Bakkt, Inc. (BKKT) Earnings Call Transcript & Summary

[Audio Gap] So I served as VP of Customer Market Insights at Bakkt. There's a lot of different pieces within that, so I'll break it down for you briefly. First, there's consumer research. So that means understanding the needs and wants of the consumer through qualitative and quantitative methods, and then taking those learnings and educating our organization, our partners and clients with the voice of consumer. So what we want to show them is, who is this person outside of their transactions, and what do they actually value. Then there's market intelligence. So what are other players in our space doing and how well are we positioned in that space? What trends out there are impacting consumers. And lastly, the third piece of my role that I oversee is Customer Analytics. The best way to find out what a customer wants is by looking at what they do, what is their actual behavior and what are the insights inside our own business data. So when you combine all 3 of those pieces together, you get a really good understanding of why customers do what they do, and how we can design better experiences for them and serve them in the future. In parallel to Bakkt, I've held many different types of roles from Consumer Insights at a financial planning firm to various marketing roles to even being a Producer and Writer of a financial talk show for 5 years. And actually, in 2013, when I worked on the show, there was a call-in segment and that was my first exposure to hearing consumers asking about Bitcoin. There's like what is this? Should I buy it? So really, since then, crypto has been definitely a curiosity of mine.

Great. Great. Well, maybe you could give us a little more detail, a little more color about the research at Bakkt and your role there.

Yes, absolutely. So first, I want to explain what customer research is because there can be so many different things. So I like to think about it in terms of a customer journey. So it can be very top of funnel like thought leadership all the way down to the bottom of the funnel and understanding why customers leave you. But in between those 2 ends, research can be [ CX ] metrics that help you understand the consumers' experiences with your product. How are we doing? It can also be preference data to understand how they rank or rate certain attributes or features. All of this is designed to help organizations figure out what's important to customers. So how we're using it at Bakkt? Right now, we're using attitudinal and preference research to give us a baseline on demand from consumers on various crypto and loyalty offerings. We are then using that data to help our partners and potential partners understand -- help them understand really which segments of their customer base have the highest crypto affinity and product fit. And what that leaves us with is, our research really giving us the confidence to say to our partners and clients, these are the demographics that will respond to a crypto offering and why. I know I've been talking about crypto, but not all of our research has been focused in the crypto space. So we've actually used various methods to understand traditional loyalty behaviors with our rewards storefronts. So when it comes to loyalty points redemptions, how are people thinking about their loyalty points? How are they strategizing about using them? What do they think of the various reward options available in the market? And what is missing? What's their awareness about various ways to pay and make transactions? So that's a lot. And what I love most about the research here at Bakkt is, I get to study products in both existing and nascent areas. So for the more nascent areas with some of our crypto offerings, there's not a lot of, well, I already knew that so we didn't need to do the research. There's always a learning for us and that's super exciting. And in some ways, I feel like we're learning it along with the consumer. There's not this established track record of what's typical consumer behavior in this market. This also helps us in keeping our own biases out of the way. Being too experienced in a subject matter can actually be a roadblock for a researcher. And as our crypto use cases evolve, I'm really excited to evolve the topics we study with the consumers. But above all and one of the things I'm trying to put into action at Bakkt is making the research actionable. You know what thrills me the most is seeing research being put to use in product and marketing recommendations or using it as a way to start a conversation with a prospective partner, bringing them a new point of view and help answering a business challenge for them.

So how does Bakkt keep up with changing consumer sentiment around crypto and the evolving industry?

Yes. As you know, crypto markets and sentiments are changing so fast, and because Bakkt sits at the intersection of crypto and loyalty offerings, I don't think that there's an industry or vertical I don't touch. So really, anything from keeping up with the banking industry to Apple products to loyalty redemptions to crypto and the gig economy, to credit card issuers, understanding which brands are in and out of favor with consumers that's so much to keep track of on a daily or weekly basis. But the problem in studying all these areas is that traditional research can be really slow and manual and costly, and that doesn't work for us. We don't have the time. So I've spent the past year putting together research platforms and intelligence partners in place to help us with that. And I feel confident that I have multiple ways to figure things out for whatever topic pretty much immediately. Companies have their martech stack, the marketing tech. The same is true for research. You have to have your restech, your research technology stack, and we have a great one. So with the program we have in place, we can do crypto sentiment tracking. We can keep up with industry trends. We can understand consumer buying behaviors, perform advanced plot methods, execute user testing, do qualitative research and brand tracking. We can really tell a complete story from multiple sources. So I want to talk about one program in particular that I'm excited about that was built specifically to help us keep up with all of the changing consumer crypto sentiment and usage. So in October, we fielded our first ever attitudes, awareness and usage tracker. So you've probably heard of a brand tracker, how is the health of the brand, how are consumers thinking about the category, how much are they using that product. Well, think about that in terms of one being built specifically for crypto. So I would like to think that this is probably the first of its kind just based on the various crypto use cases that we're testing and tracking in it. It's made up about 70 questions with questions about past behavior and intended future behavior, things like how has someone interacted with crypto in the past 6 months. What is their unaided awareness level of coins beyond Bitcoin? How much trust do they have in different ways to acquire crypto? It's also giving us the opportunity to compare crypto apps to newer acquisition models like Crypto Rewards through your favorite brand or through your primary bank. There's also attitudinal testing, which is very important. How much does the consumer agree about certain statements around crypto? So we've released our first wave of the data from this tracker in December, and Wave 2 will go to field in April. That's also where we expect to measure any longer-term impacts from last year's volatility and the FTX collapse.

Right. So what has the consumer sentiment done from pre- and post-FTX?

So that was actually one of the focuses in the Wave 1 tracker. We feel that Wave 1 end of October, and as soon as we came out of the field, guess what happened, FTX events started to unfold. So we went back a few weeks later and got a short-term assessment, and I'm going to give you 2 big learnings pre and post. The first is that the change in sentiment, pre and post FTX really depends on where someone is in their crypto journey. So for the crypto-curious audience, and these are people who don't currently own crypto, but have expressed interest in learning more about it or signal that they would purchase in the future. There was really no change pre and post FTX with them when it came to likelihood to purchase in the future. It stayed steady, around 40% likely to still purchase in the future. And if you think about it, that makes a lot of sense. They don't have a personal stake in it right now. So they have less recall the events. They aren't paying as close attention to the day to day. It's not part of their orbit. And those who did have recall, we found that they can only really speak about the events in very big ways. So for those who do own crypto, that's where we did see a slight dip in likelihood to purchase in the future, but only about 7%. And so they, of course, have higher recall of the events and are able to describe in more detail of what actually happened. But I think, overall, we can confidently say that consumers have shrugged off market volatility and the FTX collapse. There are no signals of immediate exit from the market. We're not seeing that. We know consumers move to the new cycle very quickly these days, but we expect any long-term impact to prove out in Wave 2. So that was the first learning. And I'd say, the second learning from the study is that consumers already have high levels of safety and regulation concerns prior to FTX, and those concerns begin to jump drastically once someone has over $100 invested in crypto. So it definitely does not take a large monetary amount for these things to start becoming meaningful to them. So the FTX event certainly didn't change that sentiment. It was already in place. We also ask consumers about what safety and regulation features were the most important to them. We tested a few different features. I'll name a few. The crypto provider has a bit license. The providers crypto is held in both warm and cold wallets. And that the providers crypto is not held on the trading apps balance sheet. In other words, it's your crypto, not ours. And what we found is for both crypto owners and the crypto curious, it's your crypto not ours was a top safety feature for all. And this ended up -- of course, this ended up being the main reason for the FTX collapse weeks later. And this is still the most important feature post FTX as well.

Interesting. So what are some of the bigger trends you're seeing with crypto in terms of the future of finance? And what do you expect in the near term?