by Rich Edwards Aug 12, 2022

What we're reading - 08/012/22 Edition

Customer data driving strategy, the future of securitized lending, and Apple (re)enters the ad business

...and don’t call me Shirley

Happy Friday! With school starting soon and many parents doing the requisite happy dance, we bring you three of the best reads for community banking pro who wants to keep their edge. We have an article on how fintech juggernaut Block makes the most from their customer data streams, a sober assessment of the efficiency opportunities in securitized lending, and Apple’s potential endgame in mobile advertising.

1. Customer intimacy drives strategic decisions

Kevin Kelleher of Fortune looks at how brands like Block (formerly Square) and Carparts are using customer data to drive the strategic initiatives and bets they are making going into this next business cycle.

“We have a number of signals into the health of consumers and businesses across our ecosystems,” Block CFO Amrita Ahuja said in a call discussing the company’s second-quarter earnings. “We’re tracking these trends in real-time. And we’ll use them to act quickly and prudently to guide our business decisions.”

Ahuja said Block looks at metrics like consumer engagement with products, along with product adoption and frequency of transactions, to gauge consumer health. Those metrics show stability in both discretionary spending (that is, necessities like food and utilities) and non-discretionary (splurges like travel or clothing). Data from both Square payments and CashApp showed steady growth in verticals like food and drink, retail, and personal care even as consumers grappled with inflation and slower economic growth.

We’ve seen a diverse range of use cases [in CashApp] including gas, utilities, travel, food and grocery, and big box discount retailers,” Ahuja said. “But we also recognize the environment has changed. And we’re prepared to adapt to uncertainty and maintain discipline by pulling back on operating expenses, particularly those that are less efficient.”

Look at our earlier post on HBR’s seminal piece on winning strategies during economic slowdown for how to frame this for your institution.

2. A cheaper future in lending

Kevin Miao, former Citi and Capchase structured credit manager, writes on the potential for reducing costs in securitized lending. Kevin explores the streamlining of the securitization process for loan products, like mortgages, to create lower costs for borrowers. Spoiler, it involves blockchain. But read it anyway because the ideas here avoid hype and paint a picture (first proposed by the industry’s own trade group) of what a modernized lending infrastructure could look like.

Orange boxes above the dotted line represent the key parties – obligors (the mortgage borrower), the originator (the lender that created the mortgage), and the investor (the buyer of the pooled mortgages). The core function of the securitization is to aggregate cash from the underlying obligors, divvy them up, and distribute the cash to investors.

Costs are accumulated each step of the way, adding an estimated 1% over the life of a securitization. This might seem small, but even a 0.50% interest rate reduction on a $500,000 mortgage saves $2,500 per year of post-tax salary, which is a meaningful difference in most people’s lives! That is a staggering cost for performing simple arithmetic, distributing cash according to a series of “if/then” statements, and providing an accurate report of transactions.

Parties involved in securitization transaction, per PWC

3. Apple drops the other shoe in mobile ads

Ronan Shields from Digiday writes on Apple’s apparent plan to build their own demand-side platform (DSP), like The Trade Desk, Simpli.FI, and Adroll. This action seems like a natural follow-up to their privacy-driven ATT initiatives to now offer a solution to a broken market. To quote Benedict Evans, “for Apple, ‘tracking’ is what other people do - when Apple does it it’s ‘personalisation’ “.

“Apple may have blown up the digital ads business but it left enough fertile ground to build its own, more focused play for media dollars. The company is building a demand-side platform if recent job listings are to be believed.”

“Over the years, Apple has built a vast walled garden of connected products and Apple services,” said Paulina Klimenko, chief growth officer at PubMatic. “What connects all these products and services creating seamless consumer experiences is user data. Apple building their own DSP is the next logical step in this evolution. They have been building their advertising business behind the scenes, leveraging their scale and ecosystem assets.”

This is certainly an area to keep watch on. This move potentially puts Apple into a position to take a significant share of your precious digital ad budget, on top of the opportunity to compete directly with FIs.

That’s it for this week. Even without being portrayed by David Bowie in a movie, we’ll all never be as cool as Nikola Tesla. How’d we do for you this week? We love the feedback, even the criticism; drop us a line at and share below.

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