Banking Services for the Under Banked

The under banked are not a traditionally a good target for banks. They do not typically have large bank accounts for the banks to make money off of savings accounts. They typically do not have large incomes to support high value loans. They may also not be a good credit risk for the bank’s credit card business. But wireless carrier economics are different. Carriers can leverage a service that nominally increases a customer's charge over a large customer base to increase revenues substantially. Carriers also are looking for services that reduces churn, especially for prepaid customers where churn is high. Banking services create stickiness as people tend to have long relationships with their financial institution. Prepaid wireless carriers are in a position to offer banking services to the under banked population as there is a high correlation between prepaid customers and the unbanked.

Making a Solution Possible

A company Vesta (www.trustvesta.com) has been in the prepaid top up business for years offering a turnkey prepaid top up solutions for a number of carriers around the world including Verizon, AT&T, Boost, Telcel, China Mobile, Vodafone and Telefonica. Vesta is offering a new turn- key financial solution that allows customers to pay their bills and make electronic payments. The customer puts money into a mobile wallet account run by the carrier, Vesta, and a program manager like Fiserv for example. These funds can come from a Green Dot Card, a prepaid card from Visa, MasterCard or others, cash at a retail store, or via direct deposit. The customer is charged $3 for inputting cash into the mobile wallet account. The customer is given an application on their smartphone which they can use to pay bills or transfer money from the phone; and a card which they can use like any prepaid card. The carrier, Vesta and the program manager share in the transaction fee from the merchant or electronic bill pay. The program manager is an accredited financial institution, takes care of the storage of funds, and makes money off of the float.

What has really changed the equation and made this opportunity possible is smartphones, which are getting cheaper and growing in popularity with prepaid customers; along with application stores and easy downloads. A small computer and usable applications are in the hands of people who did not have this access before.






Vesta Smartphone Application

Benefits to the Customer

The benefits to the customer are the convenience of electronic bill payment, electronic money transferring, lower cost money remittance (Vesta works with various money remittance companies in various parts of the world), as well as and maybe more importantly, a good record of income and spending.

Limitation and Potential Opportunities

Currently this is only being offered on Android phones 2.2 and 2.3, and will be offered on the 4.0 Ice Cream Sandwich version of Android 30 days after launch. Android is where the main intersection of smartphones users and prepaid users exist.

At this point in time, creating interest bearing is a small factor because the rates are low. But this could be a good way for people feel good about this service. The unbanked do not typically get interest on their money and would see this as being very attractive especially as interest rates go up.

Other opportunities in the space include:

• Cash back on purchase like PerkStreet Financial (www.perkstreet.com) offers. People in the under banked group will see that as a highly attractive feature.
• Tax preparation with automatic rebates: The under banked typically have simple returns that can be done by imputing the W-2 by the camera on a smartphone. The carrier can advise clients on how to save money on taxes via an easy to use application.
• Offering discounted coupons to merchant stores.


Win Win Scenario

This is a service which will be most attractive to carriers that focus on prepaid services in the US and international carriers everywhere else because of their high % of prepaid customers. This service is not a standard telecom service so carriers will have to promote and put their trusted brand name behind this product. The service has the hallmarks of a good product in that economically it adds revenues for carriers with the additional benefits of increased loyalty. For customer’s it saves time, creates more control around their finances, and offers potential cost savings. This can be a win-win for both parties, the hallmark of any good business transaction.

Geo Social: No longer at a loss for words

Geo Social is now starting to become mainstream. Many companies are popping up to allow people to make connections with who they know in their town (www.foound.com) and when they travel (www.ajungo.com). This is due primarily to three main factors: the penetration of smartphones to the mass market so the majority of the people in the market have a geo-sensing device that provides a rich experience; the overall popularity of Facebook so that many people with smartphones can be connected; and the ability of linking to Facebook to applications thus having readymade content at any application developers disposal.

Geo Social will take the next step in allowing people to know each other in the room via a wireless network connection and a social networking connection. This capability will probably be used in certain situations like business conferences and in dating situations where people do not know each other and will want to make some type of connection. This will move Geo Social from a community communications tool to a personal identifier and information source.

Geo Social will perform the function of knowing people's interests and characteristics before you actually meet them. It will a good conversation starter in a business situation when people are looking to make small talk and build a bond, in a dating situation where it is always more interesting to talk about something in common, or simply a way for people to exchange ideas about a topic they are passionate about. This evolution of making social interaction more efficient started with Facebook and will continue with geo social because it has value in creating more efficient conversation and it makes people more comfortable as they are able break the ice and start a meaningful conversation.

Privacy concerns do exist, and they become more impactful because the geo targeted person is at a physical location. Geo Social connecting needs to done in certain situation and should be turned off when the person leaves the particular area. In addition the same rules apply in providing content on social networks in terms of how you want to be perceived and known about. This may differ depending on the situation. LinkedIn for business situations and Facebook for social situations. People do in fact have different personas in different situations.

Some small companies are working on these types of solutions, but the larger social networks like Facebook and LinkedIn can use this to understand how people connect based on location, who people are interested in connecting with in a face to face meeting, and what common interests’ people have. Geo Social makes social networking more valuable to the user and provides a way to provide more targeted and higher CPA advertisements simply because it can help start a conversation.

Mobile Devices from Investors and Innovators Viewpoints

Connolly Bove Lodge & Hutz, a nationwide law firm which specializes in corporate development and intellectual property (www.cblh.com) put together a very informative mobile device forum which consisted of two panels on mobile device investment and mobile device innovation. The panels were made up of investors, executives from start ups, leaders from successful mobile applications companies, an IP executive from RIM. The panelists included:

Bob Moul, Philly Startup Leaders, President
Philip Moyer, Safeguard Scientific, Technology Group Managing Director
Saul Richter, Emerald Stage 2 Ventures, Managing Partner
Chuck Sacco, Mobile Monday Mid-Atlantic, President
Jonathan Darcy, RIM, Director of Licensing
Scott Snyder, Ph.D., Mobiquity, President, Chief Strategy Office and Co-Founder
Scott Wasserman, appRenaissance, Founder and President

The discussion revolved around what is shaping the mobile market, and where to put investment dollars and build businesses. The exchange of ideas took many interesting turns but revolved around the user experience, and the flood of data that comes from ubiquitous computing. The general takeaway is that companies need to fundamentally rethink the way they are interacting with customers, and be able to effectively manage and profit from the size and speed of data.

The two shoulders of tablet demographics will make tablets mainstream:

The panelist in the Investment Panel exposed the idea that there are three generations using electronics: the younger generation, the PC generation, and the older generation. The younger generation is likely to use a tablet for content creation and viewing, the PC generation feels most comfortable creating content on a PC, and the older generation which had not really taken to the PC is in love with the tablet. The tablet’s appeal for non-technical people is very strong and that group includes Doctors. One panelist stated that 70% of doctors use iPads.

The appeal of the tablet to younger generations and to people who were disinterested in the PC will also bleed over to the PC generation in different degrees. I believe the tablet will be a near universal device because of its ease of use, intimacy, universal application capability, and mobility. In the US we have a TV in every room, well in less than 10 years we will have a tablet in everyone’s hands.

There are still hurdles to overcome with the universal use of tablets. The same study from Spyglass Consulting Group that found 70% of Doctors own iPads stated that very few use them at their practice. One of the main reasons is that applications are not transferrable to the iPad. The full utilization of this tremendous user experience via mobile devices (Tablets and Smartphones) is being held back by the lack of integration to and responsiveness from mature backend systems and databases. These two worlds are going to have coalesce and the panelist believed standardization and efficiency between these two worlds needs to happen.


HTML 5 Tug of War:

The panelist brought up that there are two competing groups in the mobile space. One group is the browser based companies like Google, Facebook, and Amazon who are promoting the use of HTML 5 because it allows for the universality of service across devices and allows them to be the center of the user experience as they are in the PC world. One of the examples given was that the Kindle Fire is primarily a browser based device.

Then there are the device centric companies that introduce interfaces that make the device both more usable and more relevant. These newer interfaces and capabilities only work with the native application. Device companies need to continue to innovate and bring useful and enjoyable interfaces to the customer. One of the panelist believed that for the time being the device will be the most relevant piece of the consumer experience. This is certainly proving out in Apple’s explosive growth.

The carriers were discussed in passing do not have a major stake these ecosystems, which was a far cry from what the discussion may have been 5 years ago. The carriers are a pipe and the customer appeal characteristics have to do with quality of service, and customer service. However the carriers, I believe are more likely to support the device centric view of the world because it allows them product differentiation.

The panelist from the innovations panel believe that HTML 5 in its current state was good for brochure wear but companies that needed to provide a better user experience should look to native applications. As businesses evaluate different mobile options, it really depends how the company wants to engage with customers and the customer wants to engage with a company. Both HMTL 5 and native applications may be needed to engage the customer on their terms.

Big Data is a Game Changer:

To the panelist data is paramount trend and doing predictive analytics is an area that will highly impact business. The precision that some companies like Target can use information is astounding and in one case the panelist stated Target knew a girl was pregnant before her Father did. www.nytimes.com/2012/02/19/magazine/shopping-habits.htm?_r=1&scp=3&sq=Target%20Shopping&st=cse

This can provide tremendous marketing advantages. In addition the number of devices is growing and can throw off 200 or more indicators of the person’s interaction with the device and the user’s environment. The current need for data analytics to remain competitive, the explosion of the devices, and the capability of those devices are driving cloud economics. The current data flood has already outgrown existing database capabilities according to one panelist. We live in a world of high data capacity and traffic demands will only grow. Cisco predicts that by 2013 the annual traffic on the Internet will be 667 exabytes.

Cloud computing with its scalability of storage and processing power, and flexibility via virtualization are the back office systems of this century. The panelists believe that providing the connectors between the devices and cloud are a key area of opportunity. These connectors will allow legacy databases to react with devices users that are expecting instantaneous feedback.

Other key points on mobile devices:

Human Interaction:

Human interaction changes with mobile devices. This can lead to both better customer responsiveness in stores, and in our personal lives less direct personal interaction. One panelist stated that each generation must deal with the predominate technology of their generation.

We live in an App World:

The moderator for the Mobile Device Innovation panel stated that they choose a dog kennel company because they could watch their dog on their iPad while they were vacation. Use of a smartphone and tablet are clearly differentiators for business and this trend will only get stronger.

Privacy is lurking as a defining issue:

People do not have full control over the data that is being collected on them, and this data may impact their lives and how companies want to interact with you. One of the attendees brought up if people had control over their data, they might be able to use it for sale or barter. This is essentially what Facebook is doing via advertising, and users are getting community and engagement in return.

Is Social the new .Com?

One of the panelists brought up this point in reference to articles that question Facebook’s revenue capability. This point was in contrast to some member of the innovation panel that highlighted the value of Facebook in developing applications and the power that Facebook had in creating interest in applications. Clearly social networks have value. Monetizing that value is the challenge. Giving social network users the needed benefits will keep the personal information exchange open provided the user feels they have appropriate control of the information. The monetizing of social networks is likely to be around allowing businesses to foster better, more comprehensive and efficient relationships with their customers.

I wanted to thank Connolly Bove Lodge and Hutz LLP and the panelists for putting on this informative event. It gave a great overview of the mobile and data markets.