More than most, underserved consumers are likely to appreciate the money management bells and whistles that these newfangled products offer. And while consumers may not rate savings as high on the priority list when asked about it in a market research survey, Simple and GoBank each offers intuitive and fun savings features that small savers would appreciate.
To cast a wider net, the new entrants will have to calibrate their underwriting models to make sure they are weeding out fraudsters without inadvertently cutting off access to consumers with nontraditional credit histories.
They also will need to contemplate consumer cash flow issues. Some cash-strapped consumers need immediate access to their funds. A growing number of prepaid providers are offering check cashing via mobile phone. The customer takes a picture of the check, the check is immediately cashed for a fee, and the proceeds are deposited on a prepaid card. Why not offer customers the choice, after they have snapped a picture of their check, to either deposit the check or cash it?
Some will argue that underserved consumers don't want a financial relationship. While that may be true for some, we shouldn't confuse consumer behavior with consumer preference. Both banks and prepaid companies lament their high churn rates, but their products are often designed and priced in ways that encourage that churn.
While we may yet lack the language to neatly categorize the new products coming to market, it is clear that they represent the future of finance. Let's ensure they are marketed and structured in ways that make them a part of all consumers' futures.
Jennifer Tescher is the president and chief executive of the Center for Financial Services Innovation. Rachel Schneider is the center's senior vice president of innovation and analytics.