Wealthsimple Cash is coming for your wallet

Why I’m bullish on Wealthsimple’s new P2P product

Last year, Wealthsimple launched Cash: a peer-to-peer payments platform for Canadians. Finally, Canada had its equivalent of Venmo or Cash App.

The launch had some initial hype. I noticed a ton of my friends signing up quickly, grabbing their ca$htag, and playing around with the app.

But… the hype quickly fizzled out. From the vantage point of my social circle, product usage had zeroed out, and user growth had stalled.

At that point, I remember sighing to myself, another one bites the dust. Yet another failed attempt for FinTech innovation to truly advance in Canada.

But I was wrong.

I thought the v1 of Cash was the be-all, end-all product. But as Wealthsimple has proven over the past few months, that was just the beginning.

It takes a lot to shift behavioural change, especially when it comes to personal finances and banking — where there are legacy incumbents. And even more so in a country like Canada, where the rate of technology adoption is typically slower.

But I’m now super bullish on Wealthsimple’s strategy, and I think Cash is going to become the future of banking in Canada.

So, why do I think Wealthsimple will succeed?

1. First, they’ve cracked the major key to driving adoption: distribution. Wealthsimple is a household Canadian brand that has an existing product suite at scale.
2. Second, rather than building a mass-market product, they’ve honed in on a target segment (millennials), and the product solves niche pain points for them. These serve as ‘hooks’ for user adoption.
3. Finally, they’re building Cash with a product-led growth model — a necessary condition to building a viral consumer product.

Let’s dive into these points and more below:👇

Distribution

Fun fact: Wealthsimple Cash isn’t even the first P2P payments product that’s launched in Canada. There was Payso, and probably a few others I don’t know of.

Those startups all launched as standalone products, meaning they had to establish a brand, aggressively market themselves, acquire customers, worry about retention, and so on.

The key difference is that Wealthsimple already has distribution with its existing userbase from its Invest and Trade products, and can easily cross-sell new products to them.

Wealthsimple now has over 2 million users — all in Canada. That’s over 5% of the Canadian population, and that number is likely way higher if you only count millennials, who account for the majority of Wealthsimple’s userbase.

Because of its existing brand, Wealthsimple benefits from strong network effects; more users in Wealthsimple’s ecosystem means more users on Cash, which means more value for Wealthsimple users.

It can also use Cash as a lever for customer acquisition into the Wealthsimple ecosystem; the low barriers to adoption mean anyone can quickly sign up for free, and then be cross-sold on the rest of Wealthsimple’s products.

For example, imagine seeing an ad for Cash that sold you on the 5% cashback on food and drinks. You download the app, sign up, and are then offered the ability to use some of your cash to invest in stocks via Wealthsimple Trade, coins via Wealthsimple Crypto, or ETFs via Wealthsimple Save. Bingo — you’re now hooked into Wealthsimple’s ecosystem.

Finally, Wealthsimple can integrate Cash seamlessly into the rest of its product suite. First, this means users’ funds can flow anywhere, anytime. Wealthsimple offers “instant deposit” for users on Trade, rather than waiting several business days for the money to be deposited by their bank. This is a huge benefit for active Trade users, especially when the markets are hot.

Second, this means Cash users can benefit from integrations with the rest of Wealthsimple’s products. For example, Wealthsimple could let you round up purchases made via the Cash Card, and automatically invest that surplus in fractional stocks via its Trade app.

Finally, it’ll also boost Cash’s retention. Users already regularly check their investment accounts to monitor performance, meaning it’s more likely they’ll engage with Cash frequently.

Solving niche pain points

One thing that’s very clear, even from its marketing, is that Wealthsimple knows exactly who its target users are. The product use cases they mention, the value propositions they showcase, and even their branding — it all deeply resonates with Canadian millennials.

This shines through in the Cash product, too.

Wealthsimple recently launched the Cash Card: a Visa debit card that gives users 5% cash back at restaurants and bars (including food delivery) on weekends.

This perk shows us a few things.

One, Wealthsimple is meeting its users where they are. Rather than forcing users to adopt new behaviour, they modelled their business to fit users’ existing behaviour.

Food is one of the largest sources of spending for students; they’re always strapped for time, and many don’t know how (or don’t want) to cook.

By rewarding millennials for their existing habits (eating out on weekends), they incentivize users to freely live this lifestyle, powered by Wealthsimple, and earn free cash in the process.

Two, they understand two of millennials’ biggest pain points: cash flow, and instant gratification.

Students are always strapped for cash, and millennials don’t care to earn a measly 0.1% annually from a big bank. They want instant rewards for their purchases.

The average Canadian household spends $2,780 eating out at restaurants annually. Using the Cash Card would result in $140 in cash back!

Wealthsimple also recently launched bill splitting: a new feature on Cash that allows you to instantly split the bill whenever you’re dining out in a group.

We’ve all been there: the awkward interaction of everyone pulling out their phones, opening their banking app, sending an eTransfer, and having to add a security question. Heck, some banks even charge $1 to send eTransfers!

While this feature is designed for dining out, it can be applied for many more millennial-centric use cases: splitting grocery bills, rent, or utility payments.

Additional expenses I’d love to see Wealthsimple offer cash back on include subscriptions (e.g. Netflix / Spotify) or transportation (Uber / Lyft).

Product-led growth

Product-led growth is defined as:

A business methodology in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself.

Many big tech companies can attribute their success to product-led growth, like Slack and Dropbox.

FinTech products are especially ripe for product-led growth, because nothing gets users more excited than free money.

It’s how PayPal famously grew its userbase by 7–10% daily in its early years.

They gave users $20 when they signed up for an account, and another $20 whenever they referred another user (they later tapered this down to $5).

While you might think they were just burning money to get more signups, the reality is that this was a highly cost-effective customer acquisition method.

By spending $20 to acquire a new user, PayPal was banking on the fact that they’d make more than $20 on a given user, from their lifetime usage of the product.

This concept is referred to as customer acquisition cost vs lifetime value, or CAC:LTV.

Wealthsimple Cash is employing a similar strategy, by giving new users $25 when they sign up. As mentioned earlier, millennials love nothing more than free cash, so this is a prime incentive for them to sign up.

Next, in terms of referrals, PayPal measured how many additional users a new user was likely to bring to the product, based on their referral system.

This metric is referred to as a product’s “k-factor”, and a k-factor > 1 means the product is viral; i.e. every new user also brings 1+ additional users.

While an additional referral here and there may not sound like much, the chart below illustrates the power of a k-factor > 1:

Wealthsimple also gives users an additional $25 whenever they refer a new user, which incentivizes existing users to invite their friends to join Cash.

Finally, on mobile, Wealthsimple Cash cleverly uses push notifications as a ‘trigger’ — a common growth tactic among consumer products like Uber and DoorDash.

Every Friday and Sunday, they send out notifications to Cash users, encouraging them to dine out or order food, and pay via the Cash Card to get the 5% cash back:

This is a perfect model of Nir Eyal’s “Hooked” model, where there’s a trigger (push notification), an action (order food), a reward (5% cashback), and an investment (e.g. keeping the Cash card visible in their wallet).

Future iterations

I’m excited to see how the Cash product evolves over time. Here are some ideas I’d love to see Wealthsimple implement in the future:

User growth

A big challenge for Wealthsimple will be growing its user base, especially among non-Wealthsimple customers.

Given that group dining is a use case Cash solves for, I think Wealthsimple should leverage this social interaction for the growth potential it has.

For example, imagine a Cash user pays the bill using their Cash card, and they send a request to split the bill with everyone else. Anyone who isn’t a Cash user could receive a text message from Wealthsimple, requesting to split the bill. The text message contains a CTA to download the Cash app, and a promo code for a signup bonus.

This would be a great way to acquire new users organically, and they get to realize the value immediately. New user activation is solved.

Banking features

Cash made its first foray into millennial-friendly banking by offering the Cash card and bill splitting features. Now, it’s time for them to become the one-stop shop for Canadian millennials to manage their money.

First, Wealthsimple could expand Cash to offer more payment types, such as bill payments — so you can pay your tuition, rent, utilities, or loans via Cash.

Second, the killer feature will be when they offer direct deposit, so that your paycheque can automatically deposit into your Cash account. Not only that, but you could automatically invest a portion of that paycheque into any of Wealthsimple’s products (Save, Trade, or Savings).

For example, you could allocate 25% to invest in ETFs via Save, 50% to your Savings account, and keep the remaining 25% in your Cash account to spend on regular monthly expenses.

New financial products

Now, people don’t just use banks for chequing and savings accounts; they also use them for other financial products. Think mortgages, loans, and credit lines. And of course, credit cards. In order for Wealthsimple to become a true competitor to banks, they need to expand into these product offerings.

They already have inroads with students through their user base, so offering student loans should be an easy upsell. The same goes for first-time homebuyers who need a mortgage — these are young professionals who are likely already Wealthsimple users.

Once that vision is achieved, this will all help Cash become the de facto ‘chequing’ account for users; I truly believe that’s Wealthsimple’s long game.

In summary, here’s why I’m bullish on the future of Wealthsimple Cash:

• Wealthsimple already has mass distribution through its existing user base, allowing them to easily cross-sell and integrate Cash into its products.
• They’ve strategically built product features in line with their target demographic’s pain points.
• Finally, their product-led growth mentality will enable them to build a truly viral consumer product; a necessary condition for scale.

This is a series of blog posts on my observations from the tech industry and product management. I’m on Twitter at @samir_javer! 👋