A big part of why I love my job is because we are trying to provide the underbanked mass market with greater financial freedom.  It’s great to provide lower cost payments, the ability to build credit, better credit decision tools, greater transparency and convenience.  But the holy grail, really, is to help people earn more and save more.

However, looking at our investment pipeline, we see about one company working on a savings solution for every 50 companies innovating payments, transactions or credit.  There are several reasons for this: First, it’s hard to make money helping people with few assets put some of them away – unless you can get real volume.  Second, consumer demand for saving (not the kind that help you SPEND less) is not particularly high – consider the US’ long-time negative savings rate, for starters.  Third, helping the poor save is more likely to get you in front of your attorney general than it is the Nobel prize committee.

On that third point, I can point to quite a few well-intended efforts that were quickly and harshly ridiculed.  Several years back, then NY AG Elliot Spitzer took H&R Block to task for feeing its Simple IRA customers – largely lower income, underbanked consumers – to death and lacking transparency.  This product was not designed to be a cash cow for H&R Block.  It was actually well intended and well designed.  But when you withdraw funds early – from a small account and in a down market – the fees can be large relative to assets being saved.

For years I bugged people at Sharebuilder – which allow $4 fractional share buying, and therefore great for lower income people – to target the underbanked.  Instinctively they refused.

Just the other day, Techcrunch slammed startup BuyGoldWithCash for basically the same thing, “it seems slightly exploitative by preying on poor people and charging a premium.”  Yes, it costs around $25 in fees just to invest in gold.  If you’re only investing $100 that’s not particularly compelling – even incredibly stupid.  But I must say I’m excited to see companies like BuyGoldWithCash, which appear to hinge their business on that of startup PayNearMe’s relationship with 7-Eleven, providing savings solutions for the poor.  And the fact is that it’s going to cost fees.  And most likely fees that look ugly to higher asset savers who pay nearly nothing for comparable services.  How high is too high?

It’s funny to me that the two types of financial services that can actually help you advance your financial freedom, provoke the most offended cries: savings and credit.  Charge $5 to load funds on a Green Dot card and be a Wall Street darling.

BGWC’s CEO defends their fees against the management fees on mutual funds.  Sounds fishy? Let’s do the math.  Assume we’re saving a $500 windfall for 5 years.  The gold would cost about $25 to ship and that’s it, or 5%.  We should consider redemption costs, especially if this customer is most likely to (have to) go to a Cash4Gold type place.  A mutual fund would cost $10 plus 1.5% per year, or 12.3%.  Interesting, huh?

I’m skeptical, too, but consider the fact that gold (while at greater risk of getting stolen) is a hard asset that performs competitively against the S&P 500.  It is also one that many lower income families understand better and trust better.  I bet denominations are smaller than the average mutual fund – that’s important for this customer.  So before we ridicule too quickly, we should all put extra thought into savings and investment tools for the underbanked.  Our friends at CFPB and Treasury should put extra attention to incentives to promote this niche – and help lift the curse of helping the poor save.