Invest Like the Best with Patrick O'Shaughnessy
00:36:12 · David Vélez, Patrick O'Shaughnessy
Bring a consumer obsessed culture in an environment and industry where customers just don't really care about their banking relationships, especially for The US mass market. [00:36:22] S0: What do you think is going be the hardest part about competing in The US? [00:36:25] S1: Building a very strong brand will be one of the hardest things. US consumers mention brand as one of the key attributes to choose banks and it's not cheap. And we want to do it in a way where we obviously have a lot of financial resources, being a very profitable position, but we want do it in a way that is smarter and more capital efficient than simply come in and invest in funnel marketing all over the place. So building an organic brand in an environment where there are so many strong banking brands might be one of the most difficult challenges that we'll do. And that's critical to build trust with consumers because we wanna become their primary bank account. That's what we aspire to do. [00:37:02] S0: If I had every buy side analyst that covers NewBank here, and you got to convince them of how they should think about your business through financial metrics. You mentioned return on equity earlier. Is that the metric that you would point them to as the barometer of how well you're doing? Are there other metrics that you would hope that investors would use to assess how good a job you're doing that are financial? How do you think about that?
00:37:26 · David Vélez
[00:37:26] S1: Growth of number of customers and Net Promoter Score and the cost to acquire that customer. So when you look at figuring out, have you hit a vein and are you growing in a way where you found an underserved market and you're able to offer a product that nobody else were able to offer? That's one of the key metrics, number, user count, NPS. But then are you doing it at a sustainable pace? Because you can buy your way into growth by spending a lot of money in marketing. So what is the equation there? What is your LTV to CAC? And ultimately, what is your return on equity? And the return on equity exemplifies the advantages that the business model could have. When you compare it with the big incumbent banks in the countries that we operate, we don't charge a lot of fees. We literally charge no fee. So we have less revenue, but then we end up with a return on equity that is two to 3x their return on equity. That basically means that you found a cost structure advantage. You found a way to offer a product at better quality at a much lower cost. And if you find that, generally it's through technology, then you found yourself a moat. You found yourself a competitive advantage, especially in markets like banking that are in ways commoditized. So I think it would be also looking at that combination of return on equity. Talking about The US, one of the most interesting, least appreciated aspect of it is that by now, some of The US incumbent banks have higher return on equity, are more profitable than emerging banking banks. There's some of the emerging market banks that we compete. That means your margin is my opportunity. The typical Amazon view or vessel view of that incredible ROE that even incumbent banks have, even on top of the huge amount of cost that you're using to provide your product. That means there is a significant opportunity to undercut.
00:39:06 · Patrick O'Shaughnessy, David Vélez
[00:39:06] S0: Who are your biggest influences? I know you've learned from some of the great entrepreneurs, some of the great investors out there. When you think about your whole new bank chapter of your life, who are the people that jump out that have most actually influenced how you think about something? Who are they and why did they influence you the way they did? [00:39:23] S1: We began the company as a reaction of a consumer pain, of me realizing how bad consumer banking in Brazil was, and how painful it was, and then realizing that this was a proxy for what the majority of the country was actually feeling. So we'll always admire companies that are very consumer obsessed, that know that to win, they need to be able to offer the best product and best service in a way that creates almost fanaticism. And so from that perspective, we were very inspired by Amazon. Since the very beginning, Amazon being the more traditional consumer obsessed company and how they build this consumer obsession and how they thought about that. We started Disney very carefully because this is a company that wants to create magic experiences. Maybe it's not super obvious, but even in banking, a boring banking product, we want to create a magical experience for customers. [00:40:14] S0: What did you learn from Disney? That's an interesting one.
00:40:14 · Patrick O'Shaughnessy, David Vélez
[00:40:14] S0: What did you learn from Disney? That's an interesting one. [00:40:16] S1: I think it's the communication that you create with consumers and just simply the magic aspect of it. When you enter a Disney park, the setup of that entry path that you have, it's almost like you're entering into a kingdom. And the service that you get from everybody that works inside Disney and how they treat the young children, spectacles that they create and the fireworks that they create, they're really thinking about how do you create a product that is magical in nature. And that's something that we push our teams around is for something as boring as sending money. How do you create a magic experience out of that? The welcome kits that we're sending to our customers here in The US, when they receive that welcome kit of the first credit card, the first debit card, we're trying to create a magical experience in that moment. And we're very inspired by that. [00:40:59] S0: The customer obsession thing is something that sounds obvious now, maybe Amazon really pioneered this way of thinking. Nothing's for free, what are the trade offs associated with being so customer focused? It's become a popular thing to say and the temptation is like, yeah, everyone's customer focused to varying degrees. But what does that actually mean? What is the hard part about being so customer focused?
00:40:59 · Patrick O'Shaughnessy, David Vélez
[00:40:59] S0: The customer obsession thing is something that sounds obvious now, maybe Amazon really pioneered this way of thinking. Nothing's for free, what are the trade offs associated with being so customer focused? It's become a popular thing to say and the temptation is like, yeah, everyone's customer focused to varying degrees. But what does that actually mean? What is the hard part about being so customer focused? [00:41:21] S1: I think the hard part is, as with any cultural value, to do what you say you do. Like you see it in any company that has very nice sounding values on the wall. Then the question is, are they actually executing that? Especially when it's inconvenient. Most companies will be consumer obsessed, but then when they are suddenly seeing themselves making more money because they invented a new fee, then, oh, well, maybe I'm less customer obsessed here and I want to make a little bit more money. You're prioritizing the short term versus the long term. And actually in the entire AI debate, you actually don't hear that much conversation about customers. Because there is so much energy and focus around how to use AI for efficiency and optimisation. There is much less conversation about consumer obsession here. And this is where humans still are beating the AI. So the biggest complexities is actually prioritising this value, even when it's inconvenient to do so, especially from a financial perspective. But also the AI bro, the tech bro is much more enamored today with the technology versus the consumer experience itself.
00:41:21 · David Vélez, Patrick O'Shaughnessy
[00:41:21] S1: I think the hard part is, as with any cultural value, to do what you say you do. Like you see it in any company that has very nice sounding values on the wall. Then the question is, are they actually executing that? Especially when it's inconvenient. Most companies will be consumer obsessed, but then when they are suddenly seeing themselves making more money because they invented a new fee, then, oh, well, maybe I'm less customer obsessed here and I want to make a little bit more money. You're prioritizing the short term versus the long term. And actually in the entire AI debate, you actually don't hear that much conversation about customers. Because there is so much energy and focus around how to use AI for efficiency and optimisation. There is much less conversation about consumer obsession here. And this is where humans still are beating the AI. So the biggest complexities is actually prioritising this value, even when it's inconvenient to do so, especially from a financial perspective. But also the AI bro, the tech bro is much more enamored today with the technology versus the consumer experience itself. [00:42:27] S0: I'm really curious how you think about your own product, like literally the thing I see on my phone versus your own agent versus new agents being introduced in the marketplace. Do you think there's a world where it actually matters that your marketing is to agents more than it is to humans? Like how do you think about that world or whether to provide your own interactive agents versus a product that you're clicking around in on your phone?