Inspired by the Fast Company cover story, I’ve been wondering what consumer finance company delights its customers the way Apple does. Who is the Apple for America’s 60 million un- and underbanked? The obvious contenders are banks, alternative financial services (AFS), and nonprofits. Each has a couple Dells, an HP and perhaps even a Google. None has an Apple. Here’s why:
Retail banks don’t care about the underbanked. The basic business model of retail banks — earning a spread from making loans with core deposits — pushes their attention upstream, to compete in the already-saturated waters of big deposit accounts. Other than overdraft fees, supposedly gone since July 1, banks claim ignorance on how to serve the underbanked. Most of their community do-good requirements (also known as CRA) take the form of real-estate lending in low-income communities, but rarely benefit the masses. KeyBank scores points for offering low-cost check cashing, although it’s not a big hit.
AFS does care, but is inefficient. These are the check cashers, payday lenders, retailers and bodegas of the world. They actively serve the underbanked customer, through 100,000s locations, but they sport high fees for products like remittances, payday loans and check cashing. Their inefficiencies and legacy costs basically prohibit better rates or a great experience. Companies like Wal-Mart are making a huge dent, but still lack long-term products people need to build credit, save, and invest for the long term.
Nonprofits care, offer low cost and long-term products, but don’t scale. The “mission” folks — organizations who are in business to serve the underserved — include nonprofits, credit unions and some community banks. Many enjoy a special designation by the US Treasury, as Community Development Financial Institutions, and specifically target low-income communities with a broad range of well-priced products, from checking accounts to business loans and mortgages. The only trouble is that they don’t scale — at all! Most only serve 100s of customers; the largest serve 10,000s. But when 60 million people in the US are un- or underbanked, it will take about 10,000-100,000 CDFIs to serve the need. There are only 800.
The “Apple for consumer finance” would scale to reach millions, would delight its customers with great service, smart technology and a range of tools from transactions to investment. While the parallel remains elusive, perhaps it’s actually Apple itself. Consider the consumer finance innovation delivered on iPhones and iPads, from the Square to the Bump and literally hundreds of finance and banking apps filtered and approved by the Apple of …, well, Apple itself. There is the very real potential for Apple to become the Apple of consumer finance, as it already has done in personal computing, music, and telephony.