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David Gerbino

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David Gerbino - @dmgerbino

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The FinTech Assault on the Bank and Credit Union Deposit Relationship

12 May 2015  |  3614 views  |  0

Is DoubleNet Pay exploiting consumers’ poor financial management skills or banks’ and credit unions’ unwillingness to provide basic financial management services to their customers?

The deposit relationship between banks/credit unions and the people they serve is a lot more than a safe place to store money and to facilitate transactions. Basic financial management should also be part of the equation. Several FinTech companies, YodleeMint (now Intuit), GeezeoMoney Desktop (now MX) and others have tried to fill the gap, by working with banks or bank vendors. Some FinTech companies, SimpleMovenGoBank and others, have tried to work directly with consumers to provide basic banking and financial management services and bypass the traditional banking relationship. DoubleNet Pay is another FinTech startup trying to help people with basic financial management by inserting themselves between the consumer and a traditional banking relationship.

Banks and Credit Unions are not innovating in the retail deposit product and service space. This inaction has opened the door for FinTech firms to fill this void. In past decades, these firms would take the risk and develop these new products and services and sell them to the banks. During the last decade, some of these firms are creating solutions and selling them directly to the consumer. These companies are disintermediating retail deposit balances from the industry as a whole and redistributing them to a small number of bank partners. The redistribution of traditional bank deposits has the potential to impact spread income and non-penalty service fee income. The potential also exists for the FinTech segment that competes against traditional banks to have a negative impact on bank and credit union profits.

Several times a year we all get the chance to see who will be presenting at aFinovate conference. The next Finovate event is on May 12-13. The Finovate conference showcases a small snapshot of the innovation occurring in FinTech. Like many of my fanatical FinTech friends, I follow other FinTech showcases around the world and try to participate in several FinTech showcases in New York City and I serve on the events committee for NYPAY, New York’s leading forum for innovators and leaders in payments and mobile commerce space. When I reviewed the FinovateSpring 2015 list of presenters I thought to myself, “many of these companies should not be allowed to exist.” Why? Banks and Credit Unions along with their vendor partners should be providing these innovative deposit services to consumers.

DoubleNet Pay is one of those companies that should not exist. What they are doing should be part of the standard set of bank products/services. The ability of DoubleNet Pay to receive any VC funding is a testament to the fact that banks and credit unions have failed to provide basic financial management capabilities to their customers. Banks need to improve their capabilities. This also means they have to push their FinTech vendors to improve as well. What are the awesome capabilities that DoubleNet Pay offers that I think banks and credit unions should have been offering for at least a decade? DoubleNet Pay simply provides a way to help people pay bills on time and/or save money with an easy process that at the same time helps people manage their discretionary balances via the automated payroll process.

The DoubleNet Pay Mission

What is the DoubleNet Pay mission? Their website says it best:

DoubleNet Pay is named for and founded on the principle that bills should be paid and savings funded before discretionary spending.  By making this good habit automatic, anyone can see what their disposable income for each pay period - their DoubleNet Pay - really is.  

At DoubleNet Pay, we believe that everyone should have a clear understanding of how much they have to spend until the next pay day. That’s why we designed and built our innovative service: to help people reduce or eliminate financial emergencies caused by unexpected bills and “too much month left at the end of the money”.

Have you tried to do this yourself? I have. It takes a bit of effort and at the end of the day it was not worth doing. Additionally, the bank I was using wanted to start charging me fees where previously I was not being charged fees. When I started learning about the DoubleNet Pay product and service offering I said to myself, “I want this and I would think most everyone would want this too.”

The DoubleNet Pay FinTech Solution

The DoubleNet Pay website describes their service as a process that “automatically tracks employees’ bill amounts and due dates, and seamlessly schedules payments around their paycheck cycles, leaving employees with an exact amount for discretionary spending - without the headaches or guesswork. It also sets aside savings based on personal goals.”

This flowchart image is a visual representation of their banking like service:

 

As you can see, an employee’s paycheck gets split into two buckets. The discretionary spending bucket is your existing checking account (blue in chart). When you check this balance, it is the balance that you can safely spend each pay period on whatever you want. No more worrying if you have enough money in your account to pay your rent/mortgage or any other bill. Your DoubleNet Pay account has the money for paying your bills and any savings goals you have set up (green in chart). The service turns your legacy checking account into a truly safe to spend account.

The DoubleNet Pay service is what I call basic financial management that every bank and credit union should be offering. The days of a bank being a simple depository or transactional utility are over. DoubleNet Pay is another consumer focused service that disintermediates traditional banking relationships. Even more bank deposit balances held at traditional banks and credit unions are at risk. At least these have FDIC and regulatory protection unlike gift cards.

DoubleNet Pay is not the first FinTech company to try to help people manage their money or to help people save. What sets them apart is they are solving the problem before your payroll is deposited into your old fashioned legacy bank checking account. Additionally, they are taking advantage of the ADP marketplace to acquire customers via employers. That is freaking smart! Some of the other companies trying to help with savings are older companies like SmartyPig and newer companies like Digit and Qapital. There is a great article written by Duena Blomstrom, one of my FinTech fanatic frineds, about savings tools called “Get me addicted to Saving!”. I urge you to read it.

Final Thoughts

There is a neo-bank that has an awesome automatic tool that tracks discretionary spending automatically via debit card use and offers account aggregation. That company is Moven. Add the capabilities of Moven to DoubleNet Pay and you have an outstanding basic financial services management tool set that is better than what most banks and credit unions offer today. The fact is, today’s capabilities are already in the past. Moven is also presenting at Finovate and I expect they will introduce something wonderful if not something truly innovative for retail banking.

Banks and Credit Unions need to expand beyond the construct of their legacy deposit banking infrastructure and begin to provide seamless basic financial management services to their customers.

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The FinTech Assault on the Bank and Credit Union Deposit Relationship

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