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How Status Money Is Rewriting the Fintech Playbook

There’s always been one unspoken and grand vision in the world of personal finance and banking: to have a single organization that can give you all the financial tools, services, products and advice you need at every stage of your life. This vision has existed for a while but has never properly materialized. The first instance of an institution trying to achieve this goal happened when Sandy Weill, former chief executive and chairman of Citigroup, merged Citicorp with insurance giant Travelers Group to form Citigroup — the largest merger in history at the time. The result was a financial supermarket that could help you with retail banking, loans, credit cards, mortgages, auto loans, insurance, access to financial advisors — you name it. The problem is that it didn’t work. There were many challenges. Organizationally, it was complex and couldn’t adequately serve all the different segments of the population — it couldn’t create and manage the right products for the right segments. It also failed to integrate its myriad of services into a coherent whole from a technology and customer experience point of view. In the end, it all came crashing down during the financial crisis of 2008 with Citigroup having to take more than $45 billion in bailouts and divest, spin-off or shut down many of its business units. But the vision persisted. The early wave of fintech startups took the stage and carried forward a lot of the innovation in financial services — taking one bank service and executing it better. Once the execution was successful, they would introduce another service and expand their product footprint. Although this strategy of “unbundling and rebundling” has its upsides, its biggest demerit is that it has proven expensive to scale. Many fintechs have found it difficult to create new products that can be widely adopted by their existing customers. So they end up ballooning customer acquisition costs. Furthermore, with almost every fintech launching debit cards, savings accounts, brokerage capabilities and the like, the field has become crowded — making it difficult for these companies to differentiate themselves in the space. A Strategy That Meets The Grand Vision Majd Maksad, CEO and founder of Status Money, spoke with Benzinga about the company’s efforts to achieve the same vision. Status Money is a free popular financial management app that made headlines for offering a feature that enables you to anonymously compare all the different aspects of your finances to your peers. Unlike fintechs that adopted the unbundling and rebundling strategy, or in Maksad’s words, the “divide and conquer” strategy, Status Money adopted a marketplace strategy. Status Money’s strategy is to offer a differentiated suite of free financial management tools, create a marketplace for financial products from partner institutions, then introduce its own financial products in key verticals. The app combines all of your financial relationships into one place. Through aggregation, it delivers more intelligent insights, recommendations and financial planning tools — hence appealing to a wide group of consumers. Status Money has partnered with over 130 financial institutions and developed algorithms to recommend the right product for the right person. It has also partnered with a growing list of financial advisors — connecting them via video chat with those looking for financial advice and planning services. Through a feature called “coaching,” every Status Money member can meet with a financial advisor for just $10 per month. An App That Understands And Knows You Maksad believes that financial institutions and fintechs today come with a product-first mentality. If an institution is trying to sell you a mortgage and you can’t afford it then you’re not its customer, which is inherently at odds with achieving the vision of a financial super-app. Instead, what’s needed is a customer-level view that combines all of a customer’s accounts, investments, future plans, information about their demographics, marital status, number of children (if any), and the like. This is Maksad’s basic premise: How can an institution give you financial recommendations to help you plan your life, your children’s life, or your retirement if it doesn’t really know you? For example, a bank can see that you have $5,000 in your savings account and assumes that you are a low-income individual. It wouldn’t know that you have another account with $1 million at another bank. What follows is a series of recommendations for personal loans when you don’t need one. These institutions end up pushing you down a path that may not be right for you. Maksad worries that since most Americans are not financially literate, irrelevant ads lead to poor decision-making — individuals spending more than they should on credit cards, taking out too large of a mortgage, amassing student loans, and day-trading instead of investing for the long-term, for example. “Consumers have been dealing with an entirely fragmented financial experience,” said Maksad. “Most institutions fail to provide an integrated, smart solution for financial planning, management and advice. Ultimately, what that means is a lack of intelligent recommendations and poor decision-making on the part of customers.” Status Money’s financial planning tool lets you model your future net worth by taking into account all your aspirations. For example, if you create a goal in the app to buy a home in 6 months, it will give you information and recommendations about mortgages and property tax rates. How Does Status Money Compare with Other Financial Super Apps? 1. More inclusive social app Status Money is a much more inclusive social environment for financial conversations. The app enables users to anonymously communicate with a growing community of over 400,000 users about any financial topic. This feature opens up possibilities for knowledge-sharing in an area that has traditionally been off-limits for discussion. 2. Smarter algorithms In terms of feature set, Status has some of the best financial recommendations in the space. It uses what it refers to as a “proprietary insights engine” to give members personalized tips and recommendations — often based on how their spending, income and interest rates compared to similar peers. 3. Higher rewards rate One of Status’s key differentiators is how it encourages and incentivizes people to take charge of their finances and make better decisions. The app has a cashback program where you earn cash for doing things that are good for you financially. This could be as a result of opening new high-yield savings accounts or diversifying your investments or refinancing a high-interest loan. You could earn anywhere between $20 to $100 just for engaging in particular financial activities. You’ll even earn a $5 reward for creating your Status account. Upcoming Developments At Status Money Maksad hinted at the company’s upcoming developments that he likes to call the “aggregate and shift” strategy, which is a page taken from marketplace businesses like Amazon and Netflix. Much like how AmazonBasics products and Netflix Originals were created and offered alongside competitive products and content, Status Money plans to offer its own financial products along with those from other institutions in its marketplace. Users will have the choice to choose what’s best for them, and if Status’ products are compelling, the business will shift toward them. With Status Money planning to release its first financial products to the marketplace in 3Q 2021, the stage is set for the company to meet the pertinent financial challenges faced by consumers, while also working toward the vision of personal finance: a single app with everything to help achieve your financial goals. See more from BenzingaClick here for options trades from BenzingaWhat’s Going On With APRE Stock And IMMP Stock Today?Analyzing Visa’s Unusual Options Activity© 2021 Benzinga does not provide investment advice. All rights reserved.


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