The industry wide thinking is that most people who use check cashing or pre-paid cards were making a big mistake; banking executives believe check cashing and pre-paid cards are a lot more expensive than bank accounts, but the reality shows a different picture altogether; University of Pennsylvania Professor Lisa Servon wanted to understand why the check cashing industry was such big business and why people were using these services instead of banks; what she found was, if you factor in account fees and overdraft charges, banking was more expensive for people living paycheck to paycheck; these individuals were consciously making the choice to not use banks and she found that there were three main reasons for this trend: cost, transparency and service. Source
financial inclusion
One of the promises of fintech is to expand access to credit to those who have previously been excluded. At LendIt USA 2016 we featured many of the leading companies in the space who are making real progress here.
LendUp and Oportun are both helping underserved consumers in the USA. ZestFinance is providing the underwriting engine that enables lenders throughout the world to expand their customer base and China Rapid Finance is helping the emerging middle class access credit in China.
In the USA there are 53 million people who do not have a credit file with the major bureaus. Oportun creates proprietary risk models that score those people that most of the industry finds unscoreable. The Hispanic community, where they focus, has unique challenges that Oportun is addressing directly.
Zane Wang from China Rapid Finance introduced us to the concept of "EMMAs" - emerging middle-class mobile active users. There are about 500 million people who have quality jobs but do not have credit access - they call these people EMMAs - they are not really underserved, they are in fact completely untapped.
ZestFinance is all about data. They use traditional data sources as well as their own unique sources. They use tens of thousands of data points that enable them to far more accurately underwrite those customers. They provide this technology to platforms in the USA and China.
Sasha Orloff from LendUp works on helping their customers improve their financial situation through their LendUp Ladder, a payday alternative. They do this through education and helping their customers get out of the payday debt traps. They reward their customers when they educate themselves on finance and provide help and support along the way.
