What can a zero emission, entirely crowd-navigated road trip teach us about the future of financial services?
Friday, I went on a limb and took a road trip of exactly equal length to my electric car’s battery capacity – 200 miles – to meet with one of our investors. I enjoyed zipping by traffic in the carpool lanes (an EV perk) and when everyone came to a stand-still, my new iPhone app, Waze, helped me utilize the power of the crowd to take faster side streets in the foreign hinterworld between LA and San Diego.
Beyond the opportunity to brag about my next gen transportation prowess (which I do with some humility, as I sat sipping a milkshake at Carls Jr while my car sips power outside – just 20 miles from home), I am struck how this trip is fundamentally different from others, even if it looks the same to anyone I share the streets with – and that there are parallels to next gen consumer finance. So what’s different and what are those parallels?
A fundamentally new engine. Even though my car as four wheels and four doors and headlights and bumpers, its engine is a total departure from the 150 year old internal combustion engine that powers 99.99% of other cars on the road. In consumer finance, I continue to be shocked at the antiquity of basic banking. Why can’t checks clear in real-time? Why are core banking costs so high? Why is the basic functionality so profoundly limited? At risk of lacking greater imagination, I continue to believe that prepaid – done well – offers a panacea to these and other ails. Of course, a completely new engine would go farther than Simple and others who are just building on top of the old. More lenders are starting from scratch, including LendUp, BillFloat and Progreso. CBW Bank, some-Weir in Kansas, is working on this as well.
Zero emissions. Even though the energy electronic vehicles consume almost always do create pollution, the environmental impact is de minimis compared to “normal” cars. So, the externalities to just getting around are net-positive given today’s broader global warming crisis. In other words, a better, faster motor can actually be good for the environment. The financial services parallel, plays to our fund’s philosophy on impact alignment. We believe that companies that make financial products that will help improve consumers’ lives will make better returns in the long-run. It can’t just be consumer friendly, as there are clearly infinite ways to lose money doing that, but smarter products that create upward mobility and save costs will be the ones that pass regulatory scrutiny and will sell and trade for more when they’re acquired or go public. Square is a good example.
People powered. Paper maps are all but gone and Google Maps is being upstaged by Waze, a mashup of GPS data, public traffic data, digital maps and the real-time contributions of millions of people (in fact, Google just bought Waze last week for a cool billion). People can contribute passively while driving with the Waze app open, or actively by pointing out everything from a stalled car to a cop. Bundle and Mint started doing this in consumer finance: people like you spent $X on gasoline and $Y on restaurants. CreditKarma lets users rate offers, giving it a more democratic vibe. Barclaycard’s Ring card hyper-engages with their users. But where is the power of people in financial planning, product selection, vouching for my responsibility, sharing risk and avoiding the most common pitfalls of too much debt and too little saving? P2P lending, nowadays, is neither P, nor P. Social media may be used to underwrite and market, but doesn’t help me (although Lenddo is trying to buck that). I wrote about social savings recently. Lots of potential here.