Mobile Prepaid Startup Goes, Well, Mobile

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Despite the popularity of digital banking, consumers still seem to crave a physical launchpad – a place where they can go to get things started.

A startup geared toward the prepaid market thinks it has found a way to effectively bridge the gap between high-touch onboarding and all digital experience: operating like a food truck.

Bee is sending representatives, a truck and tables to city streets at set times and days to woo passersby. Rather than peddle Vietnamese gourmet sandwiches or overpriced cupcakes, the company is pitching potential customers on a mobile prepaid account.

The pop-up branch approach is meant to entice urban dwellers with smartphones to sign up for and download an app – and an account for $5.95 per month – on the spot.

"It's all about establishing trust," said Vinay Patel, chief executive and co-founder of One Financial Holdings, the firm behind Bee. "People want to talk to other people."

The idea is to solve one of the industry's acquisition issues: Bank branches are too expensive to maintain when day-to-day traffic is dwindling. Still, online-only services are unknown to many consumers. Also, consumers still overwhelmingly rely on branches for account openings – 73% of new checking accounts were opened in branches, according to an Aite Group study on 2013 and 2014 data released in October.

So the mobile product is – somewhat ironically – relying on time-tested methods of face-to-face interactions at a time when the industry has yet to master the art of mobile acquisitions.

In June, Bee launched in New York with appearances in neighborhoods like Harlem and the Lower East Side in Manhattan, downtown Brooklyn and nearby Bedford-Stuyvesant.

The funds are held at Community Federal Savings Bank in Woodhaven, N.Y. In response to a question about the regulatory environment for such a strategy, One Financial said that, while there is "not a substantial body of existing case law or regulatory guidance" related to its mobile approach, it is in constant conversation with the bank and the bank's regulators on its business model.

It expanded to Oakland, Calif., last month. On its website the company notes where the truck is headed and when. More than 4,000 customers have opened accounts thus far, the company says.

Bee, which aims to replace check-cashing services and checking accounts, wants to be where bank branches are not as prevalent.

"We go into neighborhoods that don't have good banking options," Patel said.

Genie Driskill, chief operating officer and senior vice president of research at Synergistics Research Corp., calls the marketing approach innovative.

"A pop-up branch concept is a very imaginative way to reach the consumer," Driskill said.

Like many in the prepaid field, Bee's target market is those with low-to-moderate incomes who use smartphones. It is a ripe market, too. While nearly two-thirds of Americans have smartphones, the devices are particularly crucial in the digital lives of those who are less well-off. Some 13% of Americans with annual household incomes less than $30,000 are smartphone-dependent, according to the Pew Research Center.

Also, prepaid products have seen major growth in recent years — prepaid card use jumped more than 50% between 2012 and 2014, driven primarily by increased adoption among consumers with bank accounts, according to Pew.

Bee said its customers include those who have defected from banks and other prepaid companies. It also has some who still have active bank accounts, Patel says.

Their "reasons are similar to why many people have accounts with multiple traditional banks," said Patel.

While Bee is trying to spread the word about its product by parking in areas where banking services might be scarce, the marketing model is indicative of a wider trend. Institutions are increasingly getting out of the branch and putting employees out on the streets to help build their brands. Wells Fargo, for instance, has been on tour with Oculus Rift sets at local events across America. PNC Financial continues to make a splash with its pop-up branch approach, including creating a gingerbread branch for the holidays. Umpqua Bank has received accolades for associating its brand with a traveling art show. And, of course, prepaid cards are sold in grocery stores and at other retailers. Boost Mobile, for instance, teamed up with Wipit to sell a mobile wallet in its prepaid mobile phone stores.

But as with everything, execution matters most in building a brand unknown to consumers.

The larger and ongoing struggle for any financial services disruptor is how to get their products in the hands of people, said Ben Jackson, a director of prepaid advisory service for Mercator Advisory Group.

"If it's just another table [selling] stuff, it might be more of a struggle," Jackson said.

"People are sensitive about their money."

Bee needs to be careful not to come off as a fly-by-night operation, Jackson said.

Still, he says such a product could be a boon for people if it's pitched in areas without many bank branches or financial services options.

Besides getting customers to sign up, the other advantage of Bee's strategy is hands-on training. For instance, Patel says Bee writes customers a small-dollar check during the sign-up to demonstrate the photo deposit feature and the payment speed options. He likens the approach to tasting stations at restaurants or video game trial machines at electronic stores. Bee customers have two options in photo deposits – for a fee of 1% of the check amount, the money is available in less than an hour. The money is available in five days with the free option. (Patel says the market rate for check cashing is between 2% and 10%.)
Bee wants to eliminate the reasons consumers may be reluctant to sign up – the work involved and the fear of change.

"Financial services are scary, and all technical platforms are scary the first time they are used, especially under a specter where one wrong click means loss of access to real funds," Patel said. "We believe we have a real opportunity to build comfort — and therefore trust — with our new customers while we are face-to-face with them."

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