There are few questions that will spark off a loud and potentially violent argument in a room full of politicians, bankers, lawyers or plumbers — because it is hard to find something that all of those groups feel strongly enough about to come to blows over it.
However, if one desperately needs to cause a fistfight for some reason, a handful of questions always does the trick — and the newest inductee to that never fail list is:
“Who is to blame for the financial crisis?”
There are a lot of possible answers, and most people believe whichever one they believed quite strongly. However, what is not controversial is the following statement: The financial crisis was bad.
Because almost no matter who one is or who one blames exactly, almost everyone agrees that the massive hemorrhaging of jobs, the bludgeoning of the real estate market, the freezing of everyone’s credit and the series of international crises it set off were not good news.
But “almost everyone” is not everyone — and some people have a unique facility for looking on the bright side of things.
One such person is Drew Edwards, the CEO of Ingo Money, who explained to Karen Webster in a recent chat that though the damage of the financial crisis was inestimable, it did bring with it one advantage that is likely to the better of everyone working in and around financial services. It stirred the pot at a time when the pot quite desperately needed a go around.
“I grew up in the financial and banking industry,” Edwards told Webster, “and I swear if they never had been a loan crisis and if rates stayed in the right place, none of them would ever have innovated anything. It was a great business to get free deposits and then charge consumers if they overdrew and loan them money at a 400 or 500 base point spread. There was no reason to do anything.”
However, with a financial crisis that left interest at zero and a new regulatory body with almost unlimited power and a penchant for finding big banks in existence, banks found themselves looking at a financial services landscape that was rife for disruptions — which is actually good news for everyone.
“Disruptions creates innovation — and the crisis created innovation. I think Ingo is part of a healthy cycle that is happening.”
What makes Ingo Money unique is that it brought innovation to the unlikeliest of places: check cashing.
Killing The Check
There are many flashier players than Ingo Money in the alternative financial services landscape, all responding to a point in the cycle that favors the unbundling of various services away from a handful of big players — and into the loving arms of tech-based startups that hope to offer a faster, cheaper path to the same set of service endpoints.
In fact, Edwards told Webster, when he first took his Atlanta-based show on the road to Silicon Valley a few years ago, he was more laughed at than lauded, because who on Earth would care to see check cashing — an outlier financial service sector mostly serving the fringe — make a big jump forward into the digital age.
“We have brought innovation to a forgotten instrument,” Edwards said. “But it is an instrument that 138 million consumers have not forgotten, because they are using it.”
And they are using it, he notes, for a variety of reasons. They are a single parent supporting a family on $60K a year that lives entirely paycheck to paycheck, or they a super small entrepreneur who cuts grass and gets a lot of checks that collectively comprise all their income, or they are a 1099 employee who isn’t working for a large enough firm to have direct deposit, but they are all hitting the same pain point: they need their money on payday, not three days after when a bank will clear their full check.
The check, he noted, “is our excuse.”
“The worst of all financial instruments are the $25 trillion a year in checks that are written. It is the opposite of fast good funds. It is instead the biggest friction point in the entire financial system, and it is wholly unnecessary.”
And so Ingo offers customers another choice: they can also take their paper check and digitally deposit it with Ingo using their phone’s camera. They can then pay an $8 fee for instant money, or have it deposited in 10 days for free.
“We think traditional deposit and money transfer mechanisms are difficult from bank to bank to bank. We have signed up 600,000 consumers who think it is easier to make their deposit with us than sweat out an overdraft fee or have to go manually exchange their check for cash and deposit it themselves. Same fee, more inconvenience.”
While it is tempting to think of this new era of innovation as a permanent feature of financial services, Edwards notes that it is a cycle and that all of the experimenters will not be around forever. PayPal, he noted, is an international juggernaut today; when it was founded it was one of many digital payments platforms. The others were bought up or went out of business, but PayPal carried on because it made itself indispensable and acted as the solution to a big problem: buying stuff on eBay.
“We think we’re part of cycle that happened before and will happen again in financial services, which is the unbundling process that is happening in FinServ. We are excited about our role in that.”
But, he said, long-term legacy players are unlikely to just sit around and watch their business get chipped away piece by piece.
“OnDeck partners with Chase. The banks are not going to sit back and let this happen,” Edwards said.
“Years ago a rep from one of the Top 5 banks told me he thought their greatest strength was their branch system. I told him I thought his head was in the sand — his bank’s strength was in its brand.”
That brand has been damaged in recent years, but not destroyed. And, Edwards said, as that big generation of millennials age into more and more life milestones, they are still looking to those very recognizable brands for things like mortgages — which means they are still powerful.
“Millennials, when they grow up, still want a relationship with Chase,” Edwards said.
Which means the unbundling will likely see more partnerships and acquisitions as banks attempt to expand their service menus with upstart tech and talent while continuing to leverage those nice old names.
Which, says Edwards, is fine with him, as there is enough room in this ocean for everyone to swim in it.
“We have large financial institutions like Regions where we power their solutions and they look at us as a partner. I don’t think John Owen thinks I am going to disrupt his business. We serve more as a proof of concept as big banks are trying to add the feature functionality to the millions of relationships they already have.”
And those relationships, Edwards notes, mean Ingo Money’s technology gets out in front of an ever wider audience as it climbs the scale mountain every startup faces.
And though you may not have heard their name yet, keep your ears open — they’ve already gotten pretty far up that mountain pretty fast.
Drew Edwards is one of the featured speakers at Innovation Project 2016, being held March 16-17, 2016, at Harvard University. He’ll share more insights on Ingo Money’s vision. Click here for more information.