Financial solutions for the underbanked

ParkPoint Capital

The ParkPoint Team

Collin Walter is an MBA candidate at the Stanford GSB. He most recently worked for Hellman & Friedman as a private equity investor specializing in consumer internet, digital media and software. Prior to H&F, Collin was an investment banker at Goldman Sachs, where he focused on the aerospace & defense and automobile sectors.

Collin has co-founded several startups, including WristBrand Media LLC, an alternative advertising firm (www.wbmbrands.com). Collin graduated summa cum laude with High Distinction in Economics from Duke University.

Elias Erickson is an MBA candidate at the Stanford GSB.  He previously worked at Dodge & Cox Funds in San Francisco, covering industrial and medical device companies.  Prior to Dodge & Cox, Elias worked at Lehman Brothers as a member of the global healthcare investment banking team and as a research associate at Longworth Venture Partners.  Elias graduated with a degree in finance from Brigham Young University where he was a presidential scholar.

The ParkPoint Team

Anish Patel is an MBA candidate at the Stanford GSB. He previously worked at Barclays Wealth in London, initially as a special adviser to the CEO and most recently as Chief of Staff for the UK Private Bank, serving high net worth individuals. He started his career as a strategist at L.E.K. Consulting and has experience executing projects in continental Europe, Asia and the Middle East. Anish received a Master's degree from Cambridge University. 

Art Wangperawong is an engineer, avid hiker and traveler. He has learned many languages, including Cantonese, Mandarin, Korean, Spanish and Thai. He has prior business experiences in the food and solar industries. At the Campus Capital Network, he is very excited about helping international students, post-docs, visiting fellows and professors benefit. 

Our Interview Schedule

Week 1: 24 Week 2: 37 Week 3: 54 Week 4: 59 Week 5: 41 Week 6: 37 Week 7: 29 Week 8: 45Total: 326

Underbanked end users Low-income individuals Immigrants

Students, employees, illegal Day laborers Teenagers

Industry experts Financial institutions Prepaid card incumbents Payday lenders Credit unions Payment tech firms

Partners & channels Supermarkets & grocery stores Prepaid card program managers Private label card manufacturers Payment processors Bank sponsors Data analytics & loyalty experts

Our Journey

• Need: active vs. passive acquisition channel

• Solution: sell prepaid at POS with loyalty tie-in

• Incumbents soon to launch a similar strategy pivot

Prepaid + Loyalty Card

Alternative Employment Services

Week 1 Week 3

Hypothesis

Existing prepaid cards add value to a subset of the population Underpenetrated

opportunity We can find a better

channel to reach this customer segment and convert them

Existing prepaid cards are flawed and can be improved We can do something

clever to shake up the fee structure and/or build in a new feature (e.g., rewards)

Solution = prepaid + loyalty card Distributed at retail

POS

Test

Interviewed supermarket executives, payment processors, private label card manufacturers, prepaid program managers, loyalty consultants, and data analytic firms

Results

User acquisition is critical user engagement is everything

Underpenetrated opportunity because people: Don’t understand the

value of the card Don’t know about the

card Haven’t bought one

yet

Potential customers are aware of and understand prepaid, but: Hate the fees Haven’t bought one

yet

Week 3 Week 4

Hypothesis Test

Interviewed end users at Walmart, food banks, bus stops, payday lenders, their homes, and supermarkets

Interviewed execs at Green Dot, Rush Card, and NetSpend

Results

End Users see value: More likely to sign up for

prepaid via assisted POS sale Active vs. passive sale

hypothesis validated More likely to keep and reload

cards with ongoing cash rewards

Higher retention via loyalty hypothesis validated

Retailers see value: New revenue opportunity is

compelling Access to purchasing data

outside the store is compelling

Industry Trends Loyalty + prepaid programs

are the future

Industry execs like this idea a lot and are actively exploring it

Existing prepaid cards add value to a subset of the population Underpenetrated

opportunity We can find a better

channel to reach this customer segment and convert them

Existing prepaid cards are flawed and can be improved We can do something

clever to shake up the fee structure and/or build in a new feature (e.g., rewards)

Solution = prepaid + loyalty card Distributed at retail

POS

Week 4 Week 5

Hypothesis

Customer awareness and education are key obstacles to customer acquisition and retention

Channel: Assisted sale at POS trumps current passive j-hook sale Active sale enhances

awareness & education

Product: Combining prepaid + loyalty Cash rebates improve

retention and incentive to reload

Test

$5 for 5 minutes campaign

Speak to as many potential customers as possible ask for an actual commitment

Results

20 preliminary signups

Built empathy around customer prepaid needs

Immediacy Security fears Fees Channels

Discovered other needs Job-seeking Saving for kids’

education Understood observed

behaviors High churn Lack of reloading Lack of regular usage

Loyalty component not required if you can service the true pain points

Our Journey

• Need: active vs. passive acquisition channel

• Solution: sell prepaid at POS with loyalty tie-in

• Incumbents soon to launch a similar strategy pivot

Prepaid + Loyalty Card

• Need: lack of services for untraditional employment

• Solution: turn-key day labor SMS program (TaskRabbit)

• Serious legal and labor code obstacles pivot

Alternative Employment Services • Need: immediate, convenient,

and cheap• Solution: ATM with complete

payday lender functionality• New enhanced functionality

ATMs to be released pivot

PayDay Lender ATM

Our Journey

• Need: Bridge from cash economy to traditional banking

• Solution: display card –touchable, transparent, trustworthy

• Lack of infrastructure pivot

Prepaid Display Card

• Need: Financial services for those without credit history or US identification

• Solution: New risk algorithm to evaluate creditworthiness

Day 1 Financial Services for Immigrants

Week 5 Week 6

Hypothesis

Day Labor TaskRabbit better way to find jobs for the underbanked

ATM check cashing more convenient way to receive money

Balance display card faster way to check balance

Test

Interviews in Sonoma and San Jose w/ day laborers

Interviews w/ Mastercard & nagraID to test display card feasibility

Interviews outside payday lenders / check cashers

Legality research on TaskRabbit idea

Results

TaskRabbit idea fraught with legal issues – unrealistic to get to market

Display card idea faces two issues in the US – IP protection and infrastructure constraints

ATM check cashing already being pursued

Back to the drawing boardDAY LABOR

$ BALANCE

=

Our Journey

• Need: Bridge from cash economy to traditional banking

• Solution: display card –touchable, transparent, trustworthy

• Lack of infrastructure pivot

Prepaid Display Card

• Need: Financial services for those without credit history or US identification

• Solution: New risk algorithm to evaluate creditworthiness

Day 1 Financial Services for Immigrants

Week 6 Week 7

Hypothesis

Focus in on a sub-segment of the unbanked Immigrants / New to

US This segment are

underbanked because of lack of credit information, not bad credit

In addition to financial products, this segment needs myriad services on ‘Day 1’

Test

Interviews with students to understand

How many have credit cards

How long it takes How many would

sign up for our service

Detailed mapping of ‘Day 1’ experience to understand pain points, costs and potential value added services

Results

Pain point is real for this segment. We learned:

Can take 1yr+ to get a credit card

Many stick with debit permanently

Can capture 30-40% of ‘Day 1’ wallet share by leading with credit and providing an integrated service

Week 7 Today

Hypothesis

Stanford student network is the best launch market

Current ‘credit builder’ products do not meet user need

There are sources other than FICO we could exploit to provide credit services

Test

Set up trial website and promote to Stanford network + international forums

Scan credit card landscape to ensure no competitors exists

Research metrics for a better algorithm (new alternative lending competitors)

Results

10 signups over first weekend – less than we hoped

Potentially more reflective of our marketing efforts vs. our solution

‘Secured’ credit cards are the only viable competitor

Target at rebuilding poor credit

Low limits, high fees Alternative scores

targeted at other US information, not international

Anthem report eFunds Debit report PRBC

Our Customer

Meet Xing Xie

Engineering graduate student Receives financial package to cover tuition,

fees, insurance and living expenses Chinese 4-2-1 family

No siblings, spoiled by parents High disposable income

1st time to America No credit score, SSN, or US address Strong ties to his community in China

Academically responsible Completes all homework on time

Financially responsible Pays all bills on time and in full

Social network is similarly responsible

ArtXing

International Graduate Student at Stanford

Our Business

Business Model

Campus Capital

Network

PMT

Graduated Students

•Future investors

Loan

s

International Students

•Access/cheaper funding

•Build credit

Fundin

g

Alumni•401K/IRA investment

•Connect w/school

ReturnsN

ew

ri

sk

alg

ori

thm

Larger Opportunity US population

without traditional credit history

Invent a better risk algorithm that is fueled by better data

Campus Capital Network

Targeted Advertising

Campus Capital Network

Building Relationships Between Lenders and Borrowers

our community

A NEW WAY TO

Fund the Future

Project of the Day My

story…

Lessons

Lessons Learned Lesson

#1 Know thy

Customer• Our key

insights came when we connected with real people

• 15 mins with a customer = 10 hours in the classroom

Lesson

#2 Fail Fast

• Be willing to be wrong

• Stay flexible despite emotional and time investment

• Encourage and internalize criticism

Lesson

#3 Beat out

your MBA• Know the

limits of theoretical models

• Hit the streets early and often

• Be humble

Viable business?

• Unearthed a huge need

• Large market• Proven

model

Next Steps?

• Capital• Partners• Legal set-up• Customer

Acquisition

Post-class?

• Recruit board of advisors

• Raise angel capital

• Let’s do this!

Next Steps

The 8-Week Journey

Business Model Canvas: Week 1

RetailersBanksTechnologyManufacturer

Pilot trialChannel

relationsTechnologyBranding

PartnershipsBrandData & techPeople

RetailersIncreased foot

trafficIndustry dataBranded card

Relationship with retailers

Vendor-assisted relationship with end user

PeopleCard ManufactureMarketing & SalesRisk & Fraud

RetailersEnd UserManufacturers

Supermarket point of sale (POS)

Interchange feesPrepaid card feesData analytics

End UserDiscounted

productsEconomic

freedom

Business Model Canvas: Week 2

RetailersBanksTechnology

Pilot trialChannel

relationsTechnologyBrandingUser

educationUser retention

RetailersIncreased foot

trafficBranded cardCost-effective

data tracking

Relationship with retailers

Relationship with end user

Direct end user awareness + education

PeopleCard ManufactureMarketing & SalesRisk & Fraud Processing fees & bank sponsor

feesData storage

RetailersEnd User

SupermarketsDirect (online)Payroll Pyramid

Mkting

End UserDiscounted

productsEconomic

freedomPersonal

finance tools

PartnershipsBrandData & techPeople

Interchange feesPrepaid card feesData analytics

Business Model Canvas: Week 3

Channel Partner

Bank SponsorPayment

ProcessorTechnologyPrivate label

prepaid card

Channel relations

TechnologyBrandingUser

educationUser retentionEmpathy

mapping

RetailersIncreased foot

trafficBranded cardCost-effective

data tracking

Relationship with channels

Relationship with end user

Direct end user awareness + education

PeopleCard ManufactureMarketing & SalesRisk & Fraud Processing fees & bank sponsor

feesData storage

End UserChannel

Partners

Retail POSDirect (online)Payroll Other

End UserDiscounted

productsEconomic

freedomPersonal

finance tools

Interchange feesPrepaid card feesData analytics

PartnershipsBrandData & techPeopleEnd user

expertise

Business Model Canvas: Week 4

Channel Partner

Bank SponsorPayment

ProcessorTechnologyPrivate label

prepaid card

Channel relations

TechnologyBrandingUser

acquisitionand retention

RetailersRevenue shareNew customer

data

Relationship with channels

Relationship with end user

Direct end user awareness + education

PeopleCard ManufactureMarketing & SalesRisk & Fraud Processing fees & bank sponsor

fees

End UserChannel

Partners

Retail POSDirect (online)Payroll Other

End UserEconomic

freedomPersonal

finance tools

Free bank substitute

PartnershipsBrandData & techPeopleEnd user

expertiseInterchange feesPrepaid card feesData analyticsAlternative monetization

outside of card fees

Business Model Canvas: Week 5

Channel relations

TechnologyInfrastructureR&D

Relationship with bank partner

Relationship with end user

PeopleCard ManufactureMarketing & SalesRisk & Fraud Tech R&D

UnbankedUnderbankedBanked

Direct (online)RetailBanksAlternative

End UserBridging tech:- Transparent- Tangible- Trustworthy

PartnershipsBrandPeople

Display cards Tech license fees

Prepaid card program manager

Private label manufacturer

Business Model Canvas: Week 6

Prepaid card program manager

Private label manufacturer

Channel relations

PrototypingR&DPre-sales

Prepaid card manager

Channel partners

End user

PeopleCard manufacture & distributionMarketing & SalesRisk & Fraud Tech R&D

UnbankedUnderbankedBankedPrepaid card

manager

Prepaid card manager

Prepaid Card Manager

Fraud prevention

Customer service cost reduction

Premier card

PartnershipsBrandPeopleIP

Display cards License technology

End UserBridging tech:- Transparent- Tangible- Trustworthy- Immediate

Business Model Canvas: Week 7

Bank SponsorPayment

ProcessorPrivate label

or co-branded partner

Investors to raise capital

Customer acquisition

Non-financial lender status

Investor relations

BrandingChannel

partners

Instill trust and confidence

Social/community

Processing fees & bank sponsor fees

PeopleCard manufacture & distributionMarketing & SalesLegal & regulatory fees

International students

H1-B Visa holders

L1-A Visa holders

ImmigrantsLenders and

investors

SchoolsEmployersInstitutionsDirect (online)

LenderBetter priced

risk/returnTie to affinity

group

PartnershipsBrandPeopleChannels

Interchange feesAnnual feesInterestData analytics &

monetization

BorrowerCredit sourceCredit builderDay 1 solutionBetter rates