I've been trying to come up with the right way to post about this and finally decided to just go for it...apologies in advance if it's a bit sloppy and unfocused.
So my idea (more of an insight at this point) is that we're at a unique point in time where everyone - and I mean EVERYONE - has internet access on mobile devices, while at the same time the consumer finance system is getting LESS accessible. The experience that started me on all this...last December I was at a small Christmas gathering, where my friend was mucking around with her smartphone (given to her by her boss) for at least 2 hours, trying to get a specific song. She was wasting all kinds of time trying one cruddy music app after the next. I found the song as an MP3 download on Amazon in less than a minute, and it was only $2, which she had in her pocket. When I asked her why she didn't just get it from there, she said "I don't have a credit card...that's not going to work for me."
WHOA! Sledgehammer to the face time! So what's going on here?? We have a person who is gainfully employed, who has access to the internet on a modern mobile device, who has CASH IN HAND - but is EXCLUDED from the conventional payment system because she has a poor credit score and uses a credit union instead of a checking account.
After this experience I could not stop thinking about it. Two weeks later I read TMFL and all the pieces started falling into place. I came up with one way to solve this problem (I won't go into details here, might go to the Inside depending on replies here...) Searching online I found some similar things but none were aggressively being marketed as a real business, and the ones I tried did a horrible job. Opportunity!
As I said I won't go into the details of what I'm going to try first. It doesn't satisfy entry as a stand-alone business, as it could easily and quickly be done by others, and I also can't think of a way to monetize it effectively...just ads and of course that's a poor primary income generator. I do think it's a good way to pull in people and get them to keep coming to my site, and build a user base/community.
So there are two main aspects to this. The first is making payments on the internet, to purchase goods and services or just to pay bills. While there are many "wallets" coming out it seems none of them will solve this problem. They all ultimately require you to have a traditional credit card or checking account as source of funds. After discussing the problem more with my friend I discovered she had tried to get a PayPal account, only to find that it couldn't be funded from her credit union account.
Why not use a MC/Visa gift or prepaid card? The fees are extraordinary and you have to go to the store to refill them. $5 monthly service charge (so $60/year just to have the stupid thing), $5 for an ATM withdrawal (on top of the bank's fees, so you could easily pay $8 on a $20 withdrawal)...the list goes on. About the only thing you can do for free is have your paycheck go directly to the card. They are also confusing...some can't be used to make any online purchases, some can, some are one-time cards ready to go when you buy them, others must first be activated (and possibly approved), some can be refilled, some can't. Making a superior prepaid card is definitely on my list, but that's going to require funding, which in turn will require me to make something else first to prove to investors that I'm the pony they should bet on.
The second is short-term loans for small amounts of money. Microlending is something that's gotten a lot of attention in other countries but not much in the US. Peer-to-peer lending is a rapidly growing industry but nearly invisible to those not in it...I just discovered it myself on accident a few weeks ago. Meanwhile the traditional companies seem to be much more interested in making their proprietary "credit score" the mother of all rent-seeking activities rather than lending money to anyone who's not already overserved.
I'm going to cut it off here before it gets even more long and rambling. Please share your thoughts, opinions, and experiences. I'm especially interested to hear from anyone who's been involved with any of these activities (either traditional banking/credit cards or the new microfinance businesses) or has a background in banking or finance. I would not have a problem with running a site for several years with zero income, if it can then be sold (or somehow partner with) large lending companies interested in the user base and alternate history of credit-establishing activity built up over those years.
One final point. While talking to various people (especially the younger programmers who represent the people expected to create the next hot startup) I was stunned at the dislike, even outright hatred, of the group of people that represent my user/customer base. I was told that I'm an idiot, that I'm targeting useless lazy bums who'll never pay for anything, that anyone who can't or won't get a credit card is basically despicable human garbage. This is in complete contrast to the people I know and have talked to. I live in the sticks in Montana and have a day job at a call center. Most of the people there don't make much money and most of them don't have credit cards, because they don't qualify and/or because they distrust them. However they are honest hard-working people who have been continuously employed for years. They aren't degenerate "party people" blowing all their money on a good time, they're raising families and paying the bills. They just don't have good credit scores, because you have to use credit to raise your score, and if you don't have a good score you can't get credit...a vicious loop that excludes anyone not already in it, and rewards people for levering up as high as they can. It doesn't promote prudent behavior at all, as long as you can make the next payment your score keeps going up, even as the actual RISK keeps increasing. Meanwhile people who live within their means and don't make use of the system get a low score, and incrediously, this simple-minded single-number system means they are untrustworthy (seriously - I've had people tell me this!), immoral, bad drivers (another mind-blowing revelation from an insurance agent aquaintance - he said the only thing that really matters to insurers is your credit score, not driving history or DUIs or anything else). On a moral, human level I'm appalled at this situation. As a businessman, I smell an IMMENSE opportunity as a huge segment of society (60M people at least based on back-of-napkin math) is being excluded based on a completely flawed and broken methodology that's nevertheless being adopted ever more widely.
Ok definitely rambling now, let me know what you think!!
So my idea (more of an insight at this point) is that we're at a unique point in time where everyone - and I mean EVERYONE - has internet access on mobile devices, while at the same time the consumer finance system is getting LESS accessible. The experience that started me on all this...last December I was at a small Christmas gathering, where my friend was mucking around with her smartphone (given to her by her boss) for at least 2 hours, trying to get a specific song. She was wasting all kinds of time trying one cruddy music app after the next. I found the song as an MP3 download on Amazon in less than a minute, and it was only $2, which she had in her pocket. When I asked her why she didn't just get it from there, she said "I don't have a credit card...that's not going to work for me."
WHOA! Sledgehammer to the face time! So what's going on here?? We have a person who is gainfully employed, who has access to the internet on a modern mobile device, who has CASH IN HAND - but is EXCLUDED from the conventional payment system because she has a poor credit score and uses a credit union instead of a checking account.
After this experience I could not stop thinking about it. Two weeks later I read TMFL and all the pieces started falling into place. I came up with one way to solve this problem (I won't go into details here, might go to the Inside depending on replies here...) Searching online I found some similar things but none were aggressively being marketed as a real business, and the ones I tried did a horrible job. Opportunity!
As I said I won't go into the details of what I'm going to try first. It doesn't satisfy entry as a stand-alone business, as it could easily and quickly be done by others, and I also can't think of a way to monetize it effectively...just ads and of course that's a poor primary income generator. I do think it's a good way to pull in people and get them to keep coming to my site, and build a user base/community.
So there are two main aspects to this. The first is making payments on the internet, to purchase goods and services or just to pay bills. While there are many "wallets" coming out it seems none of them will solve this problem. They all ultimately require you to have a traditional credit card or checking account as source of funds. After discussing the problem more with my friend I discovered she had tried to get a PayPal account, only to find that it couldn't be funded from her credit union account.
Why not use a MC/Visa gift or prepaid card? The fees are extraordinary and you have to go to the store to refill them. $5 monthly service charge (so $60/year just to have the stupid thing), $5 for an ATM withdrawal (on top of the bank's fees, so you could easily pay $8 on a $20 withdrawal)...the list goes on. About the only thing you can do for free is have your paycheck go directly to the card. They are also confusing...some can't be used to make any online purchases, some can, some are one-time cards ready to go when you buy them, others must first be activated (and possibly approved), some can be refilled, some can't. Making a superior prepaid card is definitely on my list, but that's going to require funding, which in turn will require me to make something else first to prove to investors that I'm the pony they should bet on.
The second is short-term loans for small amounts of money. Microlending is something that's gotten a lot of attention in other countries but not much in the US. Peer-to-peer lending is a rapidly growing industry but nearly invisible to those not in it...I just discovered it myself on accident a few weeks ago. Meanwhile the traditional companies seem to be much more interested in making their proprietary "credit score" the mother of all rent-seeking activities rather than lending money to anyone who's not already overserved.
I'm going to cut it off here before it gets even more long and rambling. Please share your thoughts, opinions, and experiences. I'm especially interested to hear from anyone who's been involved with any of these activities (either traditional banking/credit cards or the new microfinance businesses) or has a background in banking or finance. I would not have a problem with running a site for several years with zero income, if it can then be sold (or somehow partner with) large lending companies interested in the user base and alternate history of credit-establishing activity built up over those years.
One final point. While talking to various people (especially the younger programmers who represent the people expected to create the next hot startup) I was stunned at the dislike, even outright hatred, of the group of people that represent my user/customer base. I was told that I'm an idiot, that I'm targeting useless lazy bums who'll never pay for anything, that anyone who can't or won't get a credit card is basically despicable human garbage. This is in complete contrast to the people I know and have talked to. I live in the sticks in Montana and have a day job at a call center. Most of the people there don't make much money and most of them don't have credit cards, because they don't qualify and/or because they distrust them. However they are honest hard-working people who have been continuously employed for years. They aren't degenerate "party people" blowing all their money on a good time, they're raising families and paying the bills. They just don't have good credit scores, because you have to use credit to raise your score, and if you don't have a good score you can't get credit...a vicious loop that excludes anyone not already in it, and rewards people for levering up as high as they can. It doesn't promote prudent behavior at all, as long as you can make the next payment your score keeps going up, even as the actual RISK keeps increasing. Meanwhile people who live within their means and don't make use of the system get a low score, and incrediously, this simple-minded single-number system means they are untrustworthy (seriously - I've had people tell me this!), immoral, bad drivers (another mind-blowing revelation from an insurance agent aquaintance - he said the only thing that really matters to insurers is your credit score, not driving history or DUIs or anything else). On a moral, human level I'm appalled at this situation. As a businessman, I smell an IMMENSE opportunity as a huge segment of society (60M people at least based on back-of-napkin math) is being excluded based on a completely flawed and broken methodology that's nevertheless being adopted ever more widely.
Ok definitely rambling now, let me know what you think!!
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