The ol’ “Money In” Problem

The ol’ “Money In” Problem

Jack Dorsey just raised $100 million at a valuation of $1 billion for his new startup, Square, which allows smart phones to act as merchant credit card swipers.  Western Union charges a pretty dime to accept cash and move it elsewhere. Green Dot’s reload network accounts for roughly one third of its revenues. Tio Networks accepts walk-in bill payments at over 50,000 locations.  PayNearMe has figured out how to accept cash at 7Elevens for complex transactions such as loan payments, remittances, and bus tickets.  These companies all solve for the “money in” problem.

A consequence of being unbanked or underbanked is that there are real challenges to get access to money.  It doesn’t all aggregate into your account.  Square allows anyone with a smart phone to access credit cards.  Green Dot and the others give people ways to transfer cash into an electronic form.

And this is big business: Aite released a paper projecting cash will be important for another 200 years (based on a bumpy erosion averaging 4% per year and starting at over $1 trillion today).

But it’s still incredibly inefficient.  All the above companies charge a pretty penny, as much as $5, to transfer your greenbacks into digital currency.  I think for mobile payments – or prepaid accounts for that matter – to really take off, we need to solve for the “money in” problem.

Money In needs to become cheap and ubiquitous if we are to bring the underbanked into the mainstream; that is, provide access to the range of financial products and at the relatively low cost that the “optimally banked” enjoy.  So, we’re actively looking for companies that solve for Money In.