In the last post, we explored what drives an economy (spending) and the levers that a government can use to restart the economy after a crisis (monetary and fiscal). Since 2008 monetary policy has paid the dominant role, but in 2020 fiscal policy is finally making a comeback. Fiscal policy has a direct impact on consumers’ lives as the main objective is to get cash into consumers’ hands so that spending continues unabated.

How to get cash to citizens?

It is logistically impossible for a government entity to show up at every citizen’s doorstep with a truckload of physical cash. Besides the obvious problem of logistics, there are also problems with confirming identities and physical record-keeping. Especially when governments are handing out money, they want to be very particular that only their citizens are getting the cash and there are no cases of freeloading (via fraud, etc). Direct transfers are a politically charged issue – there are always allegations of a slippery slope, nanny state, and communism that get thrown around! You have to get this part right.

We’ve been taking a journey through the BNPL space, we looked at the history, the product, and the go-to-market. I’d like to close the series with a view on the competition and where I think the industry is headed. Warning speculative discussions and opinions ahead.

Continuing the deep dive on the BNPL players, the next thing I wanted to look at is their go-to-market strategies. How do they get their customers? Links to Part 1 and Part 2. A word of caution, all the research and numbers are from an outside in perspective and based on publicly available information. There is a possibility that I’m completely wrong in my analysis!

My simple mental model for go to market is,

• Who is the target customer? Are there many target customers?
• What is the narrow sub-segment of target customers?
• What is the value proposition and positioning for this customer?
• What are the channels that are used to reach out to this customer? Is there a low-cost acquisition channel in the mix?

Sooner or later, everything old is new again

– Stephen King

The thesis expressed today is that financial services are no longer a separate vertical component in consumers’ life. Consumers are going to be better served where they already hang out. So the natural extension for business with a large number of customers is to start offering financial services to their user base. In this model, financial services transition from a vertical component to a horizontal capability that all businesses will offer to their users. Hence the popularity of the term embedded finance.

Is this thesis valid? I’ve been thinking about this for a few years and this post is an attempt to work out a mental model and answer this question.

Short answer – this thesis is wrong. Long answer- it’s nuanced.