Brett King, best-selling author and founder of the mobile money service Moven (pictured above), envisions a future where all banking is done via a smartphone.
During his keynote address at the Center for Financial Services Innovation’s (CFSI) 8th Annual Underbanked Financial Services Forum, King cites plummeting visits to brick-and-mortar financial institutions, the rising market penetration of smartphones, and the popularity of prepaid debit cards among Generation Y as evidence that a tidal shift—similar to what’s transforming traditional media—is also shaping financial services.
The future of financial services, King says, belongs to anyone who can provide consumers with mobile banking that includes real-time information about their spending and saving in a way that stimulates good behavior and discourages bad.
“It doesn’t matter if it’s a bank or Walmart or Moven that provides this,” King says, adding that consumers will choose whatever banking product offers the most utility.
|From left: Daria Sheehan, Citi Foundation; Quiñonez; Camille Busette, Consumer Financial Protection Bureau Office of Financial Education; and Collins.|
Jose Quiñonez, executive director of the Mission Asset Fund, says peer lending can help low-income immigrants build credit histories by formalizing naturally occurring “peer to peer” loans and reporting the repayment activity to credit bureaus.
He cites a report, “Building Credit for the Unbanked” which confirms that pairing social loans with financial education can raise a low-income consumer’s credit score by 168 points to an average of 603, and reduce low-income consumers’ debt an average of $1,000.
However, simply presenting people with information isn’t enough to change behavior, warns J. Michael Collins, director of the University of Wisconsin’s Center for Financial Security.
“If information alone were enough,” he says, “you wouldn’t need to go on a diet because you understand what a calorie is.”
Randy Dotemoto, president of Kinecta Alternative Financial Solutions, says underbanked consumers are “disadvantaged from day one” due to their exclusion from mainstream credit products.
“It's no wonder they become check-cashing customers,” he says.
|From left: Michael Daly, Bank of America; Dotemoto; and MasterCard Worldwide’s Richard Rozbicki.|
Kinecta Alternative Financial Solutions offers two cards designed for underbanked consumers, the Select Plus Hybrid prepaid card, and the Select Plus Hybrid secured credit card.
The cards help underbanked members manage their money—and they pave the way to traditional financial services.
Millennial seek utility
Members of the millennial generation, those born between the late 1970s and early 2000s, might lack access to financial services.
But don’t call them “underbanked,” advises Stephen Drees, managing principal of global consulting for Acxiom Corp. He says members of this generation don’t think of themselves as “underbanked,” just like they don't think of themselves as “underburgered” or “underaccessorized.”
|Stephen Drees, Acxiom Corp.|
Millennials, he adds, don’t differentiate between banks and other financial services providers, they just “care about utility.” If that means using a prepaid debit card, he says, that’s what they’ll use, and they won’t attach any stigma to it.
Sociogramics CEO Eric King, introduced by CFSI Senior Vice President Rachel Schneider (see below), got a laugh from attendees when he said it's possible that people who share drunken pictures of themselves on Facebook might be 10% better credit risks than those who don't.
“Until you look at the data, you don't know,” King says, adding that financial institutions fail to use a lot of valuable data that’s available to them.