“I think we're just at the earliest stages of people really monetizing all of their interests and their hobbies and their passions” -Oona Rokyta
Oona Rokyta, CEO and co-founder of Lance.app, built a neo-bank that forges strong connections with self-employed freelancers and side hustlers. She believes Lance is tapping into an enormous and underserved audience.
She shares her insights on the issue of neo-banking for freelance entrepreneurs and other professionals who are saying goodbye to traditional banks.
From Personal Frustration to Professional Inspiration
Oona’s company, Lance, arose from her experiences with banking as a self-employed professional. As she worked with startups and expanded her contacts in the financial world, she noticed a common feeling of frustration among freelancers.
They hate managing money, paying taxes, and handling other necessary financial tasks. This is an especially pervasive feeling among artists, designers, gamers, musicians, influencers, writers, and other creative souls who prefer to focus on their work, not their money.
Related Content: The Sustainable Habitat of Niche Banking
Plus, many freelancers have multiple income streams and find it challenging to keep a grip on their finances. How much should they spend? Save? Invest? Pay in taxes? They need help reaching their long-term financial goals, but who’s there to help them?
This sleek and intuitive neo-banking platform goes beyond banking alone, extending a helping hand to freelancers starting from scratch in terms of money management. As Lance explains on its welcome page, it offers “state-of-the-art banking for freelancers and independents with automated budgeting tools, smart tax withholding and payment, $0 fees or minimums.”
The Chase is On: High-Expectation Account Holders
Oona points out that Lance’s primary customers have extremely high expectations for a neo-bank. They might be on the younger side, but they’re not naive, and they’ve been using digital products their whole lives.
In the world of startups, these are known as high-expectation customers or HXCs. Many traditional banks don’t even try to pursue these customers and view them as impossible to please.
HXCs are willing to pay for excellent services. They might have high expectations, but they also have a high propensity to stay loyal to services that treat them well and will spread the word about their favorite brands on social media. They’re well worth pursuing and building relationships with.
But don’t do it scattershot.
Oona recommends a careful and thoughtful approach where you “go small before you go big.” Determine who your first customers are and meet their needs. Find ways to start getting paid early on, then use this influx of revenue to fund your full roll-out.
Also, accept that there’s a steep learning curve. The first two years of a neo-bank can be hit hard by economic instability, inflation, a recession, a pandemic, and other global factors we’ve seen in recent years.
How Financial Brands Can Woo HXCs
Take a moment to think about this question:
What attracts and retains the world’s highest-expectation customers?
At Lance, they reach HXCs by keeping the focus on easy accessibility. The company takes an almost gamified approach to connecting with its customers, making it fun to explore new banking options. Every interaction is rewarding.
In terms of the customer experience, the team at Lance keeps their users’ financial realities front and center. Although their customers have high expectations, they’re not all high rollers - at least, not yet. Many have mid-range incomes and are gig workers, so they need affordable options. Oona likes to think of them as having $50,000 to $100,000 per year incomes, which they’re always looking to scale up.
Passion is also part of the experience because these are passionate people. A professional food truck vendor, coffee roaster, or DJ is passionate about what they do and probably has multiple creative passions in their lives.
Why couldn’t financial management be at least a small part of their world?
One of the biggest differences between Lance and its traditional banking competitors relates to customer confusion. Their clients don’t want to be buried in confusing, old-fashioned banking services. They want banking to be fast and easy. Lance delivers on that promise.
The Concept of Community
James Robert believes that community is one of the emerging hot topics in the banking world. He points out that a great book on this topic, “The Business of Belonging,” has an interesting subtitle: “How to Make Community Your Competitive Advantage.”
When a company can successfully build a community around its product, the community of fans can send its reputation into the stratosphere. Suddenly millions of new prospects are in the pipeline.
How do you build a community around a brand new neo-bank?
Oona suggests starting at the most basic level by searching for an unmet need. Take a close look at the questions people are asking about your adjacent competitors’ products and look for gaps in the customer experience.
Be transparent about asking people to discuss their unmet needs. When someone is willing to give you a peek inside their minds, values, tastes, and preferences, give them the respect of incorporating their feedback into your planning.
Oona finds it beneficial to do a type of social listening where she checks Twitter and YouTube to see what kinds of goals and approaches people are using to handle their money. Did they get a new job? Do they have a new goal? Are they saving up for a vacation?
She also advises familiarizing yourself with the lingo communities tend to use. For example, teachers use different shorthand terminology compared to doctors. Musicians tend to speak differently than lawyers. If you’re targeting one of these groups, make sure you know how to speak the language.
Potential Pitfalls for Upstart Neobanks
Anyone familiar with the world of neo-banks is familiar with one of its core struggles: freemium vs. subscription. This decision sits at the heart of your company’s profitability, and there’s no clear winner or loser. It depends on how you handle it.
Approach this decision carefully with customer retention in mind. Don’t try to scale at all costs, or you’ll end up with an unhealthy business model. Many growth-at-all-costs companies are finding that the fintech industry has finally caught up with them and is now leaving them behind, in terms of profitability.
Beware that the entire fintech industry may be reaching an overall trajectory of slower growth, so it’s important to be circumspect about business stability. Keep an eye on your churn rate. Don’t take your eye off the ball when it comes to fraud. Accept slow, predictable growth.
This isn’t always welcome advice for eager entrepreneurs in the neo-bank space. Maybe that’s because slowing down and focusing on retention just doesn’t sound like much fun!
James Robert recommends the book “Never Lose a Customer Again.” It serves as a great reminder that it’s very expensive to acquire a new customer but it’s much more cost-effective and better for your reputation to retain an existing customer.
In terms of retention, don’t forget about your employees. Even the most cutting-edge financial brand can make the mistake of using antiquated approaches to employee retention. Are you offering a good work/life balance? Does your remote work model allow people to work productively?
Also, build partnerships that allow your company to run more efficiently. Oona sees many incumbents in the financial space that are reluctant to work with newer players. They view every upstart as a competitor when they could be a partner.
Looking into the Future of Neo-banking
Finally, let’s wrap up with some forecasting. When Oona looks at the future of neo-banking, she sees the following trends on the horizon.
- An athletic approach to finance, where people build up their financial muscles and every new stage of life requires adjustments to financial stamina.
- Greater scalability from fintech partnerships and integrations like Squarespace, Shopify, and more.
- Extensive layering of products and services, where people choose additions to their business on a need-by-need basis.
- Innovations in onboarding for more personalized interactions that bond people with brands.
- Advances in access that make banking and financial literacy accessible to more people than ever.
How about you? What trends do you see in the future of neo-banks? You’re welcome to contact us online and share your thoughts or text a question to 415-579-3004 so we can answer it in a future article based on the Banking on Digital Growth podcast.
This article was originally published on September 16, 2022. All content © 2023 by Digital Growth Institute and may not be reproduced by any means without permission.