Neither a borrower nor a lender be | A tour through Upstart’s S1

Upstart Holdings, an online lender recently filed their S1. This is the first blog post that I have collaborated on. It was too good to pass up collaborating with another Rohit :). Y’all are in for a treat, it’s a 2-Rohit’s-for-the-price of one analysis!

What is Upstart?

Upstart is an online consumer lender and a lending technology provider. Their core differentiation is that they use Artificial Intelligence for lending decisions. Upstart claims that this results in automated disbursals, higher approval rates, better risk-adjusted performance, and reduced fraud. Their main customer interface is via its website http://www.upstart.com and through bank partners. Currently, their cloud lending platform is available only in the US. Software is eating the world, but in a financial services business, the product is always money. Upstart is an online lender first. They have operated a lending platform for years and now pivoting to providing a SaaS (ish) platform for banks.

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End of the Line | Lessons from the fall of AT&T

Book review time! Some lessons learned from reading the End of the Line: The Rise and Fall of AT&T by Leslie Cauley . How I got to this book is an interesting story in itself. I’m a huge Twitter consumer (I read a lot, but barely tweet) and Post_M is one of my favorite accounts on Twitter. She tweeted a video of a talk with Liberty Media’s CEO John Malone, which I watched and started going through the rabbit hole of more John Malone talks on Youtube and one of the videos recommended this book. The cable industry was never on my list of things that cared about, but thanks to Twitter and Youtube and a book recommendation – I learned a lot! The internet is truly a wonderful place.

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Jedi or Empire | Buy Now Pay Later competitive dynamics

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.

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To market to market | How do BNPL players go-to-market?

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?

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Go Vote | A tour through the real economy

We take a break from our regular programming to remind everybody to go vote. This election is important, y’all know that. Just vote if you haven’t already. I don’t care who you vote for, just vote.

Another question that I have been pondering is – We know the stock market is up and to the right, but it’s not the real economy. How is the real economy doing? How bad is it – Is there another shoe to drop? As I dug into some indicators, color me pleasantly surprised.

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What’s in a name – A deep dive into the BNPL product offering

Part two of the deep dive into the Buy now pay later (BNPL) market. In part one we dug deeper into the core product and its history. In this post, I dig deeper into the value proposition of the product.

A common misconception about this market is that it exists only to serve only the needs of the consumer. It exists only to make consumption easy. This is wrong. This a two-sided platform product. This product exists to help both sides of the transaction – merchants, who sell items and the consumers who purchase them. The fundamental axiom in use here is that extending credit greases consumption. Consumption for consumers is revenue for merchants. By offering various credit constructs and financing options to your customers you are enabling them to buy more of your products. This increases your revenues as a merchant. There is immense value in this product as a conversion tool.

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The song remains the same, a look at the Buy Now Pay Later (BNPL) players

Affirm filed for an IPO last week. I’ve wanted to do a deep dive into the BNPL segment and Affirm’s filing is the inspiration that I’ve been waiting for!

Let us start at the very beginning. Once humans came together in groups, the concept of lending aka credit has been willed into existence. The very earliest example of lending dates back to over 4,000 years ago in Mesopotamia, 2,000 BCE, where farmers bought seeds on credit and repaid the debt after the harvest. Pre-industrial revolution most economies were rural. Lending was like having a tab at your corner store. All underwriting was social and very few folks wanted to risk being cut off from the local economy by defaulting on their debt. All credit was local.

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Optimistic PM, Pessimistic PM

“I’ve never seen a monument erected to a pessimist.” – Paul Harvey

We live in interesting times, the world around us seems to be constantly on fire – physically and metaphorically. It’s gloom and doom all around. Morgan Housel touches on this extensively in his latest book, The psychology of money. He makes a convincing argument on why pessimism appeals to our emotions more than optimism. We tend to be more fearful than optimistic as losses hurt more than happiness from gains.

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Lights out, lessons from the turmoil at GE

This is the first attempt at what could become a monthly feature on this blog. I’m always experimenting with new things to write about and books are my latest source of inspiration 🙂 It fits with the theme of this blog – I want to write about things as a mechanism to learn and retain! What better way to retain knowledge than to write down what you learned from books!

I recently finished the book Lights Out: Pride, Delusion, and the Fall of General Electric which goes into detail about the downfall of General Electric. There are some great lessons for leaders and especially leaders in the fintech space from this book.

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Old ideas, new packaging – is embedded finance worth the hype?

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.

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