Takeaways:
Individual investors have become increasingly sophisticated in their financial knowledge and behavior thanks to a crypto bubble, a decade of market gains, and easy-to-use trading apps like RobinHood
The historic bull-run has created a generation of young investors willing to take big risks for big rewards. Fintech companies have been under pressure to rebrand and promote riskier options in order to seize the growth opportunity presented by the glut of new investors looking to get rich.
As the tide goes out and people worry more about their assets, trusted institutions (like Fidelity) and new entrants who prioritize consistency and credibility in their branding (like Coinbase) will be the winners. Companies who pivoted to a ‘YOLO’-style brand will struggle to recover credibility.
You may have noticed that the vast majority of your Finance apps are blue:
Companies choose their colors according to the feelings they evoke. In Western cultures blue typically evokes feelings of peace, calm, responsibility, and reliability, exactly the qualities you would want in the institution that is taking care of your money.
[It’s no coincidence that these are also textbook MATT DAMON qualities, but more on that later...]
However, despite seeming on the surface like they know who they are (or at least who they want to be seen as), modern Fintech companies are struggling to work out their identities in a world of rapidly changing consumer needs.
Sophisticated, self-declared degenerates
The world of consumer investing on Youtube and Tiktok is colorful and baffling - crypto shills rub shoulders with Warren Buffet panderers and anthropomorphic Shiba Inu - all of them promising to make you rich.
Along with the explosion in Finance-related content and the mainstreaming of finance-related news (think about the recent Sam Bankman-Fried FTX scandal), retail investors have become far more sophisticated in their understanding of the market. Their desire for more complex (and usually riskier) investment options has also grown.
The bizarre and willfully 'degenerate' memes on r/wallstreetbets may leave you thinking the community is a carnival of idiots, but if you scratch the surface and you’ll find a community highly conversant in esoteric financial terminology, with an understanding of the financial system that would have been specialist knowledge only a decade ago.
You may say that this is nothing new, and remind me about depression-era Joe Kennedy knowing it was time to exit the stock-market when his shoeshine boy started giving him stock tips.
This time around, though, it's a lot easier and more attractive to enter the casino - there are consumer-friendly investment apps like RobinHood, real-time market data at everyone’s fingertips, and an Internet full of FOMO about random teenagers becoming millionaires.
Amongst this, companies like Wealthfront and RobinHood are torn on how to brand themselves. They need to appeal to this younger generation and seem disruptive enough to differentiate themselves from “Boomer” institutions like Fidelity. At the same time, they still need to appear responsible enough for you to entrust them with your money.
Let the people YOLO
Under most pressure are the early wave of Fintech ‘disruptors’ - companies like Wealthfront and Betterment. Founded in 2008, their aim was to bring passive, index investing to monied Millenials. The positioning on Wealthfront’s *old* homepage made it clear that Wealthfront is a reliable, ‘set and forget’ way to invest your money without having to worry or be particularly engaged:
Unfortunately for Wealthfront, the zeitgeist changed rapidly. Accelerating returns in the stock market and an incredibly frothy crypto bubble drove massive interest in active investing - hoards of younger investors with less money individually but a way higher appetite for risk piled in.
Because Silicon Valley startups are valued based on their growth and future growth potential, Wealthfront had to be seen to be appealing to this newer, larger audience in order to retain their valuation.
What followed were a succession of clumsy brand pivots - the introduction of a sassy mascot known as ‘CashCat’ and a shift in messaging away from passive investing and towards cash prizes and day-to-day financial needs.
Lacking a real product offering that appealed to the new customer needs (ie crypto trading or fractional share purchases) Wealthfront not only failed to attract this growing audience, but also alienated their existing users, who saw a respectable-seeming (and blue-ish!) brand that used to talk to them about passive wealth-generation switch to sweepstakes and half-baked memes.
Wealthfront struggled. In 2022 it was acquired by Swiss financial titan UBS so that UBS could compete with the robo-advisors being offered by its peers. Fast-forward to today post-correction, and Wealthfront is now back to being all about ‘safe, long-term investing’...minus a lot of credibility (the UBS acquisition subsequently fell through).
Creating this pressure, as well as their own set of problems, are the ‘second’ wave of investing apps, focused on ‘democratizing’ access to investment by allowing investors access to products like fractional share purchasing, and risky financial instruments like short-selling.
Robinhood (founded in 2015) is one of the most famous, with a brand name deliberately chosen to position themselves as the upstart hero in a “David vs Goliath” struggle of the people against the Financial establishment.
For several years Robinhood was a media and consumer darling, attracting industry plaudits for their rapid business growth, and brand love from consumers for the access to investing options they provided. This meteoric success is a large part of what sucked the oxygen out of the room for companies like Wealthfront and Betterment, and induced Wealthfront’s knee-jerk strategy shifts.
The only problem with setting yourself up as an anti-establishment hero is if…well…you’re lying about who you are.
Industrious Internet people gradually began to suspect that Robinhood was in bed with establishment financial institutions, and was actually using their data to help huge organizations like Citadel Securities ‘get ahead’ of consumer trading activity.
Such seeming hypocrisy from a startup positioning itself as ‘stealing from the rich’, coupled with massively unpopular business decisions like limiting trades on specific stocks during periods of high volatility, undermined consumer trust in Robinhood, and largely destroyed the company’s brand equity with young investors.
A year or so and one massive financial correction later, Robinhood has been humbled. Its customers are slipping away to more traditional investing platforms (r/wallstreetbets is replete with memes about turning to Fidelity), its stock price has cratered, and it has laid off a quarter of its staff.
Like Wealthfront, it now positions itself as a place for responsible investing; the homepage heavily promoting its low-risk retirement investment instruments.
Branding after a correction: how to win when the tide goes out
Amidst peak frothiness in the equities and crypto markets, trading app crypto.com dropped this remarkable prestige commercial ‘Fortune Favors the Brave’. lt features Matt Damon (an investor in the company) who in branding terms is one of the ‘nicest’ and most trustworthy Hollywood celebrities in the world.
With its sweeping, aspirational appeal to human struggle and ambition, its closing gesture towards a space-bound human future, and even a little detour into two teens getting together in a club, it is incredibly savvy in delivering its message:
“You, young person, should invest your money in crypto in order to be great like me, Matt Damon. Otherwise you will miss out on being successful like all of your friends who are getting rich in crypto, and probably never get a girlfriend. See you in space.”
The ad has obviously aged like milk in light of the ensuing crypto meltdown. In fact, if you saw it when it came out in January 2022 and were inspired to drop $100k on Bitcoin, you would have a little under $50k today.
Despite the incredibly poor timing, though, there are elements in the crypto.com ad that gesture at how Financial apps and services will need to rebrand to thrive in a post-correction and potentially recessionary economy.
The first insight is that credibility remains essential when people are trusting you with their money. If you aren’t established enough to have it, you can do a lot worse than borrowing someone else’s (in this case Matt Damon’s) and yes, making your app blue.
The second is that consistency is essential to retaining trust and credibility. Wealthfront’s messy pivots damaged their brand, while Robinhood’s disingenuousness ruined its reputation. In the crypto.com ad the company tries to use the history of human endeavor as a proxy for this consistency, placing you (the customer) with them in a long tradition of bold and successful adventurers. It is no accident that ‘history’ is the first word in the commercial, just as it is no accident that Wells Fargo still features those old-timey wagons on their banks.
The final insight is that greed still matters. Your customers need to trust you, but their primary motivation for giving you their money is to make more. Without a compelling narrative around enrichment (in this case fortune favoring the brave) you will not be able to differentiate from competitors and attract customers.
Outside of the crypto.com commercial, it is important to note the heavily regulated nature of Finance and huge government interest in the financial system, which gives a large advantage to large, incumbent institutions over startups.
There is a reason that in America the most valuable car-maker was founded in 2003 (Tesla), the most valuable retailer was founded in 1994 (Amazon), but the most valuable bank (JP Morgan Chase) was founded in 1808(!). Regulation makes it hard to innovate and compete.
Companies that observe the above when thinking about their brands and business will succeed in the coming decade of finance. Big institutions that are able to scoop up or copy innovators (like UBS with Wealthfront) are under little threat of disruption, while companies like Coinbase, who partner closely with national regulators and maintain a consistent, trustworthy (and yes blue) tone are likely to be able to maintain customer trust despite turmoil in the markets.
And, like shills and carpet-baggers in any industry throughout any period, apps and startups that draw in users with promises of getting rich quick, change the rules on their customers when it suits, and change their message to suit the mood of market, may make some money in the short-term, but will lack the credibility to retain them once the tide goes out and they are shown to be distinctly lacking in underwear.
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