How Does Social Media Turbocharge FinTech Growth?

The global FinTech landscape has evolved significantly, beginning with PayPal's early innovations in the 2000s. This evolution continued with the introduction of mobile payment solutions like Venmo, PhonePe, Paytm etc. and expanded into investment platforms such as CoinDCX, Robinhood, and Groww.

Yet, among all the FinTech innovations, only a few have truly mastered the art of social engagement. These platforms make users eager to share their transactions and derive social satisfaction from them, thereby creating organic, long-term loyalty without the need for discounts or rewards. Chief among these are Cleo, Venmo, Cred, and a handful of other applications.

In this deep dive, we will explore how some brands have successfully leveraged the social code to supercharge the success of their FinTech products.
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Money is no longer a private matter

Traditionally, financial matters were private, shrouded in confidentiality and caution. However, this attitude has undergone a cultural shift – today, discussions about salaries, trading results, and even debts are more openly shared on social media. 
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Major factors driving this trend of 'social sharing' include the shift in newer generations' relationship with money, their evolving financial aspirations, the economic upheaval of the past few years, and a desire to hack one’s way into achieving economic independence.

The global market for influencers has surged 18x from $1.7 billion in 2016 to nearly $21 billion today, and India has witnessed a significant rise in the pool of finance content creators. Both these developments underscore how money is increasingly becoming a topic of social conversation.

What is the social code in FinTech?

Roughly speaking, creating social engagement for any internet app involves one, or a combination, of three approaches:

1. Encouraging people to boast about using the product on social platforms.
2. Motivating users to share their experiences with the product and recommend it to others.
3. Attracting a crowd that keenly follows how others are using the app.

In the case of FinTech, as users start interacting in addition to transacting on the app, a flywheel effect is created. The actual manifestation of the flywheel effect can also be understood through examples like CRED, Venmo, and Cleo.

‍This flywheel effect is not limited to apps alone

Consider So-Fi, a company specialising in refinancing student debts. They host exclusive, Instagram-worthy parties for their members, who are primarily HENRYs (High Earning Not Rich Yet), as a reward for timely EMI repayments. This strategy transforms timely EMI payments (indicative of high earnings) into a point of brag.

We see here how when a product's features challenge the norm of ‘not talking about money’, it sparks curiosity, induces FOMO (fear of missing out), and motivates people to engage. This, in turn, leads to a cycle of 'showing off,' thereby perpetuating the flywheel effect.
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‍Why do FinTech brands focus on cracking the social code?

Many FinTech companies do not generate revenue directly from user transactions. Instead, they aim to cultivate user loyalty, enabling them to cross-sell other products, like in the case of PhonePe, PayTm, BharatPe, and GPay. A significant challenge arises because most apps offer similar features and lack distinct branding, causing consumers to switch to whichever app provides the best cashback offers.

Another obstacle is the cost of acquisition and distribution. In the absence of significant brand differentiation, apps are unlikely to experience network effects (where customers refer others) unless they are heavily incentivised. Therefore, brands depend largely on paid advertising to reach more customers, which substantially increases the CAC (Customer Acquisition Cost).

Successfully integrating FinTech with social interaction offers four major advantages:

i. It naturally attracts customers who become curious or intrigued by others using the interactive features.

ii. It nurtures customer loyalty, as social rewards with each transaction encourage users to continue engaging for excitement.

iii. It facilitates cross-selling, as customers are engaged with the app's overall experience.

iv. It triggers a network effect, where interest proliferates from one person's network to another.
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Why haven't all FinTech brands cracked the social code?

To begin with, not every FinTech use case lends itself to socialisation. In categories like lending, where a significant amount of personal financial information is involved, it's highly unlikely for users to refer the app to others, even if incentivised. This negates any possibility of utilising the social interaction feature.

Moreover, people typically share transactions they are proud of, not those they are potentially ashamed of, such as debt payments or credit card expenditures.

Take the example of Blippy, a credit-card-focused app that would automatically post a Facebook status detailing all items a user purchased with their card. While many users enjoyed sharing their spending habits, a significant portion of their user base felt embarrassed when their private expenditures became a topic of discussion among their Facebook friends.

In the world of fantasy gaming or cryptocurrency marketplaces, known for their volatile nature, users often experience dramatic wins or severe losses. Interestingly, these losses are not borne individually (unlike varied stock investment strategies) but collectively, as many users often back similar teams or invest in identical cryptocurrencies. This scenario fosters a 'brothers in arms' mentality, where users bond over shared outcomes. As a result, rather than hiding their losses, users tend to publicly celebrate their daring in team selection or risk-taking in investments.

Fractional Ownership: An Innovative Intersection of FinTech and Social Dynamics

The fusion of 'social meets FinTech' finds a unique expression in the burgeoning trend of fractional ownership across different sectors.

In essence, this model involves contributing a portion of the cost to acquire a share in an expensive physical asset. This investment yields not only potential profits and partial access to the asset but also a sense of prestige. The application of this model is varied, encompassing fields like angel investing, real estate, upscale dining establishments, luxury vehicle rentals, and even part-ownership in restaurants.

For example, Prorata in India allows individuals to jointly own luxury cars within their residential communities. Similarly, YOURS provides a chance to share ownership of bungalows in sought-after tourist locations, tapping into the increasing trend of communal ownership of farmhouses and holiday homes.

This has crafted an entirely new meaning of ‘social code to FinTech’, unique to the fractional ownership category.   

So how did Cleo crack the code?‍

Cleo, a UK-based budget management app developed by Barney Hussey-Yeo, has garnered significant success, amassing 4 million loyal users and achieving $50m in ARR within just 6 years. The app distinguishes itself with its unique 'roasts' delivered through notifications and chatbot interactions, which playfully encourage users to manage their finances more responsibly.

‍An increasing number of Cleo users are engaging with the chatbot to generate content for sharing on social media. This behaviour not only attracts new users to the app but also motivates existing users to interact more frequently, thereby initiating the flywheel effect.
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‍Closer home, has CRED also cracked the code?

‍Initially launched as a credit card bill payment app, CRED gained popularity through its exclusive, invite-only model relying on users' credit history. The app's primary allure lies in its 'CRED coins,' awarded for timely bill payments. This system, gamified through a slot machine feature, allows users to redeem their coins for exclusive deals with leading consumer brands.

This approach established an ideal 'social meets FinTech' flywheel for CRED. As users accumulated coins, they began boasting about their earnings on social platforms and engaging in friendly competition. This behaviour generated the FOMO (fear of missing out) effect, consequently attracting more credit card holders to the app, eager to earn CRED coins themselves.

Over time, while coins have become less ubiquitous, CRED continues to offer enticing features like Mint, Flash, Cash, and Garage. Each feature enhances the bragging rights of being a CRED member, an appeal often fueled by their nostalgic and spoof-like marketing campaigns.

CRED has not only cracked the social code in FinTech but also captured a significant market share. The brand now facilitates 13% of India's credit card bill payments - a notable feat in a country with 87.7 million credit cards. 

With new features on the horizon, CRED is poised to further expand the boundaries of social-FinTech integration.

Platforms like So-Fi, Cleo and CRED have mastered the art of blending social dynamics with financial services. This innovative approach has not only fostered a new era of financial interaction but also reshaped how we perceive and engage with money in our increasingly connected world.

They have built proof for neo banks of the future to leverage ‘social code to FinTech’ as a philosophy in building relatable products for the internet generation.  The global FinTech landscape has evolved significantly, beginning with PayPal's early innovations in the 2000s. This evolution continued with the introduction of mobile payment solutions like Venmo, PhonePe, Paytm etc., and expanded into investment platforms such as CoinDCX, Robinhood, and Groww.