In conversation with a retired executive from one of the country’s big banks this week, we got to chatting about the current strengths and future prospects of the financial institutions that still define the Bay Street corridor, the commercial pulse of the city.
The big banks have three things going for them, he said: “They have these great retail franchises, they have these great retail franchises, they have these great retail franchises.” (He hasn’t lost his legendary dry sense of humour.)
The future? “The big question is, who’s going to come after them?”
I thought the answer might be Apple.
Apparently it is Snoop Dogg.
And lingerie models.
I speak here of Mogo Finance Technology Inc., the upstart, publicly traded, Vancouver-based fintech company that is suddenly putting a hard push on brand awareness. Witness the unconventional marketing arrangement with Postmedia, in which the Mogo brand is being driven out across all Postmedia platforms. Mogo will pay a modest share of revenues to Postmedia, and has issued warrants to Postmedia to acquire slightly more than one million Mogo shares.
I can’t think of another arrangement like it.
On Friday, Mogo will be an event sponsor at the 2016 Maxim NBA All-Star party (“500 hottest girls next door + lingerie models”) at Muzik. Which is where Snoop Dogg comes in. And Shaquille O’Neal. The two winners of Mogo’s social media contest will get a meet and greet with Shaq or Snoop.
I believe the CIBC does not brand itself in this way. RBC still has that little British man as its mascot, the one with the bowler.
I’ll stop there.
Founded by Dave Feller, who runs the company with his twin brother Greg, an ex-Lehman banker, Mogo is an instructive example of the digital disruption in financial services — or what the company calls a “frictionless digital experience.”
The initial target market: online borrowing millennials. Not surprisingly, the early pitch has been to help encumbered consumers get their debt under control. I will call them subprime, or underwater, millennials.
The company’s curation has all been very smart, at least from a branding perspective. Coolly designed prepaid Visa cards (convenience without the credit), MogoZip (14- to 30-day loans), MogoMini (one-year lines of credit). Interest rates on loans start at 5.9 per cent and run all the way up to 39.9 per cent for borrowers with the poorest credit ratings. This may sound astronomical, unless you’re a 25-year-old payday loan aficionado with an execrable credit rating
This is clever: the “Level Up Program” in which a borrower’s interest rates are lowered every 12 months once he or she has proven a solid payment history.
So take that zaftig debt, role it into a more manageable Mogo product, and preload a Visa card that has no credit provisions. I know parents who may start to advance the merits of the concept upon reading this.
When the company went public last June, it played up its “do more, spend less” ethos, using the branding line: “Uncredit card your life.” The company’s prospectus touts the firm’s “socially responsible financial solutions that help Canadians stay in control of their financial health.”
In control but in debt, of course, for that’s how Mogo makes its money.
Most of us are still in the dark when it comes to fintech, according to a report released two weeks ago by consulting firm EY. We’re way behind Hong Kong, Australia and the U.S. in adoption rates. Apparently this is not due to lack of trust, but lack of awareness. Slightly more than 57 per cent of respondents said they were unaware the products even existed. Just 10 per cent cited lack of trust as a factor. (I would bet that the majority of Canadians are still unfamiliar with the term fintech, the marriage of finance and technology in the online world of financial transactions.)
Here’s the kicker: EY forecasts a tripling of fintech adoption within the next year.
Feller has grand ambitions to be a full financial online brand without becoming a bank. When he even says the word “bank” it sounds antiquated. He adds the word “legacy,” which, you know, is never good. He says the company will launch MogoMortgage this year. Of course, he aims to grow the client base across the full spectrum of consumers from, at last report, 158,000 “members.” (He’ll have to cut back on the club-like vibe if he wants to accomplish that.)
Mogo’s shares have slumped badly from their opening price of $10, trading in the $2.50 range. It will be an uphill battle. There will be many more upstarts enjoined in the fight. Here’s the question: are the big banks playing offence or defence?