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Yes let's make it easier for youngsters to get themselves in the hock for that hit of instant gratification. Get 'em on the never-never instead of teaching them

Yes let's make it easier for youngsters to get themselves in the hock for that hit of instant gratification. Get 'em on the never-never instead of teaching them to save. What I'd like to see is a disruption to banks to encourage people to save properly, by integrating proper budgeting and accounting into the bank account itself. I.e. walling money that is allocated for future expenses such as insurance, utilities, presents etc. On the other hand with no extortionate fees for going overdrawn. I'd love to see something like that.

hkmurakami 11y ago
Serious question: Why would any financial institution implement something that will reduce their revenues? Followup question: How would a company be able to come in and offer what you describe and offer users savings, and take a cut for themselves along the way, so that the users and the new company wins, while the incumbent banks lose?
- bbcbasic 11y ago
  Good question, one I was thinking myself! Some banks offer something a little bit in this direction (at least in the UK and Australia). I have heard of banks with 'savings pots' and online saving planners. For a bank it is probably good for them if you save. Eventually you will spend the money and in the mean time the saved money makes them money because (due to how the banking system works). The way I can see this playing out is based on consumer demand. Banks have little in the way of genuine USP. I mean they all pretty much offer the same service and must compete on service, interest rates, fees, branding, reputation etc. So offering a way to help people save could be a good USP for the right kind of bank.
boling11 11y ago
There are a couple of companies trying to do this right now. Digit just raised 11mm to do something similar. Acorns does something similar with investing. It is definitely a hard business to be in though, at the end of the day someone does have to pay for it for these things to work - be it users, merchants, or businesses.
- bbcbasic 11y ago
  Just had a thought maybe pension/superannuation companies, who have a vested interest in you saving more. Also mortgage companies, who could help you save for a deposit on a house (and therefore take out a mortgage). Of course mortgage is debt but it is backed by an asset, usually comes with an excellent interest rate that is very close to zero or negative in "real terms".
manigandham 11y ago
This is driven by profit and no banks are interested in people saving money when they could rather be charging interest and fees through debt. Also this seems to be more of a failing of the education system. Young people should learn the proper financial skills in school instead of relying on corporations to just help them out. All these loans are voluntary and help plenty of people who need a way to borrow.
msane 11y ago
I agree. Even if by miraculous technology they are able to be effective at extending loans only to good debtors and be ethical with their bad debtors ... is a conversion optimized "Make me a debtor!" button really the kind of incentive society should have? shame. However Max and Affirm justify their business, there isn't an algo smart enough to only offer small credit to people who won't get in to trouble. In fact there is a huge incentive to lure people into using credit when they won't be able to handle it. Which is evidenced by almost any consumer credit business in history. Even if they say they won't charge late fees (for now), to play up their ethics, believe they are still going to be monetizing outstanding loans. Businesses like this (payday loan/ small credit / auto title loan / rent-to-own) typically sell their bad debt to recovery agencies and still turn a profit on the interaction. Not to mention Affirm will get a point or 2 from the merchant in all cases, I assume. No surprise about the $275M though.
easytiger 11y ago
Only governments can do that make making saving compelling. But they want people to spend so make saving poor value for money. We did this in the UK, Wonga.com/samedaycash firms everywhere and the government had to legislate to stop them exploiting the poor.
xasos 11y ago
> Yes let's make it easier for youngsters to get themselves in the hock for that hit of instant gratification. Get 'em on the never-never instead of teaching them to save. I think the people that are more likely to save are also the ones less likely to default on loans. Maybe it's just over-simplified thinking, but I think the reason Affirm works wonderfully is because they keep audience in mind. They pull in a ton of data points to assess the risk on investments, and I would love to see the percentage/demographics of people that get loans.
- deleted 11y ago
  [deleted]

hkmurakami 11y ago

Serious question: Why would any financial institution implement something that will reduce their revenues? Followup question: How would a company be able to come in and offer what you describe and offer users savings, and take a cut for themselves along the way, so that the users and the new company wins, while the incumbent banks lose?

bbcbasic 11y ago
Good question, one I was thinking myself! Some banks offer something a little bit in this direction (at least in the UK and Australia). I have heard of banks with 'savings pots' and online saving planners. For a bank it is probably good for them if you save. Eventually you will spend the money and in the mean time the saved money makes them money because (due to how the banking system works). The way I can see this playing out is based on consumer demand. Banks have little in the way of genuine USP. I mean they all pretty much offer the same service and must compete on service, interest rates, fees, branding, reputation etc. So offering a way to help people save could be a good USP for the right kind of bank.

boling11 11y ago

There are a couple of companies trying to do this right now. Digit just raised 11mm to do something similar. Acorns does something similar with investing. It is definitely a hard business to be in though, at the end of the day someone does have to pay for it for these things to work - be it users, merchants, or businesses.

bbcbasic 11y ago
Just had a thought maybe pension/superannuation companies, who have a vested interest in you saving more. Also mortgage companies, who could help you save for a deposit on a house (and therefore take out a mortgage). Of course mortgage is debt but it is backed by an asset, usually comes with an excellent interest rate that is very close to zero or negative in "real terms".

manigandham 11y ago

This is driven by profit and no banks are interested in people saving money when they could rather be charging interest and fees through debt. Also this seems to be more of a failing of the education system. Young people should learn the proper financial skills in school instead of relying on corporations to just help them out. All these loans are voluntary and help plenty of people who need a way to borrow.

msane 11y ago

I agree. Even if by miraculous technology they are able to be effective at extending loans only to good debtors and be ethical with their bad debtors ... is a conversion optimized "Make me a debtor!" button really the kind of incentive society should have? shame. However Max and Affirm justify their business, there isn't an algo smart enough to only offer small credit to people who won't get in to trouble. In fact there is a huge incentive to lure people into using credit when they won't be able to handle it. Which is evidenced by almost any consumer credit business in history. Even if they say they won't charge late fees (for now), to play up their ethics, believe they are still going to be monetizing outstanding loans. Businesses like this (payday loan/ small credit / auto title loan / rent-to-own) typically sell their bad debt to recovery agencies and still turn a profit on the interaction. Not to mention Affirm will get a point or 2 from the merchant in all cases, I assume. No surprise about the $275M though.

easytiger 11y ago

Only governments can do that make making saving compelling. But they want people to spend so make saving poor value for money. We did this in the UK, Wonga.com/samedaycash firms everywhere and the government had to legislate to stop them exploiting the poor.

xasos 11y ago

> Yes let's make it easier for youngsters to get themselves in the hock for that hit of instant gratification. Get 'em on the never-never instead of teaching them to save. I think the people that are more likely to save are also the ones less likely to default on loans. Maybe it's just over-simplified thinking, but I think the reason Affirm works wonderfully is because they keep audience in mind. They pull in a ton of data points to assess the risk on investments, and I would love to see the percentage/demographics of people that get loans.

deleted 11y ago
[deleted]