annual growth rate of FinTech revenue between 2022 and 2028 – that’s nearly three times the overall banking industry’s growth rate of ~6 percent.

What has become increasingly clear is that the winners in FinTech will be the ones who can grow their user base quickly over the coming years, and thereby, grow assets under management (AUM), especially in the thick of the Great Wealth Transfer. Another area where the fintechs appear to be overtaking their more traditional banking counterparts is the use of AI. We surmise, in the race to acquire new users and scale AUM, scaling up targeted, personalized AI marketing practices will be the real deciding factor, determining tomorrow’s winners and losers on Wall Street, on the blockchain, or anywhere else. 

FinTech: Breaking Down the Demographics and Growth Potential 

Currently, 64 percent of global consumers use two or more fintech services with nearly 26,300 FinTech startups aiming to break through in this overflooded market (11,651 fintech startups in the United States). According to the latest statistics, China, India, South Africa, and Peru possess the highest rate of adoption with $6,105.96 billion in revenue expected globally. As such, the FinTech company services can be broken down across the board, as such:

  • Wallets and mobile payments: 66.7%
  • Cards and other traditional payments:  62.5%
  • Savings and checking accounts: 33.3%
  • Value-added services: 29.2%
  • Loans/mortgages: 12.5%
  • Wealth and asset management services:  8.3%

In the gluttony of FinTech startups, the simple question remains: how does one rise above the crowded marketplace? The road to success and long term profitability lies in the marriage between rendering an in-demand quality service by appealing to an exasperated consumer base searching for alternative methods to find financial sustainability. 

Like always, you need an undeniably promising pitch.

Coinbase: FinTech’s Major Advertising Spend Seeks to Pay Off Big Dividends

Playing into perceptions of a stagnant economy and out-of-date, predatory banking system, the United States’ crypto exchange platform Coinbase, the first crypto company in the world to go public and be traded on the NASDAQ since Spring 2021, has started to make its case by rolling out a bevy of national ad campaigns in America specifically focusing on the “critical” role that crypto will play in modernizing the global financial system. 

Tapping into mounting consumer frustration, Coinbase has made its mission to reach out to recent college grads who are open to distancing themselves from traditional banking fees and government-set interest rates.

In fact, Coinbase is staking its brand on appealing to the next generation of homeowners. With all its employees operating remotely, the FinTech company has been at the forefront of ad spending in traditional media, hoping to transition from a speculative platform aimed specifically at the FinTech-minded crypto sector in an effort to cross over into the general public’s consciousness. 

Employing auteur filmmaker Mike Mills, Coinbase began its campaign in March 2023, releasing their “It’s Time to Update the Financial System” spot only then to kick off via a series of four different advertisements featuring Coinbase CEO Brian Armstrong a few months later. All were part of Coinbase’s new “Moving America Forward'' campaign. 

These advertisements mostly aired during popular Sunday shows – including the older skewing Face the Nation – with some also appearing during ad breaks of the NBA Finals series. This comes, of course, after Coinbase’s famously successful 2022 Super Bowl viral ad — which just bounced a QR code around on a black screen — and outperformed the group of competing Super Bowl Sunday ad buyers. Coinbase installs jumped 309% week-over-week after the airing; company installs continued to climb by another 286% the following day. 

However, it wasn’t until the release of the “House” advertisement in which Coinbase targeted the declining prospects of Gen Z homeownership (and beyond). 

Struggling to rebound since the pandemic, the opportunity among FinTech startups to capture a frustrated generation has proven a winning strategy, as companies like Coinbase aim to acquire new users by promising greater autonomy over their finances. 

In the final months of 2023, the rate on the popular 30-year fixed-rate mortgage hit a more than two-decade high just under 8%, leading to a 4.1% drop in U.S. existing home sales last month alone. This is the lowest annualized rate since 2010, 3.79 million units. Plateauing in late September, the 30-year mortgage rate has since leveled off; meanwhile, the national mortgage rate is still expected to average 6.5% throughout 2024 (likely not dipping below 6% until 2025). 

Consumer spending may be on the rise, but polling suggests long term economic confidence among Gen Z has reached historic 21st century lows. So what does this perceived economic stagnation mean? 

Coinbase has sought to assuage the younger generation’s financial concerns and position themselves as the optimal substitute, and solution, for the future. Young Americans have become the target of a surging FinTech industry looking to capitalize on waning optimism. For most, class advancement and upward mobility through homeownership seems like a rags-to-riches pipe dream crushed by the demands of higher education loan repayment, healthcare, inflation, and other debilitating lending practices.

All of this success has occurred against the backdrop of Coinbase suing the SEC to gain clarity on the agency’s approach to crypto regulation. One in ten U.S.citizens holds some variant of cryptocurrency. In a federal court action filed in April, the cryptocurrency exchange asked a judge to compel the Securities and Exchange Commission to release its response to a petition from 2022 asking the SEC to “propose and adopt rules to govern the regulation” of digital assets. 

Coinbase CEO Brian Armstrong earlier this fall continued to draw controversy insisting via X (formerly Twitter) that any government regulation on AI would be cataclysmic to the United States. “We need to make progress on it as fast as possible for many reasons (including national security),” Armstrong stated. “And the track record on regulation is that it has unintended consequences and kills competition/innovation, despite best intentions.”  Armstrong continued, “We’ve enjoyed a golden age of innovation on software and the internet largely due to it not being regulated. AI should do the same. The best protection is to decentralize it and open source it – to let the cat out of the bag.” It is worth noting that 90 percent of global FinTech companies already heavily rely on artificial intelligence and machine learning, so regulation may place barriers on growth and data collection.

Whether the formation of Coinbase’s “Moving America Forward''  campaign was in response to an uncertainty in the company’s future or a concerted effort to make appeals to the frustrated homebuyer, the cryptocurrency platform has been among the most visible FinTech companies willing to convert the unconvinced, broader public of cryptocurrency’s longevity in the financial marketplace. 

FinTech Companies & How They’re Using AI in their Ad Strategies

While not all FinTech companies have been as outspoken or forward facing in their messaging, the FinTech industry as a whole has begun to integrate AI in a variety of ways specifically geared toward personalizing targeted advertising. On Worky, we’ve already documented the potential of AI’s benefits in personalized marketing. But we’ve yet to take a deeper dive into the FinTech space and its prospective digital customers. 

However, the recipients of AI’s targeted advertising are not exactly who you might expect. Despite Gen Z's reputation as digital natives, they still treat the FinTech industry with a bit of skepticism. In fact, Millennials are more likely to embrace FinTechs with 32% of Millennials acknowledging that they are likely to use banking services from a FinTech or neobank in the next 12 months. That’s more than Gen Zs (22%), Gen X’ers (13%) and Baby Boomers (5%), according to a Business Wire report circa 2022. 

Perhaps even more surprisingly, over 33 percent of respondents – across all age groups and generations — would consider using generative AI for financial advice and/or planning services, an unusually high figure for a capability that was little known to the general public less than a year earlier.

FinTech app trust levels vary considerably by consumer age. However, in a McKinsey survey on consumer digital payments published this past fall, Fintechs rated lowest in trust among the four provider categories, preferring large banks, community banks, and large tech companies. 

While overall trust in these institutions declined among demos, FinTechs encountered the steepest 2023 drop in perception from 2022. Only 8 percent of the 55-plus demographic rates FinTechs favorably, versus 51 percent unfavorably. Meanwhile, the 18-to-24 demographic also regards FinTechs with the lowest trust and large banks with the highest, but the disparities in trust and confidence are less pronounced, suggesting that the demographic is open to having their opinions swayed.

Furthermore, nearly 30 percent of respondents indicated that they have used “Buy Now, Pay Later” (BNPL) apps or services in the past year, and those surveyed most frequently identified the providers as Affirm, Afterpay, Klarna, or PayPal (each cited by 20 to 30 percent). Another 15 percent have suggested a willingness to try these applications in the future, suggesting an increasing awareness and curiosity among the consumer base. These services have clearly begun to infiltrate the social consciousness; however, rates of adoption have slowed over the past year, which makes advertising and new in-app features (AI based or reward based) imperative to their continued growth. 

Focusing our attention to Klarna, Swedish technology startup launched its own artificial intelligence-powered image recognition tool in fall 2023 in order to help people find products they want to buy. Klarna, which was founded in Stockholm in 2005, exploded in popularity over the pandemic as more people turned to online shopping to fill up their wardrobes. 

The company’s zero-interest credit model proved particularly popular for younger, less affluent consumers lacking the credit history to successfully apply for a credit card. For years, Klarna offered users the ability to pay for items over installments. But it has been increasingly trying to build out its offering to include more features specific to shopping. 

For instance, Klarna launched its own cashback rewards program called Klarna Cash. Starting with the U.K., but rolling out to other markets in the future, Klarna Cash will allow shoppers to earn up to 10% of their purchase amount back when they pick pay now, pay in three, or pay later at the checkout of retailers with active offers.

The company overhauled its app in April this year with new features for personalizing users’ feeds to help them find the items they want with more advanced AI recommendation algorithms, inspired in no small part by TikTok’s addictive discovery algorithm.

Klarna’s market value ballooned to $46 billion at the peak of the low interest rate-fueled tech stock frenzy. Since then, the BNPL darling has a tougher time in the market with its valuation sinking 85% to only $6.7 billion. The company laid off 10% of its global workforce last year. In order to offset the catastrophic year, Klarna had been planning to integrate AI, hoping in the not so distant future to become a leaner business as it, like plenty of other fintech firms, pushes aggressively toward profitability.

Looking to take on big U.S. tech giants, Klarna’s new feature enables users to point their phone at an item of clothing or an electronics product and find results for similar items directly within the Klarna app. The tool is trained on data from PriceRunner, a price comparison service Klarna acquired for close to $1 billion.

Roundup: What Fintech Companies Had a Banner Year?

Here are some fintech companies demonstrating solid of growth at the end of 2023.

Highest User Growth:

  • Chipper Cash: 3,700% 5-year search growth (peer-to-peer payments)
  • Sendwave: 6,800% 5-year search growth (cross-border money transfers)
  • Sunbit: 1,467% 5-year search growth (buy-now-pay-later)

Valuation Growth:

  • Stripe: Raised $6.5 billion at a $50 billion valuation (payment processing)
  • Chime Financial: Increased valuation to $25 billion (online banking)
  • Brex: $12.3 billion valuation, serving corporate customers (corporate expense management)

At present, the most in-demand marketing titles in fintech for 2024.

Content Marketing:

  • Financial Content Creator: Craft engaging and informative content that educates potential customers about fintech products and services. Expertise in complex financial concepts and SEO optimization is crucial.
  • Social Media Manager: Develop and execute engaging social media strategies to build brand awareness, drive community engagement, and generate leads. Strong understanding of fintech trends and target audience is essential.
  • Email Marketing Specialist: Develop targeted email campaigns for lead nurturing, customer engagement, and product promotion. A data-driven approach and knowledge of financial regulations are key.

Performance Marketing:

  • Performance Marketing Manager: Oversee digital marketing campaigns across various channels (Display, PPC, SEO, social media) to drive traffic, conversions, and app installs. 
  • Growth Marketing Specialist: Experiment with innovative strategies to acquire new customers and retain existing ones. A creative mindset and data-driven approach are vital.
  • SEO Specialist: Optimize website content and online presence to achieve high rankings in search results for relevant financial keywords. Understanding of SEO best practices and financial regulations is essential.

Brand and Product Marketing:

  • Brand Manager: Develop and manage the company's brand identity and messaging across all marketing channels. A deep understanding of the fintech industry and target audience is key.
  • Product Marketing Manager: Define product positioning, messaging, and go-to-market strategies for new and existing fintech products. Strong communication and collaboration skills are necessary.
  • Public Relations Specialist: Secure positive media coverage and build brand awareness through press releases, media outreach, and events. Familiarity with financial media and storytelling skills are vital.

All of these positions will be enhanced by AI in the year ahead. From content to paid ad creation and client communications, AI will make each of these roles more efficient and productive. The hope is that the marketing effectiveness will be part and parcel of new AI platforms and in-house capabilities. The future of these companies depends on it. 

If you are looking to scale up AI marketing talent, you can book an appointment here.

Artificial Intelligence