Cool. Hip. Fresh. These words are rarely used to describe traditional retail banking. But that's how some experts have referred to Mango Financial Inc., a start-up targeting underbanked consumers. The company is raising eyebrows with its sleek, colorful flagship store in Austin, a plan to build similar outlets around the country, and a paid-membership model designed to encourage customers to use Mango over the long term. The new institution is also leveraging mobile phone technology and SMS to enhance its appeal.

Mango was founded by Bertrand and Roy Sosa, the brothers who started NetSpend Corp., now a leader in the prepaid debit card business. Unlike NetSpend, Green Dot Corp. and other prepaid marketers, which distribute their cards through partnerships with retailers, Mango is focused on building its own physical presence. It plans to open about 10 more stores over the next 12 months in large metropolitan markets. The idea is to appeal to consumers who have little experience with traditional banking by offering services that meet their immediate financial needs- prepaid cards, money transfers and bill payment-in a welcoming environment.

"They are clearly trying to differentiate themselves by just rethinking the conventional unbanked relationship," says John Grund, a partner at First Annapolis Consulting. "The more you can treat the unbanked like the banked in terms of service and prestige, or just status, the better it is."

Another of the Sosas' portfolio companies, MPOWER Mobile Inc., has designed software that lets Mango customers send money and check balances through text messages. Mango is using the service to attract customers. To accept money transmitted by a Mango client via text message, a person must have a Mango card.

"As we get retail customers, they are going to help us through their phones to introduce new customers into the system, which is something that everybody in banking should be doing, by the way, but they're not," Bertrand Sosa says.

With its bright yellow and orange furnishings and open floor plan, Mango's Austin store, which opened earlier this spring, stands out not only from typical banking offices but also from many inner-city financial outlets, where bulletproof glass is the norm.

"It's like a cross between an Apple store and a yogurt shop," says Jennifer Tescher, director of the Center for Financial Services Innovation, a nonprofit affiliate of Chicago's ShoreBank Corp. "It's definitely not like being in a bank branch, and it's definitely not like being at a check casher."

Mango's target customers are 25 to 35, make less than $60,000 a year and regularly use check cashers. The company is also trying to attract Hispanic customers, with signage in both English and Spanish.

"We're looking at someone that has had a bank account before but maybe that bank account is just an entry-level checking account and has experienced heavy check-bouncing activity," Bertrand Sosa says.

Consumers who pay a one-time fee of $10 to become lifetime members can load checks on to the Mango MasterCard card for free and send international money transfers for $5. Nonmembers pay a one percent check load fee and $10 for international money transfers. Cardholders must load at least $500 a month to their cards to bypass a monthly fee. The $181 million-asset Horizon Bank in Austin issues the Mango card. Bill payment at Mango costs $1 for members and nonmembers. Most other services, like direct deposit and online card-to-card and bank account transfers, are free.

Aside from the memberships, the Sosas are hoping to foster long-term relationships with customers through other companies funded by their venture capital fund, MPOWER Ventures. One such company, Gratio Capital, is set to launch a mutual fund for the underbanked that will eventually be offered in Mango stores.

Mango's success will depend in large part on the ability to expand its stores, Grund said, which is a costly undertaking. "It could be a potentially expensive build-out."

And customer retention is a challenge for all prepaid providers, said Bryan Derman, a partner at Glenbrook Partners LLC, a consulting firm in Menlo Park, Calif. "You'll hear people say the average life of a [general-purpose, reloadable] card is seven months," he said.

Then again, "most people are getting their prepaid cards off the rack at a retail store," Derman said. "But a chance to meet the company itself and get a real person to explain the product to you, I would guess that would be valued by the people opening these accounts, because in many cases it's the first formal account that many of them have had."

-American Banker reporter Marissa Fajt contributed to this story

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