Month: March 2021

Growth of Fintechs in North America

Financial technology companies (fintechs) stepped up innovation during COVID. This new breed of challengers to financial services is emerging to disrupt the payments industry. From non-banks and neobanks to tech companies and cryptocurrency platforms, these new fintechs are competing with traditional financial institutions. What began in Europe has seen a surge in other parts of the globe as well. The demand was propelled by COVID as stay-at-home orders globally fueled these upstarts, spawning more efficient payment platforms and allowing a full range of banking services. As a result, a number of fintechs have broadened their reach  and can be seen investing heavily to enter the North American market, especially the U.S.

Overcoming Challenges

North America is commonly the leader in most financial developments; however, fintechs have had a harder time cutting through the noise in this highly competitive market. The strong grasp many big financial institutions have dominates this more mature market. A whitepaper recently commissioned by the Aite Group pointed out the inherent challenges fintechs must overcome to be successful, including:

• Building trust
• Competing customer attention
• Developing the right brand and product positioning
• Overcoming regulatory hurdles
• Selling products without a branch network

The Battleground 

The closure of physical bank branches across the U.S. creates an opportunity for fintechs. By pushing consumers out of their comfort zone toward banking through their mobile phones, they are reevaluating the value and need for a physical financial location. Digital banks are growing quickly in the U.S. due to the pandemic, which is concerning to traditional financial institutions. One way this battle is playing out is through acquisitions. Despite a few failed attempts, many larger financial institutions, such as Bank of America, are investing heavily in digital for the future. Others, like JP Morgan’s venture in the U.K., are starting their own digital banks in select regions.  Fintechs also are partnering with financial institutions to share banking licenses and build collaborations.

Fintechs had to get creative in how they compete against more established financial institutions and stand out in the crowded marketplace. They are creating user experiences that are better and easier with mobile apps and online customer service. Fintechs are developing directed incentives that lure customers, including robust rewards programs, no-fee programs and premium cards that use metal materials and advanced designs. Bigger brands typically only offer metal cards to their elite customers, while fintechs expand the experience to all customers, including pre-paid cards in sophisticated metal material to differentiate themselves. 

Experiencing the Metal Card Difference

People  still like the feel and use of a card, even as they adapt to online and mobile banking. The increased use of metal payment cards to attract customers is not a surprising tactic. In fact, Aite Group’s whitepaper also breaks down the ROI of offering a metal card to customers. The benefits of metal cards far outweigh the cost associated with them. This has been one of the keys to the success of fintechs as they continue to expand their reach throughout North America. It is proven that metal cards increase account acquisition, card activation, transaction revenue, cardholder retention and additional fee income. Cards, in general, are the billboard for any brand and in many cases, the only physical connection a customer has with the bank. 

There are many examples of fintechs leveraging the issuance of a metal payment card to build their brand, grow customers quickly and disrupt the financial market. Greenwood, Blockfi, and X1 are all examples of fintech banks launching with waitlists and marketing a metal card to draw publicity. Koho and Chime have offered upgrades to metal cards when you refer friends. According to the whitepaper, half of consumers worldwide would leave their existing bank for another if it offers a metal payment card as part of their rewards and loyality benefits. As the competition for brand loyalty heats up, one of the most effective weapons that financial institutions have in their arsenal is the metal card.  

For more information on best practices of common fintech challenges and an overview of metal card issuance, please download the full report of Aite Group commissioned by CompoSecure L.L.C. “A Competitive Edge for Fintech Issuers.”

Free Report on Benefits of Metal Payment Cards For Fintechs

Aite Group research report shows how metal cards can attract and retain customers

Somerset, New Jersey – March xx, 2021 –  CompoSecure, L.L.C., a pioneer and category leader in premium financial cards, today released Metal Cards: A Competitive Edge for Fintech Issuers, a report on the benefits of metal cards as part of a robust proposition to attract new cardholders. The report can be downloaded for free and was commissioned by CompoSecure and produced by Aite Group, a global research and advisory firm delivering comprehensive, actionable advice on business, technology and regulatory issues and their impact on the financial services industry.

”Fintech firms see card design and material decisions as critical to success when competing with traditional banks and credit unions worldwide,” said David Shipper, Senior Research Analyst at Aite Group. “These fintech firms attest to the fact that metal cards are well worth the higher price, citing higher revenue generated from new account growth, better activation and usage and increased cardholder retention.” 

The report identifies the key challenges fintech firms face when launching and managing card programs, including building trust, competing for customer attention, developing the right brand and product position, overcoming regulatory hurdles and selling products without a branch network. The report provides the best practices for launching a successful metal debit or credit card product and how it can attract cardholders and support a tiered structure that provides the most benefits to premium customers. 

“With increased competition between financial institutions, companies are looking for ways to stand out and attract new customers,” said Jon Wilk, CEO of CompoSecure. “Companies have an opportunity to build a relationship with their customers by offering a uniquely designed and customized metal card with a variety of material options and enhancements that would create a premium experience for the cardholder.” 

According to consumer research cited in the report, 65% of global consumers would choose a metal card over a plastic card when all benefits and rewards are the same. Key benefits of a metal card include:

Eco-friendly – Metal cards offer several environmental benefits. For instance, metal veneer cards are made with 75% recycled stainless steel.

ROI– There are key expense considerations for a metal card, including per-card cost, card personalization, card delivery or other expenses. However, the return on the investment is high, such as greater account acquisition, increased card activation, improved transaction revenue, heightened cardholder retention, and additional fee income.

Consumer demand– Plastic cards are unlikely to achieve the prestige inherent to a metal card regardless of the design.

• Brand exposure – Issuing a metal card can increase the number of online and social media mentions, providing ongoing benefits to the issuer’s brand and products.

To download the free report, please visit: https://www.composecure.com/competitive-edge-for-fintech-issuers

Fintech and Metal Card Opportunities in Latin America

View blog in Portuguese here.

Fintechs have spread globally over the past decade, taking root in major financial markets like the UK or the US. The Latin American fintech market was still behind compared to this worldwide trend; however, it is undeniably booming today. According to CB-Insights Research published in February 2020, the investment in fintechs in Latin America grew considerably from 2018 to 2019, and now the region is the hottest fintech marketplace. Brazil is without a doubt leading the region with the largest number of fintech companies, followed by Mexico and Colombia. The main sub-sectors in fintech are payments, digital banks (Neo-banks), loans and funding.

The main driver for the remarkable boom in Latin America is the massive technology shift: first, by increased internet penetration, which surpassed 66% in 2019, over the world average of 53% according to the World Bank; second, by the penetration of mobile subscribers which, according to GSMA Latin-American, accounts for nearly 67% of the total Latin American population. Nearly 80% use their mobile devices for the internet, with forecasts estimated to reach 87% by 2025. This technological evolution helps access the massive unbanked and underbanked populations, in addition to the small- to medium-sized businesses, which digital products and services can be offered.

At the same time, authorities and regulators in many of these Latin-American countries have enacted fintech-friendly regulations with lower market entry barriers, identifying fintech and digital financial services as a way to provide widespread financial access.

Finally, according to Finnovista, an organization that propels fintechs and startups in Latin-America, international investors have moved into the region as an attractive investment space with a peak seen in 2018. Today, despite COVID-19 and political uncertainty around administrations in Brazil and Mexico, the Latin-American fintech industry is very dynamic. According to Latam Fintech Hub, it raised US$ 525M (US $ 249.3M in equity and US $ 275.7M in debt) in 74 deals in the first half of 2020, showing that investment has continued despite turbulences. 

Make an impression with innovative products

As the pandemic continues and the post-COVID-19 economic impact remains to be seen, many fintech companies in Latin America may be under stress. However, great opportunities for them may arise while the need for digital services suddenly increases. Fintechs could seize this unique situation to leverage assets, challenge and differentiate themselves through more innovation and creativity. 

While the number of fintechs in Latin America is expanding, market research companies sustain that those who will make an impression when starting a new business will find their way through this pandemic storm. Those who will be able to attract new consumers and connect to their audience by creating unique experiences will grow stronger through the adversity. This is where metal card influence can come into play and make a difference. 

In this context, a recent Aite Group research paper on next-generation metal payment cards shows how in the US and Europe metal cards have represented a key medium for financial institutions, fintechs and digital banks to communicate with their digital customers, delivering a human experience through premium products.

For example, Mexico is a favorable market to watch in terms of the successful adoption of premium products. The average age in Mexico is 28, with 41% of the population being 25 to 54 years old, which represents a fruitful base of young, tech-savvy consumers. These young consumers are attracted not only by neo-banks’ digital services, but also by their overall benefits that aim at differentiating themselves, including specific products such as the cool form factor of metal cards.

Metal cards to drive fintech growth

Metal payment cards are by no means a new concept. They have been present in the marketplace for nearly 20 years. However, their issuance was originally targeted towards tier-one and limited to ultra-high-net-worth (UHNW) segments.

Today, the target consumer for metal cards has changed. This is driven by requirements for segmentation and differentiation, targeting the premiumization of the mass affluent consumer base. Included in this are millennials, a highly desirable segment for fintechs. Fintechs in Europe and the UK, among others, seem to have helped boost the issuance of metal variant card bodies, as a uniqueness form factor, integrating latest EMV and contactless technologies to innovate and compete against traditional incumbent banks offerings.

Metal cards are attractive for fintechs for many reasons. Not only does the metal card the “look and feel” that a customer is looking for in a product, but it also creates an elevated emotional connection where the customer has the feeling of being part of  a cool premium community. The premiumization effect associated with specific brand-connected benefits is key to a unique customer experience. Metal cards are a differentiation that combine digital services with an attractive physical product. Metal cards help create a top-of-wallet status. They elevate the fintechs brand positioning and the customer’s perception of it. According to a CompoSecure proprietary analysis, they drive higher transaction and spending volumes, increase customer retention and, in a virtual circle, can help contribute to new customer acquisition. 

Disrupt the status quo

Latin America is following the example of European fintechs, where business cases point to metal card adoption as a successful business growth driver. Latin American fintechs could define their own product innovation offering, in accordance with their regional and local market specificities and ecosystems. The Aite Group report concludes that metal cards could be a key driver to disrupt the status quo, especially in a region where the population segment of millennials is high, and where differentiation and “cool factor” are important.

For more information on best practices of common fintech challenges and an overview of metal card issuance, we invite you to down-load the full report of Aite Group commissioned by CompoSecure LLC “A Competitive Edge for Fintech Issuers”