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Fintech Macro Part 4. CAC/LTV is single metric to evaluate both banks & Fintech startups 

CAC/LTV can be used to do comparables analysis across both bank incumbents and Fintech upstarts.

A business with low CAC and high LTV should be worth a lot and vice versa, regardless of the label.

CAC/LTV = Customer Acquisition Cost/Life Time Value.

CAC/LTV can be used to do comparables analysis across both bank incumbents and Fintech upstarts.

A business with low CAC and high LTV should be worth a lot and vice versa, regardless of the label.

Customer Acquisition Cost (CAC) on its own is the province of Sales and Marketing departments, armed with CRM and Marketing Automation systems to get to low CAC.

The biggest enemy of a low CAC is churn = low LTV.

Both are complex in their own right, but it is the interaction between the two that is so often confusing or difficult. Product strategy, pricing, Sales and Marketing all have to be in alignment. Another way of saying churn is “customers think the product sucks despite all that great Sales & Marketing”.

The story of Banking in the 20th century can be summed up as low churn. We are statistically more likely to get divorced than change banks. There was no point in changing Banks, because the difference between banks was marginal. The Fintech disruption changes that. Now customers have more real choice and regulation is seeking to protect consumers from lock-in strategies that make it hard for them to switch.

With churn a reality, we are now seeing Banks buying Fintechs in order to reduce CAC.

Part 1

Part 2

Part 3

Part 4

Some subjects are too complex for our short attention spans, so we do 4 posts one week apart, each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.

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