Brainstorms Issue #5

Brainstorms Issue #5

Announcement: Validation Bootcamp

If you missed it last week, I announced that I'd be hosting a Validation Bootcamp for anyone wanting to learn how to find great business ideas, launch MVPs, and find early adopters. Check out my announcement for more details. 

I've got 2 spots left. If you're interested, just reply to this email! 

Alright, on with the show! 

What's this newsletter all about?

My name is Keevin and business ideas are my thing. For over 7 years I’ve been working with early-stage companies, and have learned that a quality problem is worth more than 100 “good” ideas. Each week, I scour the web, engage my network, and use a few top-secret tactics to find unmet needs. I then outline the business opportunities behind them. Here’s what you can expect:  

• I’m all about quality over quantity - I’ll send you (1) well-researched, hand-selected business idea every Thursday.

• All of the problem data synthesized, with meaningful context for why this idea is worth building or pursuing.

• A short, tactical game plan for how to turn the idea into a revenue-generating company quickly and efficiently.

Pretty straight forward, right? Last thing - as your host, it’s my job to make sure your time spent here is valuable. So please, reply to this email if you have any questions or suggestions! 

Let’s dig into this week’s Brainstorm!

Credit Card Points & Rewards Are Tough To Manage

This week’s pain point comes from a consumer trying to play the credit card points "game" - 

“A problem I face daily is managing my credit card points. Currently, I’ll use 5 credit cards at any given time or place depending on which one gives me the best cashback and rewards for the purchase. The challenge is both remembering which card to use, where to use it, and making sure I am remember to use my points for each card.” 

- Anonymous Credit Card User

Market Background/Opportunity Size

The topic of credit card usage can be polarizing - there are some strong opinions out there. Regardless of where you stand, it’s undeniable that credit cards are the most widely used way to purchase goods and services for both businesses and consumers.

To give you a sense of how popular credit cards are, there are over 1.1 billion credit cards issued in the US alone and the average American carries 4 credit cards. Maybe you didn’t need convincing that the credit card industry is massive, but there’s an ancillary industry that’s picking up steam. 

One of the major factors in credit card success is the cash-back rewards you get from using them. People see terms like: “Make money every time you spend money!” -  and who doesn’t like the sound of that? 

While it may seem straightforward, the complexities lay in finding the right credit card that gives you the best rewards for your spending situation - and there are 1,000+ different credit cards to choose from with varying rewards associated with them.  

These complexities have led to a  number of companies creating big businesses helping people understand credit card rewards. Let’s take a look at some major players in the credit card rewards industry.

Major Players

Here are some big players in the ancillary industry of helping you understand, pick, and managing your credit cards - 

Credit Karma

• Founded in 2007

• Roughly 1,000 employees

• Raised $868M

Nerd Wallet

• Founded in 2009

• Roughly 300 employees

• Raised $105M

Credit Sesame 

• Founded 2010 

• Roughly 150 employees

• Raised $124M

Note: These companies aren’t credit card companies, but rather major players in the ancillary industry of helping you understand, pick, and managing your credit cards (among other things).

The Pain Points

While many of the major players mentioned above are helping people make better decisions about what credit card is right for them and how the rewards work - I don’t think they are perfect. Three clear pain points that I see are:

1. Most of these sites require you to spend time and energy educating yourself through reading articles. If you aren’t interested in personal finance it can feel like a real drag and can be pretty confusing.

2. It appears most of the big players are funded by advertisements from major credit card companies - which puts into question the authenticity of their resources and recommendations.

3. None of these companies help you manage and utilize the rewards and points you get from credit cards. Which is essentially the problem stated above.

The Opportunity

I think there are a wealth of opportunities in this space ranging from small side projects to large VC backable companies. Here are some ideas: 

1. Rather than educating myself on what the best card is, let software do that. Create a tool that scrapes users' bank transaction history and uses the purchase history to make credit card recommendations. It’d be similar to this tool, just automated.

2. Often, people don’t think about what card will give them the most cash-back for a specific purchase - they end up just using the same one over and over. Create a chrome extension that tells users which one of their credit cards will give them the best cash-back right before they make an online purchase. 

3. The most ideal solution would be to have one credit card that automatically directs purchases to whichever card credit (that users are signed up for) offers the best rewards on that purchase. This would act as a universal card that contains the data for all cards that users are signed up for. I assume this would be technically difficult to pull off, but never again having to keep track of where to use credit cards based on their rewards is a great value proposition.

4. Build a mobile app that tracks your location, and then sends you a recommendation based upon what purchases it thinking you’re going to make. If it knows you're in a restaurant, it might suggest a completely different card than if you were at a gas station.

Current Solutions

• MaxRewards

  • MaxRewards is a mobile app that keeps track of your credit card points and gives you a cheat sheet for which cards give the best rewards for specific purchases. As far as I can tell, it’s not completely automated. For example, you still need to manually enter your credit cards and check to see which one to use. 

• AwardRewards

  • Similar to MaxRewards, this is a tool for managing your points. One of the most valuable features appears to be the reminders it gives you when your points are about to expire - making sure you utilize the points you receive. While the tracking happens automatically, there are still manual components and the site’s design could use a lot of work.

• Mo Points

  • I’m mentioning this site because it seems to be the most effective way to maximize points, but falls short of solving the problems above. Mo Points is a consultant group that looks at your individual finances and builds a plan for which cards to use to maximize points. Being consultants, it’s basically a service-based business - if you could figure out a way to productize this service, that’d be way more scalable.

Note: These companies don’t appear to offer the exact same solutions as the ideas outlined above.

How to Execute

If I were building this business, here’s what I would do - 

• Find Your Early Adopters: To start, I’d focus on people who are new to the credit card game and seeking information about maximizing points. Personal finance is a topic that many people are very passionate about - so much so that there are dozens of online communities dedicated to discussing this. I’d find early adopters in these groups.

• Build an Audience First: One of my favorite hacks to getting early traction is to build an audience. I’d create content via an email list or Facebook/Slack Group. Depending on what problem you choose to solve, you can tailor the group and content to specifically address that challenge. This will give you a base of customers that trust you once you’re ready to launch. 

• Start with a Landing Page: To gauge interest, I’d make a well-designed landing page and just capture emails. This will give you the opportunity to test out marketing channels and find out if people are interested in your product before investing in the development time.

• Build a Manual MVP: I’m not a technical person, so when possible always recommend a concierge/manual MVP to start. In this case, I like the model that Mo Points is taking (see points above). A great way to fund this venture could be to become a consultant on credit card points. This would give you an opportunity to learn more about the problem and make some money helping your potential customers.

Challenges

My assumption is that most of the challenges here are going to be on the technical side (where I’m the least well-versed). Financial data appears to be tricky to work with.  

1. This Technically Possible? My assumption is that opportunities 1,2, and 4 from the section above are technically possible with the use of Plaid and other APIs. Idea 3, while incredibly attractive, seems ambitious. I’m not sure that the universal credit card could technically be done - developers, feel free to give me your thoughts on this.

2. Fintech is Competitive: FinTech has been hot for several years now. Currently, you’ve got massive incumbents competing with thousands of scrappy startups for a piece of the pie. With many of these companies targeting consumers, it could be hard to breakthrough.

• High CAC: As with more competition, comes the increased value for a lead or a customer. If you want to strictly go the paid advertising route, you’ll likely need to spend a lot on marketing to even get in front of your target audience.

Thanks for reading - now get out there and build it! 

Catch ya next week, 

Keevin ✌