5 ms·

US ventures aimed at helping the unbanked are taking cues from developing world

21 points by hotgoldminer 11y ago

thrownaway2424 11y ago
The article doesn't address one of the primary issues of the "unbanked" in the US: black people don't trust white people with their money.
- benten10 11y ago
  Don't know if you'll be checking this after probably being downvoted out of existence but: Would you have something apart from 'personal experience' to back your claims? It's an interesting issue: a cultural mistrust of financial institutions to take care of money, and is bound to have generated much research if there is any truth to it. If this is the case (as it may well be, I don't understand the downvotes, perhaps your generalization of 'black people'/'white people' instead of pointing out cultural issues at play?), social (non-economic) solutions are likely to be more effective than strictly financial/technological ones. As in, how east Africa has gotten people to put complete faith in mobile banking, but South Asia has failed completely. Perhaps lessons from here could be useful for South Asia?
Someone1234 11y ago
They should look at the UK instead. "Basic bank accounts" were a game changer. They're what the US calls "checking accounts" (minus the checks) with them you get a debit card, the ability to pay in, take out, and transfer money; however absolutely zero ability to go overdrawn (no loan, no line of credit, etc). But everyone could get one, even those who declared bankruptcy, since it was decided that it was not-viable in the 2000s for someone, anyone, to not own or have the ability to own a bank account. Which is right. Banks make money via the spread between the general interest rate and the lower interest rate offered by the account, in addition to sales opportunities (e.g. offering to upgrade to a full account, savings accounts, small loans, etc). However in general in the US banks are under-regulated and antiquated. Banking in the US Vs. UK feels like going back in time twenty years, everything is slow, complex, expensive, they charge for a basic checking/current account(!), you still have to physically go to a branch [ever!], transferring money between two banks is annoying, checks still exist, their anti-fraud is pathetic, and they're only getting C&P right now. PS - Although I am at Wells Fargo so maybe my opinion about US banks is really more Wells Fargo biased than general banking. Maybe there are better US banks, but I don't know who they are.
- norea-armozel 11y ago
  The problem is that in the US you get trapped in fees if you live paycheck-to-paycheck. It's damn hard to avoid them in some cases. I think Wells Fargo is probably the easiest bank in terms of avoiding fees. But others that were in my area weren't so friendly to poor people in that regard.
  - mafribe 11y ago
    The problem is that in the US you get trapped in fees One solution to this problem would be a legal requirement to have cost-free basic bank accounts. This could be a necessary requirement to getting a banking license.
    - ashark 11y ago
      Requiring things of corporations in exchange for the many protections and the enormous power we grant them is considered by many in the US to be socialism, and therefore immoral and unacceptable.
      - titzer 11y ago
        I laughed out loud when I read your comment, it's so true. Why in hell would we ever expect corporations to give up _anything_ in exchange for their benefits from the system? It's funny, the left treats wealth like a fact of nature (the only problem is how to distribute it!) and the right treats protection like a fact of nature (I ain't givin up nothin in exchange for protection of my assets!)
    - norea-armozel 11y ago
      It's sorta hard because I think the regulations on commercial banks is oddly split between the federal and state govts. I know some deregulation has occurred at the federal level, but I'm not sure it included asserting federal dominance on commercial banking as a whole.
- sksk 11y ago
utnick 11y ago
I have some experience in this area. From what I've seen any company involved with lending to the underbanked is going to operate pretty similarly to a payday loan company... A lot of these new companies want to appear different and go out of their way to never mention payday lending. But the terms are pretty similar at the end of the day. Lending to this segment of the population is fraught with write-offs, its just not possible to give a great deal on loans with that kind of risk unless you are a non-profit. If it were possible, one of the payday lenders would do it and corner the market.
- danharaj 11y ago
  > If it were possible, one of the payday lenders would do it and corner the market. The market is efficient; therefore the market is efficient.
- mafribe 11y ago
  For many unbanked, getting loans might not always be the highest priority. Just a safe place to park one's money is valuable. Imagine you are sleeping rough on the streets, where do you store your few monetary possessions? If you keep them on your body, they are likely to get stolen. A basic bank account as Someone1234 describes it, would help.
  - utnick 11y ago
    Totally, I agree, I think someone1234 is describing a UK law that provides these basic bank accounts to everyone. I think the underbanked will be helped more through laws and regulations like that than by a new company or something.
roma1n 11y ago
Compte-Nickel, a French operation, has a basic package available that includes a debit card, IBAN number (to receive or wire funds) for 20 euros/year. No other fees since there is no possibility of being overdraft. Payments are free, although ATM withdrawals are paid (something like 2 euros/withdrawal). It can be bought from tobacconist's stores and refilled there. An ID is required but nothing else (so it is available to homeless people). Overall seems like an interesting, non-preying offer.

21 points by hotgoldminer 11y ago

The article doesn't address one of the primary issues of the "unbanked" in the US: black people don't trust white people with their money.

benten10 11y ago
Don't know if you'll be checking this after probably being downvoted out of existence but: Would you have something apart from 'personal experience' to back your claims? It's an interesting issue: a cultural mistrust of financial institutions to take care of money, and is bound to have generated much research if there is any truth to it. If this is the case (as it may well be, I don't understand the downvotes, perhaps your generalization of 'black people'/'white people' instead of pointing out cultural issues at play?), social (non-economic) solutions are likely to be more effective than strictly financial/technological ones. As in, how east Africa has gotten people to put complete faith in mobile banking, but South Asia has failed completely. Perhaps lessons from here could be useful for South Asia?

Someone1234 11y ago

They should look at the UK instead. "Basic bank accounts" were a game changer. They're what the US calls "checking accounts" (minus the checks) with them you get a debit card, the ability to pay in, take out, and transfer money; however absolutely zero ability to go overdrawn (no loan, no line of credit, etc). But everyone could get one, even those who declared bankruptcy, since it was decided that it was not-viable in the 2000s for someone, anyone, to not own or have the ability to own a bank account. Which is right. Banks make money via the spread between the general interest rate and the lower interest rate offered by the account, in addition to sales opportunities (e.g. offering to upgrade to a full account, savings accounts, small loans, etc). However in general in the US banks are under-regulated and antiquated. Banking in the US Vs. UK feels like going back in time twenty years, everything is slow, complex, expensive, they charge for a basic checking/current account(!), you still have to physically go to a branch [ever!], transferring money between two banks is annoying, checks still exist, their anti-fraud is pathetic, and they're only getting C&P right now. PS - Although I am at Wells Fargo so maybe my opinion about US banks is really more Wells Fargo biased than general banking. Maybe there are better US banks, but I don't know who they are.

norea-armozel 11y ago
The problem is that in the US you get trapped in fees if you live paycheck-to-paycheck. It's damn hard to avoid them in some cases. I think Wells Fargo is probably the easiest bank in terms of avoiding fees. But others that were in my area weren't so friendly to poor people in that regard.
- mafribe 11y ago
  The problem is that in the US you get trapped in fees One solution to this problem would be a legal requirement to have cost-free basic bank accounts. This could be a necessary requirement to getting a banking license.
  - ashark 11y ago
    Requiring things of corporations in exchange for the many protections and the enormous power we grant them is considered by many in the US to be socialism, and therefore immoral and unacceptable.
    - titzer 11y ago
      I laughed out loud when I read your comment, it's so true. Why in hell would we ever expect corporations to give up _anything_ in exchange for their benefits from the system? It's funny, the left treats wealth like a fact of nature (the only problem is how to distribute it!) and the right treats protection like a fact of nature (I ain't givin up nothin in exchange for protection of my assets!)
  - norea-armozel 11y ago
    It's sorta hard because I think the regulations on commercial banks is oddly split between the federal and state govts. I know some deregulation has occurred at the federal level, but I'm not sure it included asserting federal dominance on commercial banking as a whole.
sksk 11y ago

utnick 11y ago

I have some experience in this area. From what I've seen any company involved with lending to the underbanked is going to operate pretty similarly to a payday loan company... A lot of these new companies want to appear different and go out of their way to never mention payday lending. But the terms are pretty similar at the end of the day. Lending to this segment of the population is fraught with write-offs, its just not possible to give a great deal on loans with that kind of risk unless you are a non-profit. If it were possible, one of the payday lenders would do it and corner the market.

danharaj 11y ago
> If it were possible, one of the payday lenders would do it and corner the market. The market is efficient; therefore the market is efficient.
mafribe 11y ago
For many unbanked, getting loans might not always be the highest priority. Just a safe place to park one's money is valuable. Imagine you are sleeping rough on the streets, where do you store your few monetary possessions? If you keep them on your body, they are likely to get stolen. A basic bank account as Someone1234 describes it, would help.
- utnick 11y ago
  Totally, I agree, I think someone1234 is describing a UK law that provides these basic bank accounts to everyone. I think the underbanked will be helped more through laws and regulations like that than by a new company or something.

roma1n 11y ago

Compte-Nickel, a French operation, has a basic package available that includes a debit card, IBAN number (to receive or wire funds) for 20 euros/year. No other fees since there is no possibility of being overdraft. Payments are free, although ATM withdrawals are paid (something like 2 euros/withdrawal). It can be bought from tobacconist's stores and refilled there. An ID is required but nothing else (so it is available to homeless people). Overall seems like an interesting, non-preying offer.