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Financial solutions for the underbankedParkPoint Capital
The ParkPoint TeamCollin 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 TeamAnish 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: 45 Total: 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
ResultsEnd 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 Graduate
d Students
•Future investors
International
Students•Access/cheaper funding
•Build credit
Alumni•401K/IRA investment•Connect w/school
ReturnsNe
w ris
k al
gorit
hm
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 communityA NEW WAY TOFund the Future
Project of the Day My
story…
Lessons
Lessons Learned Le
sson
#1Know thy
Customer• Our key
insights came when we connected with real people
• 15 mins with a customer = 10 hours in the classroom
Less
on #
2Fail Fast• Be willing to
be wrong• Stay flexible
despite emotional and time investment
• Encourage and internalize criticism
Less
on #
3Beat 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
investorsSchoolsEmployersInstitutionsDirect (online)
LenderBetter priced
risk/returnTie to affinity
group
PartnershipsBrandPeopleChannels
Interchange feesAnnual feesInterestData analytics &
monetization
BorrowerCredit sourceCredit builderDay 1 solutionBetter rates