Banking The Underserved
As Chore Scout is creating a new segment, so too is Fintech Bank: a de novo bank startup in the USA focussed on banking Money Service Businesses. These include pawn brokers, pay day lenders, cheque cashers, title loan shops and other non-traditional financial providers. It is estimated that more than 40% of America manage their cash flow through these companies.
It is illuminating that these companies service more than low to moderate income earners. There are profitable stores in places such as Beverly Hills, home to the stars that are also popular amongst the locals. Its not just the bottom half: Hollywood stars, dentists and other professionals have short-term cash needs, to make payroll or cover the party.
Moroku has a significant shareholding in the bank that aims to be in pilot by early 2019. The bank has commenced with the most difficult pieces, the pieces that present the greatest risk to the project – getting a banking charter and acquiring day one customers. Both critical aspects are making good progress: There is a significant pawn broker committed as a day one customer and investor. Following an initial set of meetings with the regulators, we are now preparing a visit to Washington in April for what is termed pre-filing. Whilst Varo Money, SOFI and others have been dabbling with a challenger bank license, Fintech Bank appears to be the only federal application backed by a business plan to make money.
As Fintech Bank prepare for these important meetings, market research to test the original thesis indicates that the initial model, in terms of the fees and margins charged, was very conservative. Along with the interest from the regulators and customers this is giving the project confidence and helping close the angel round. With a positive response from the pre-filing meetings it is anticipated that work will start in June to add details to the technology and business plans for a Series A investment and charter application in the new year.