The strategy of European banks ever since the Global Financial Crisis has been to focus on profitability1. How do you achieve a higher return on equity? There are two commonly followed options. Either you cut costs, e.g. by merging banks in the same geography and closing down the redundant branches. Or you sell the business, especially when you’re an also-ran outside of your home market.
Alex Zhu (TikTok) also discusses the challenges of online content and learning at the beginning of this interview:
His key insights:
people want light content, both as consumers and as creators
education goes against human nature: most people use their smartphone for communication and entertainment, not to learn
Neil Patel wrote a very instructive blog post about creating and selling online courses. By giving away the course for free (for a limited time), you can generate publicity and collect an email list for future courses.
I especially liked his discussion of “front book, back book“. Banks and insurers accumulate a long-term book of assets. These generate a predictable stream of income (interest and premiums). Unfortunately, this “back book” exposes them to unexpected losses. As a result, financial firms need a lot of capital.
The business model of Software-as-a-Service (SaaS) companies is also based on a back book. However, unlike banks, their portfolio of subscribers does not require a lot of capital.
In the same newletter, Rubinstein discusses the possibility of bank M&A funded by badwill, as I suggested earlier.
Sean Pawley talks about banking in East Africa on the Palladium Podcast (discussion about banks between 6:50 and 22:15). Multiple issues with banking in Rwanda and other countries in the region: economy runs on cash payments -> banks lack reliable data on borrowers -> high default rates -> unstable banks, high interest rates and fees, preference of cash over bank deposits. His solution: a narrow bank that eliminates credit risk. Provide a cellphone-based payment solution. Collect payment data. Based on the data, start making loans.