The future of ‘fintech’: selling advertising

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Una persona usando un móvil, en Ciudad de México.
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The question is whether the regulators will accept that they use user data for that purpose

The fintech they are in trouble. Rising rates have dented their valuations, and the slowing economy threatens to cut their once-high growth rates. The KBW Nasdaq Financial Technology Index is down 30% from its October 2021 peak. The hype looks like a good bet.

Two of the advantages of these companies are their strong relationships with retailers and a large number of young users. That combination points to an opportunity: to help the former reach the latter. Post-payment London group Zilch, valued at $2 billion in 2022, is charting that path. Backed by Goldman Sachs, it is turning its apps in something similar to an advertising platform. Retailers like Nike and Adidas pay Zilch to show off their products to prospective buyers, and they often encourage customers to buy by offering rewards like cash back. Jack Dorsey’s Block is building a similar feature for its popular Cash App payments service, while PayPal’s Honey works on a similar principle.

It’s part of a broader trend in which advertisers are trying to target customers as close to the moment of purchase as possible. Amazon and Walmart have benefited from this: eMarketer expects the duo’s ad revenue to grow 30% on average this year, outpacing Facebook and Google. The idea is that ads are more effective if the viewer is already in buying mode. In theory, the fintech and payment firms could make a similar argument: they know customers’ spending habits and have a good idea of ​​their disposable income. Zilch could, for example, allow a supermarket to send a targeted ad to another store’s customer on the day they usually shop.

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One question is whether consumers, and regulators, will agree that the fintech so use the data. Another is whether they have enough users to make it worthwhile for merchants. The good thing about Amazon’s ad business is that a lot of people already shop there. And big firms like Block might be leery of muddying their apps with ads. But none of these dangers undermine the basic appeal. It is worth studying how to take advantage of it.