Last month, Daphne Veras of Refundo interviewed Arjan Schütte, the managing partner of Core Innovation Capital and senior advisor to the Center for Financial Services Innovation. The following is the result of their exchange:
REFUNDO: Looking back at the past couple of years, why do you think the underbanked community has become such a desired and marketable audience within the banking industry?
ARJAN: The segment has become more attractive because people now see it as an underserved market, instead of just an underserved consumer. The difference is that the former represents an opportunity, whereas the latter, for most people, is mostly a bummer. The emerging middle class — the underbanked — is not just a lot of people (>68 million Americans), but represents a big aggregate income block ($1 trillion) and a big financial services revenue source ($77 billion).
REFUNDO: Isn’t it an irony that nowadays even the “MegaBanks” are now trying to serve the underbanked/unbanked?
ARJAN: I don’t see that. I don’t see the banks trying to serve this segment. Minor initiatives and feel-good efforts around the edges, sure. Nothing at scale. For tens of millions of people the bank will never be an attractive solution. For thousands of banks, these potential customers will never be attractive. I’m really excited for banks to stop most of what they’re doing today — which is either Mickey Mouse or Scrooge (i.e., small or aggressive) — and start serving this customer indirectly, through specialist intermediaries, like Progreso Financiero, BillFloat, Plastyc, or NetSpend.
REFUNDO: At Refundo, we strongly believe that mobile technology provides the best opportunity to reach underbanked individuals, not only in the US but also Worldwide. What is your take on leading with mobile when it comes to serving the financially underserved?
ARJAN: I don’t see mobile becoming important for another 5+ years. Mobile is certainly logical on many levels. But there isn’t a good enough value proposition to the consumer, a supportive regulatory environment, or any real willingness to partner between the mobile operators, tech players, and banks. Personally, I’m focused on retail as the best opportunity to reach this emerging middle class.
REFUNDO: What changes would you like to see in the banking industry in the next five years?
ARJAN: An equivalent of the Hippocratic Oath.
REFUNDO: And lastly, what tips can you recommend that you’d only share with a close friend to start-up companies competing with big banks to help the underbanked community?
Think big. If you’re not convinced you can get to millions of users, do something else. If you can, you don’t have to worry about the big banks (or perhaps you’ll partner with them).