The latest wave of tech-based financial startups have a new angle on
the banking sector:
They'll assume that everyone is out of money,
then try to monetize their brokeness...
challenger banks, have been all the rage
in Europe and Australia for the past few years.
starting to get attention here in the US, with
Chime, Varo, SoFi, Current, GoBank, and
even - heaven help us -
Yes, the exclamation point is part of the name. Like
Cutting edge, I know...
neo-banks have been trying to make money in the usual ways:
By taking a cut of credit or debit card transactions,
collecting interest on consumer deposits, and making loans.
The usual banking stuff.
come-on is that they're super-convenient, all-digital,
mobile alternatives to the big banks. Better yet, they're
focused on their customers' "financial health," as one
neo-bank CEO told me, and easing the "pain" that people feel
around their money.
that pain go away?
At Chime and
Varo, you can get what
sounds a little like a neo-payday loan - your paycheck cashed,
up to two days before your actual payday. Checking accounts
at these startups are often free, and the companies will let
you go $50 or $100 into the red before they start charging
any overdraft fees.
Some have automated savings accounts
that invisibly funnel a few dollars from your paycheck into
neo-banks aren't necessarily even banks at all...
apps that facilitate transactions, which are then carried
out by partners that are banks.
Others have applied
for bank charters while touting their homegrown technology
stacks and hyperpersonalized product offerings (based, of
course, on your personal data).
But all of them say,
explicitly or by intimation, that they're mission-driven.
Their mission is the hot mess that is your finances.
mess is very real.
Seventy-eight percent of Americans live
paycheck to paycheck.
Student loan obligations in this
country total $1.5 trillion, and researchers believe they're
cutting into millennials' ability to
buy homes, have kids, and save for retirement.
40 percent of households have some credit card debt:
better fix than to slap a slick veneer of tech over basic
banking services, push the
ouroboros paycheck cycle up by a couple of days, offer
some basic budgeting tools, and call it a revolution in
banking isn't a bad idea, nor is it a tough sell.
definitely an ambient frustration with the megabanks that,
I mean, there really
should be a
mission to take customers away from these companies. At
minimum, it's smart to capitalize on all of this well-earned
deeply depressing to attend a large gathering of executives,
founders, and industry veterans, as I did at October's
Money 20/20 conference, and hear the same, somber
message repeated over and over again:
The future of money
will be predicated on the fact that the personal finances of
the next generation are as fragile as a Fabergé egg...
according to attendees and speakers, is both a problem and
No one bothered mentioning that the sick
state of the nation's finances isn't technology's problem to