Why Neobanks Were Really Founded

Neobank Unifimoney recently launched a hard-hitting marketing campaign. If you remember the 2008 financial crisis, a few clips from an Unifimoney video could bring those memories back. Many neobank founders worked for the big banks during the housing bubble. But they didn’t like what these financial institutions were doing. So they resigned to start their own banks after the financial crisis. Now Unifimoney is reminding viewers about the events that happened back then.

Banks and the Global Financial Crisis

Twelve years ago, banks helped cause a global financial crisis. They made risky bets with their customers’ money during the housing bubble. Some of them even approved NINJA mortgages, home loans to borrowers with no job, income, or assets. And they bundled these loans into mortgage-backed securities and sold them to investors who had no idea how risky they were. Buyers included institutions like pension funds that invested retirement money for police and teachers.

The federal government tried to save the banks by buying their mortgage-backed securities. But bailouts were not enough to save many of them, especially banks that made a lot of mortgage loans or banks that were loaning money to borrowers in expensive housing markets. Remember Countrywide, Washington Mutual, or Lehman Brothers? Like Unifimoney explains in its commercials, there are fewer banks now than there were before the financial crisis. A few large banks, including Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo, hold most of the deposits in the US. And the situation is similar in other countries, such as Australia.

More Recent Bank Misbehavior

Now Unifimoney is reminding its potential customers about the business practices of their current banks. These commercials include scenes such as bank executives getting grilled by Congress about their risky lending practices and abuse of their customers. Big banks have received billion-dollar fines for practices such as signing their customers up for financial products without telling them first. More recently, a whistleblower at the regulatory institution FinCEN leaked reports on the big banks to journalists. And now some reporters are accusing these institutions of processing financial transactions for international criminals, including terrorists and drug lords.

But these types of practices aren’t the only behavior Unifimoney criticizes in its videos. It also makes fun of the big banks’ current advertising campaigns. These banks make commercials about young customers relaxing on the beach, taking care of their pets, riding on cruise ships, and participating in other fun activities. Unifimoney’s commercials are much darker. In its ads, it explains that the big banks’ high-impact commercials are funded through practices like charging customers $500 per year for a fancy metal credit card.

Adversarial Marketing

By attacking other banks in its ads, Unifimoney is making enemies. And sometimes brands do this intentionally. Ben Soppitt, the founder of the neobank, mentioned another recent marketing campaign when he shared the Unifimoney video. But this wasn’t a bank’s marketing campaign. It was Epic Games’ challenge to Apple. Back in 1984, Apple was a startup. IBM was the dominant personal computer manufacturer. So Apple released a commercial inspired by George Orwell’s book 1984, announcing the release of its Macintosh personal computer to challenge the technology giant.

But 26 years later, Apple is no longer a plucky startup. It’s grown into one of the largest hardware manufacturers in the world. Billions of customers own its iPhones, and these smartphones can only run software that Apple allows them to sell in its App store. Developers such as Epic Games must share 30 percent of the revenue from their apps with Apple. Other major tech companies have similar app store policies. Epic, the developer of the popular Fortnite game, felt that this revenue share agreement was unfair.

So Epic Games made its own commercial inspired by the old Apple commercial. But this time the hero was a Fortnite character. Apple was Big Brother, the villain whose image appeared on the television screen. By directly challenging Apple like this, Epic Games received a lot of publicity. It helped that the original commercial was very well known and Fortnite was a game with a large player base.

Financial Institutions Can Do Better

Unifimoney challenges big banks by accusing them of taking advantage of their depositors. In its commercials, it explains that the banks make money management complicated, so depositors often keep money in checking accounts that don’t pay any interest. Neobanks can automatically move this money into interest-generating accounts. While big banks have the technology to do this as well, they would lose access to a pool of money that they don’t have to pay interest to use.

And the startup doesn’t just challenge the big banks. Its blog also criticizes the startup stock brokerage Robinhood for allowing inexperienced investors to make risky trades. Neobanks, just like major banks, provide wealth management services. So they compete with stock brokerages as well as banks, and some stock brokerages also have a history of bad behavior.

The Takeaway

This adversarial marketing approach may be risky. The big banks may get angry at these commercials and potentially even file lawsuits over them. But done correctly, this approach could reduce Unifimoney’s marketing costs by quite a bit. Banks have a very high customer acquisition cost, or CAC. I’ve seen estimates in the $1000 range before. So banks often try to bribe other banks’ customers to switch. But by challenging the big banks with its videos, Unifimoney could get a lot of new customers by explaining why neobanks were founded in the first place.

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