The Brandeis GPS blog

Insights on online learning, tips for finding balance, and news and updates from Brandeis GPS

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Student Spotlight: Ines Stafford

 

Student Spotlight: Jennifer Faske

Student Spotlight: Li-Tao Guo

The Rise of FinTechs Partnering with Financial Institutions

By Gideon Taub

The Disruptor Era

The first few waves of FinTechs primarily pursued a direct-to-consumer strategy, disrupting the legacy Financial Institutions and dis-intermediating banks, brokerages, and credit unions. Services like Mint (founded 2006), Wealthfront (founded 2008), Venmo (founded 2009), and Robinhood (founded 2013) all had a significant impact on how their customers manage their finances and forced the incumbent financial institutions to adapt, whether it be by building their own robo-advisors, creating Zelle, and decreasing brokerage fees.

Very few ‘disruptor era’ FinTechs focused on partnering with legacy financial institutions to drive their distribution, and those that did faced uphill challenges in terms of not being embraced by banks, offering inferior user experiences due to the limitations of legacy vendors, and long, if not, impossible implementations.

Partnering with Financial Institutions as a Great Distribution Strategy

As we look across the FinTech ecosystem, we’re now seeing far more startups focus on a B2B2C business model, partnering with banks, brokerages, and credit unions to reach customers. As we look at the startups (including our company, Pinkaloo) in the recent MassChallenge FinTech cohorts in 630’s recent programs; and in other leading FinTech Accelerators, we’re seeing many consumer-facing solutions whose primary business model is partnering with financial institutions.

What’s driving that change?

  1. Financial Institutions Eager to Partner

The innovation being led by the Direct-to-Consumer FinTechs is forcing the incumbent Financial Institutions to adapt, and in many cases, partnering is the less expensive and faster path to support that.

Like in the case of the development of Zelle, we’ve seen banks come together to create their own solution, but for many others, such as better customer onboarding experiences, chat bots, and white-label Donor Advised Funds, it makes more sense to partner.

  1. The Incumbent Vendors Are Opening APIs

The leading vendors, particularly the front-end banking providers, have similarly realized that the best way to meet their clients’ needs is to open up APIs and SDKs and allow FinTechs to create beautiful solutions on top of their infrastructure. Those vendors don’t have to build every solution themselves and it makes it even harder for their clients to switch, a win for all parties.

  1. Lower Marketing and Customer Acquisition Costs

For the FinTechs, partnering offers a distribution channel with much lower marketing and customer acquisition costs. Digital advertising rates for financial services products are particularly costly, so being able to generate recurring revenue via partnering is particularly attractive.

The Downsides to Partnering

As FinTechs decide on their go-to-market strategy, they should be sure to consider the downsides to this approach. First, most financial institutions are still learning how to successfully work with FinTechs, and sales and implementation cycles can be long.

The partnership strategy also requires a more mature, enterprise-ready product. You can throw the ‘Minimum Viable Product’ mindset out the window, as financial institutions expect and need a more sophisticated product.

Lastly, be prepared for a thorough compliance and diligence review, and be ready to dedicate tech resources to working through that. For many, Pinkaloo, included, the benefit far outweighs those downsides.

Gideon Taub is the CEO of Pinkaloo Technologies. Pinkaloo helps businesses engage their customers and communities through philanthropy and helps donors manage their giving through Pinkaloo’s white-label Modern Giving accounts.

Brandeis Graduate Professional Studies is committed to creating programs and courses that keep today’s professionals at the forefront of their industries. To learn more about the MS in Digital Innovation for FinTech, visit www.brandeis.edu/gps.

Student Spotlight: Esther Brandon

Student Spotlight: Adam Burkin

Sins of our past modeling our future – Diversity and bias in AI and data

By Deniz A Johnson

With International Women’s Day approaching, I was recently interviewed regarding the gender gap in Fintech and Financial Services. This is a hot topic with a variety of efforts underway to address it.  To name a few:

  • A recent California law (SB826) mandated diversity in the boardroom.
  • Goldman Sachs CEO David Solomon announced that the investment bank will no longer take a company public unless said company has at least one “diverse” board member.

These are just the most recent examples of current shifts in the industry.

Perhaps the most compelling reason to increase diversity is that it pays! A 2020 KPMG study concluded that “boards that include more women and directors with diverse backgrounds and experiences are more effective on a variety of measures, including financial performance, risk oversight and sustainability.”

While these are steps in the right direction, I believe that diversity in financial data sets is a much larger issue. Without resolving the bias in AI and its data, we cannot make diversity in financial services a sustainable reality.

Every day, we generate data trails as part of our lives as we engage in financial transactions large and small; post on social media; or even just log into a website or app. This data is and will be available for building and refining our Machine Learning (ML) and other Artificial Intelligence (AI) technologies.

As these new technologies are adopted to guide business decisions, including creation of new investment products and services, the diversity challenges have a potential to create significant limitations:

  • When data sets represent only a small percentage of the actual population’s activities, preferences and needs
  • When past decisions contain identifiable or hidden prejudice/ bias
  • When past business decisions omit segments of the population

If we do not openly address these problems, we will carry narrow customer insights and potential biases to future products and services, thus missing the opportunities to add greater value to more clients. This could mean; a minority group that has traditionally avoided loan applications can be automatically rejected in the future since the data set is incomplete.

Let’s begin to address this problem by first using ML/AI to identify bias, bad data, and data gaps. Further, let’s leverage community and educational programs to increase workforce diversity and encourage firms to create inclusive work environments – both will make diversity a reality rather a goal – and enable broader thinking about client segments and their diverse needs and preferences.

Diversity and inclusion are not just feel-good concepts, but investments in the future. Both are necessities for creating better data sets for the new technologies that will help us build the financial solutions of the future and our industry’s success.

Taking a mindful and intentional look into identifying and solving bias in data as well as models is the key to making diverse organizations.

Deniz Johnson is a FinTech thought leader, advisor and executive in the Boston area. You can find her on LinkedIn here.

Brandeis Graduate Professional Studies is committed to creating programs and courses that keep today’s professionals at the forefront of their industries. To learn more, visit www.brandeis.edu/gps.

Wellness tips to combat any remaining winter blues

Despite the fact that 2020 has been a milder winter than normal here in the northeast, the tail end of winter always has a way of dragging on. It is reported that anywhere from 14% to 20% of Americans may experience a shift in their mood with colder, darker and wetter weather. If you find yourself with feelings of fatigue, lethargy, and other cases of the winter blues, here are four wellness tips to raise your spirits and combat the colder and grayer months. 

  1. Create an exercise routine

Keeping active is one of the best ways to fight off seasonal depression. Exercise has been shown to reduce symptoms of depression and, in some cases, can  mimic the effects of antidepressants. Consider hitting the gym or practicing yoga for at least 30 minutes to get those endorphins running. 

  1. Find something that keeps you busy 

Being cooped up inside for months at a time can be a serious mood buster. This can be a great time to pursue some of your professional goals.

  1. Plan fun indoor activities

As tempting as Netflix can be, don’t let yourself get stuck in a routine of going to work, coming home, and catching up on your favorite shows. Make room on your calendar for a movie or show, rotating dinner parties with friends, or even a cozy weekend away with the family. 

  1. Invest in a Sun Lamp

According to a recent study by Harvard University, using a light box for 30 minutes per day can reduce symptoms of seasonal depression. A light box mimics the effect that sunlight has on the brain, thus reducing fatigue and helping your body fall into a natural circadian rhythm that can be disrupted during grayer winter days. 

 

Student Spotlight: Bharath Kumaraswamy

Marketing 101: What’s Push versus Pull?

By Steven Dupree

Fishing on Ashumet Pond is one of the most relaxing things in the world. But good luck catching anything! Unless you’re Kevin. Kevin loves fish, he wears fish shirts, he puts fish bumper stickers on his car. Kevin once researched whether a surplus of carbon dioxide causes cataracts in fish. And Kevin catches fish when he wants to.

The way I see it, there are two ways I can someday snag fish like Kevin (besides trading in my Brandeis mathematics degree for marine biology, of course):

  1. Improve fishing skill
  2. Add fish to pond

Step One: Pull

Hopefully, your product or service already has an audience out there. They’re looking for you. It’s your responsibility to make customer value as available as possible. Find prospects wherever they are and meet their demand.

When I worked at LogMeIn, we coined the term “active seekers” to describe this population. These are the hungry folk. The old lawnmower broke and they’re searching for “John Deere riding mower” so they don’t have to collect and dump lawn clippings.

Pull marketing starts with search-based advertising (Google Ads) but it doesn’t end there. If you offer a niche consumer product or a B2B product, there may be digital marketplaces or directories where you want to be. Signs for bananas where the monkeys are famished.

Pull marketing (alternatively known as inbound marketing, demand harvesting) has two advantages: it’s relatively cheap and it converts quickly. The primary drawback? You can do a limited amount of pull marketing before you hit some invisible wall.

Ok, let’s suppose I’ve practiced casting my fishing rod. I know how to tie a fly. But the fish still don’t bite! What now?

Step Two: Push

You may need to stock the pond.

If you’re solving a pain point that customers don’t even know they have, then you may not have much of an audience (yet). And even if they know the pain point all too well, your audience may have trouble discovering you if they are not searching.

Push marketing (alternatively known as outbound marketing, demand generation) includes the vast majority of online and offline media: newsletters, display advertising, Facebook ads, most social media, billboards, door hangers, and sides of buses…to name a few.

Why are there so many more channels for push advertising? After all, the unit economics are typically more expensive than pull advertising. It takes longer to convert dollars into customers due to that nuisance of “educating” the customer. Why not invest 100% in paid search? Well, you simply may not be able to.

Push marketing, in contrast to pull, is virtually unlimited. Advertisers desperately need customers, publishers will gladly take your money, and all the while your target audience will do whatever they feel like. Success depends on delivering the right message to the right customer at the right time. Good push marketing does just that.

One year, they stocked Ashumet Pond with extra trout. I’m still a novice fisherman but I managed to catch one or two.

If Pull and Push Don’t Work?

Even if your audience doesn’t know or care about your product or service, you mustn’t lose hope. It may be costly to acquire customers and difficult to demonstrate positive return-on-investment “ROI” in the early days. But it won’t always be this way.

Ask yourself: can an “active seeker” population develop as your early customers share their experiences with your product or service–thus enabling you to add pull marketing to your mix? Rising demand for your product or service generates inbound interest. This enables pull marketing and defrays your acquisition costs. 

Or: will it become prohibitively expensive to rise above the noise–as competitors enter and your target market evolves? Customer education is always an option, but it’s expensive. You can do as much push marketing as you need if only you have an unlimited budget. Success still depends upon how receptive customers are to the value you provide.

Rule of Thumb:

In marketing and fishing, as in skeet shooting: pull first, then push!

Steven Dupree is chair of the MS in Digital Marketing and Design program at Brandeis Graduate Professional Studies. In his day job, Steven is VP, Marketing at Amava, a platform helping active retirees find opportunities to earn, learn, travel and more. He has previously held investing and operating roles including VP, Marketing at SoFi, the first and largest provider of student loan refinancing, and VP, Online Marketing Operations at LogMeIn, an early software-as-a-service provider of remote access and collaboration tools. He mentors entrepreneurs for Endeavor Global and Reforge, and serves on the board of the Astronomical Society of the Pacific.

Brandeis Graduate Professional Studies is committed to creating programs and courses that keep today’s professionals at the forefront of their industries. To learn more, visit www.brandeis.edu/gps.

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