Why Fintech CAC Models Are Breaking – and What Growth Teams Are Doing About It

Abbhinav R Jain, Co-founder & Chief Financial Officer, AdCounty Media

For decades, fintech advancement mostly followed a known strategy: attracting customers through marketing, improving how people are convinced to buy fintech’s products or services, and increasing expenses as long as CAC remains lower than LTV. This was a model that was meant to help fintech companies progress fast until it worked.

Now, changing this scenario has become less feasible.

What is difficult is not that advertisement expenses have risen, but that customer acquisition is now a problem of trust rather than just one of marketing.

Financial products are something that requires careful consideration. For example when it comes to creating a savings account, applying for a loan, or selecting a platform for investing, people rarely make any decisions after seeing one advertisement. They compare options, read reviews, get references, and often come back multiple times before making a decision. Thus increasing budgets for advertising campaigns does not guarantee achieving the expected returns.

In response to the trend, growth teams are starting to shift their focus from customer acquisition to customer economics.

One of the major changes is focusing on the importance of conversion quality rather than the significance of the number of leads generated.  Instead of optimizing campaigns for getting clicks and app downloads, marketers start understanding whether newly acquired users go through KYC onboarding, turn their accounts active, perform transactions on a regular basis, or start using other financial products.

Another trend is the increased effectiveness of owned channels. Email, mobile messaging, content marketing, referral initiatives, and community building have helped fintech companies rely less on paid advertising. Not only are these owned channels cheaper over time, but they also help strengthen the relationship with customers throughout their life cycle.

Additionally, the product experience has gained importance as well. Many fintech companies have started looking at onboarding, educating their users, and supporting customers as marketing activities. A smooth onboarding process, pricing transparency, and timely financial advice can boost activation and word-of-mouth advertising, thereby reducing customer acquisition costs by not increasing spending on paid advertising.

AI is impacting businesses in a way that not many of us expect to. Instead of just automating ad purchases, AI helps teams find more customers, allow for personalized communication, and predict and reduce churn, which is not simply about bringing new customers but helping the company grow the value of every customer’s life.

The most significant change may be how success is measured. Rather than asking, “What is the cheapest way to acquire a customer?”, growth teams now ask, “How can the relationship be most profitable over a period of time?”.

This change also shifts priorities. The budget needs to be no longer focused only on paid advertising, but also on customer experience, retention, education, and advocacy that used to be outside any conversations but matter now and affect how people acquire customers.