On July 24th, I attended a Branchless Banking Roundtable discussion sponsored by the Financial Services Innovation Coalition (FSIC) at the Rayburn House Office Building in D.C.
Panelists include the Co-Founder of BankMobile, Luvleen Sidhu, Founder of Creative Investment Research, William Michael Cunningham, and the founder of HBCU Wall Street, Torrence Reed. The moderator was the founder of FSIC, Kevin B. Kimble. During the hour-long discussion, they discussed issues related to the inefficiency of bank branches, the problem of bank transaction fees, and how newly developed technologies can change people’s way of banking.
The discussion kicked off with agreement among the panelists that bank branches are no longer a necessary part of people’s banking experience. Based on statistics, bank branches are, on average, only getting one account opened each week per branch, which equals 52 accounts opened a year at each branch. Apparently, the influence of bank branches on people’s banking habits has diminished.
Mrs. Sidhu, the founder of BankMobile, noted she designed her company to target the underbanked, millennials, and middle-income Americans. She offers an entirely fee-free checking account for each of her clients. The fee-free guarantee includes the following: no minimum balance requirement, no direct deposit requirement, no transfer fee, etc. (There is a fee when a user withdraws money from ATMs that are not owned by BankMobile.) Considering that millennials nowadays transfer money much more frequently (that is why apps like Venmo are popular among the younger generation), the free transfer feature is viewed as a major benefit.
Mr. Cunningham echoed the idea that regulations are pushing people away from using bank services. He talked about Nigerian digital money service provider ‘Paga’, a mobile banking service provider like BankMobile. With smartphone penetration rates getting higher everywhere in the world, branches will likely suffer, generating lower revenue. This got me thinking about the Wells Fargo scandal, where the bank notoriously opened 2 million fake accounts, as a clear example of why the existence of mobile banking services like Paga threaten branch banking.
Mr. Cunningham then described the Initial Coin Offering (ICO) as a way for young entrepreneurs to fund their ideas. An ICO is a way to raise startup funding (mostly Bitcoin or Ethereum) by issuing your own currency, in our case, SRI coins. Investors who choose to invest in your ICO are either: speculating the rise of cryptocurrencies, or: investing in your idea in exchange for future service from the ICO issuer. What makes an ICO so desirable is the fact that: it is totally unregulated.
Funding ideas come and go, going from venture capitalists, to borrowing money from the bank, or even asking for money from your friends or parents. These all take time, and timing is everything in creating a new business. With an ICO, you do not need to know who is investing in your business, you do not need to worry about explaining to your friends or your parents of why your business failed, if it does fail, but the most valuable factor in an ICO is it's unregulated nature. People can invest tons of money into a business with or without knowing the risks behind their investment. Although controversial, an ICO is indeed the easiest way for young entrepreneurs to fulfill their dreams. In 2016, over $1 billion has been raised via ICOs, compared to $600 million in venture capital.
After attending the discussion, I came away impressed by the progress regular people (like me) have made over the years, seeking to make our lives easier. It is because of new technologies that we can access capital in a much better way.