Banks and Fintechs new revenue model, Selling Ads like Google, and I bet you love it!

Imagine someone who knows your spending habits and how much money you actually have, trying to sell you something every day— Ads are coming to your money screen.

Introduction:

Remember when I said payments should be free? Yes, I went further and wrote that fintech, mobile money and banks should find new ways to make money beyond payments charges, one of the models i proposed was to use ads a new revenue stream. Today, I want us to look at some of the examples and real life business signals which will show a few big guys experimenting with ads of financial services platforms.

Payments should be free, That's when financial services will include everyone.

Fintech companies have revolutionized the financial landscape by leveraging technology to provide innovative services and experimenting with innovative business models. Traditionally, these companies have generated revenue through payment fees, transactions charges, and loan related revenues. However, a new business model is emerging in the fintech industry: selling advertisements. Much like Google, Facebook and Amazon, fintech firms are now exploring the potential of ad sales to bolster their revenue streams. This article explores this emerging trend, examining how fintechs and even some banks are adopting this model, and what it means for the industry.

The Emergence of Fintech Ad Sales

If you think about it, The concept of fintech and banks selling ads is not entirely new but has gained traction in recent years with the tech taking over fin. The idea is straightforward: fintech platforms, which have amassed significant user bases and collected vast amounts of data, can leverage this information to deliver targeted advertisements to their users whether businesses or individuals. This model mirrors the approach taken by Ad giants like Google, Amazon and Facebook, who monetise user data through personalised advertising.

In late May 2024, PayPal made a bold move appointing Mark Grether as General Manager of the new division, PayPal Ads. Mark formerly led Amazon Ads and then Uber Ads divisions. This division is set to revolutionize the advertising landscape, building on the foundation of PayPal’s first ad product, Advanced Offers, and introducing cutting-edge ad formats that promise to redefine digital marketing.

Examples from Major Fintechs

Several prominent fintech companies in the US have begun exploring ad sales as a revenue stream. Here are some notable examples:

1. PayPal: PayPal, a leading fintech giant, It has always wanted to do better in ads that why they acquired Honey in 2020 for $4 billion. Honey is a browser extension that finds and applies coupon codes at checkout, and this time they have even got serious now with AI and new hires to lead the ad business department. Beyond providing value to consumers, Honey collects data on shopping habits and preferences, which can be used to deliver targeted ads and offers.

   In 2024, PayPal made a bold move appointing Mark Grether to lead the new division, PayPal Ads. Mark formerly led Amazon Ads and then Uber Ads divisions is the right man for the job. This division is set to revolutionize the advertising landscape, building on PayPal’s first ad product, Advanced Offers, and introducing ad formats that promise to redefine digital marketing.

2. Revolut’s Official Move into Ads: Europe’s fintech giant is known for fast scaling and now they are diversifying their revenues expecting to make almost $400 million from selling ads by 2026. According to a report by the Financial Times, Revolut has announced its intention to grow its revenue through advertising and personlised offers which will be opt ins. The UK-based global fintech plans to leverage its extensive user and transactional data to deliver highly targeted ads and personalized offers, diversifying its revenue and enhancing user engagement.

   Revolut's commitment to diversifying its revenue through advertising is evident in its strategic hire of Inam Mahmood, the former Head of e-Commerce Partnerships at TikTok. Mahmood was brought on to lead a team of 30 people, tasked with driving Revolut's media strategy and expanding its ads initiatives

3. Klarna: A leading Buy Now, Pay Later company, has emerged as a significant player in digital marketing. In 2023, Klarna introduced a suite of solutions aimed at enhancing the consumer shopping experience and empowering retailers with robust marketing tools. Central to this suite is "Ads Manager," leveraging Klarna's extensive first-party data to enable retailers to target shoppers effectively and enhance shopping relevance. Marketing represents a pivotal growth area for Klarna, identified as its fastest-growing revenue stream. Klarna highlighted substantial growth in "marketing revenue," with affiliate marketing alone contributing $144 million in the fourth quarter, comprising 10% of global revenue.

4. Square’s Cash App: Square’s Cash App, a popular peer-to-peer payment service, has also entered the advertising arena. Cash App now features “Cash Boosts,” which are personalised offers and discounts available to users who pay with their Cash App card at select merchants. These offers are essentially a form of targeted advertising, providing a win-win for both users who get discounts and offers, and merchants who attract more customers. You would see them doing recruitment to boost this advertisement tech and operations.

5. Robinhood: The stock trading app Robinhood has ventured into offering advertisements as well. While its primary revenue source has been payment for order flow, Robinhood has begun incorporating personalized offers and advertisements within its app to allure users. These are aimed at enhancing user engagement while providing an additional revenue stream.

6. M-pesa and TigoPesa Mobile Money: Tigo Pesa, Airtel Money, MTN MoMo, and Orange Money are revolutionizing the mobile money landscape with an audacious blend of convenience and subtlety. In a masterstroke akin to M-pesa, these titans have woven advertisements into their app experiences with such finesse that users might barely notice—small banners that merge seamlessly with the interface, a whisper of commerce in the digital ether. But the brilliance doesn't stop there. Each app transforms into a multifaceted powerhouse, offering mini-apps that unlock a universe of services: instant loans, insurance at your fingertips, e-commerce wonders, and effortless travel bookings. This bold strategy not only redefines user convenience but also taps into vast new revenue streams, leveraging their massive user bases.

Traditional Banks Embracing the Model

Interestingly, traditional banks are not left behind in this shift. Many US banks are recognizing the potential of selling ads and are developing strategies to capitalize on their existing customer bases:

1. Chase Offers: JPMorgan Chase offers a program called “Chase Offers,” which provides cashback deals to credit card customers when they shop at specific retailers. These offers are personalized based on customer spending patterns, effectively serving as targeted ads that benefit both consumers and merchants.

2. Wells Fargo Deals: Similarly, Wells Fargo has a program called “Wells Fargo Deals,” which delivers personalized offers to customers. This initiative not only enhances customer engagement but also provides a new revenue channel for the bank through partnerships with merchants.

News and Developments in Fintech Advertising

Recent news underscores the growing interest in fintech ad sales:

1. Affirm and Targeted Ads: Affirm, a fintech known for its buy-now-pay-later (BNPL) services, announced in early 2024 that it would begin offering targeted ads within its platform. By leveraging data on user purchasing behavior, Affirm aims to deliver highly relevant advertisements, thereby creating a new revenue stream while enhancing the user experience.

2. SoFi’s Partnerships: SoFi, another prominent fintech, has been forging partnerships with various brands to offer personalized deals and advertisements to its users. These partnerships not only provide additional value to SoFi’s customers but also open up new revenue avenues for the company.

Implications for the Industry

The adoption of an ad-based revenue model by fintech companies signifies a significant shift in the industry. This model offers several advantages:

• Diversification of Revenue Streams: By incorporating ads, fintechs can diversify their revenue streams, reducing dependence on traditional sources like transaction fees and interest income.

• Enhanced Customer Engagement: Personalized ads and offers can enhance user engagement, leading to increased customer loyalty and retention.

• Data Monetization: Fintech companies can effectively monetize the vast amounts of data they collect, turning insights into profitable ad placements.

However, this model also presents challenges, particularly around data privacy and user trust. Fintech companies must navigate these concerns carefully to avoid alienating their user base.

Conclusion

The move towards selling ads represents an exciting evolution in the fintech industry. By leveraging their extensive user data and technological capabilities, fintechs and traditional banks alike are exploring new revenue opportunities through targeted advertising. As this trend continues to develop, it will be interesting to see how it shapes the future of financial services and advertising.

The combination of the usual financial services with sophisticated advertising models marks a transformative era for the industry. By embracing open banking, open finance, and generative AI, fintechs and banks can provide highly customised experiences that benefit both consumers and businesses. This approach not only diversifies revenue streams but also fosters deeper customer engagement and loyalty. As fintechs and banks navigate this new landscape, their ability to innovate and ethically manage user data will determine their success in the burgeoning ad-driven market. The future of finance is not just digital; it's personalised, data-driven, and integrated, promising unprecedented growth and opportunities