Parkpoint E245 final presentation

Financial solutions for the underbanked

Collin Walter is an MBA candidate at the Stanford GSB. He most recentlyworked for Hellman & Friedman as a private equity investor specializing inconsumer internet, digital media and software. Prior to H&F, Collin was aninvestment banker at Goldman Sachs, where he focused on the aerospace &defense and automobile sectors.Collin has co-founded several startups, including WristBrand Media LLC, analternative advertising firm (www.wbmbrands.com). Collin graduated summacum laude with High Distinction in Economics from Duke University.Elias Erickson is an MBA candidate at the Stanford GSB. He previouslyworked at Dodge & Cox Funds in San Francisco, covering industrial andmedical device companies. Prior to Dodge & Cox, Elias worked at LehmanBrothers as a member of the global healthcare investment banking team andas a research associate at Longworth Venture Partners. Elias graduated witha degree in finance from Brigham Young University where he was apresidential scholar.

Anish Patel is an MBA candidate at the Stanford GSB. He previouslyworked at Barclays Wealth in London, initially as a special adviser to theCEO and most recently as Chief of Staff for the UK Private Bank, servinghigh net worth individuals. He started his career as a strategist at L.E.K.Consulting and has experience executing projects in continentalEurope, Asia and the Middle East. Anish received a Masters degree fromCambridge University.Art Wangperawong is an engineer, avid hiker and traveler. He haslearned many languages, includingCantonese, Mandarin, Korean, Spanish and Thai. He has prior businessexperiences in the food and solar industries. At the Campus CapitalNetwork, he is very excited about helping international students, post-docs, visiting fellows and professors benefit.

 Underbanked end users Week 1: 24  Low-income individuals Week 2: 37  Immigrants  Students, employees, illegal Week 3: 54  Day laborers  Teenagers Week 4: 59  Industry experts Week 5: 41  Financial institutions  Prepaid card incumbents Week 6: 37  Payday lenders Week 7: 29  Credit unions  Payment tech firms Week 8: 45  Partners & channels  Supermarkets & grocery stores Total: 326  Prepaid card program managers  Private label card manufacturers  Payment processors  Bank sponsors  Data analytics & loyalty experts

Alternative• Need: active vs. passive Employment Services acquisition channel• Solution: sell prepaid at POS with loyalty tie-in• Incumbents soon to launch a similar strategy  pivot Prepaid + Loyalty Card

Hypothesis Test Results Existing prepaid cards add value  Interviewed supermarket  User acquisition is critical  to a subset of the population executives, payment user engagement is everything  Underpenetrated processors, private label card opportunity manufacturers, prepaid  Underpenetrated opportunity  We can find a better channel program managers, loyalty because people: to reach this customer consultants, and data analytic  Don’t understand the value segment and convert them firms of the card  Don’t know about the card Existing prepaid cards are  Haven’t bought one yet flawed and can be improved  We can do something clever  Potential customers are aware to shake up the fee structure of and understand prepaid, but: and/or build in a new feature  Hate the fees (e.g., rewards)  Haven’t bought one yet Solution = prepaid + loyalty card  Distributed at retail POS

Hypothesis Test Results Existing prepaid cards add value  Interviewed end users at End Users see value: to a subset of the population  More likely to sign up for Walmart, food banks, bus prepaid via assisted POS sale  Underpenetrated stops, payday lenders, their  Active vs. passive sale opportunity homes, and supermarkets hypothesis validated  More likely to keep and reload  We can find a better channel cards with ongoing cash to reach this customer  Interviewed execs at Green rewards segment and convert them Dot, Rush Card, and NetSpend  Higher retention via loyalty hypothesis validated Existing prepaid cards are Retailers see value: flawed and can be improved  New revenue opportunity is  We can do something clever compelling  Access to purchasing data to shake up the fee structure outside the store is compelling and/or build in a new feature (e.g., rewards) Industry Trends  Loyalty + prepaid programs are the future Solution = prepaid + loyalty card  Distributed at retail POS  Industry execs like this idea a lot and are actively exploring it

Hypothesis Test Results Customer awareness and  $5 for 5 minutes campaign  20 preliminary signups education are key obstacles to  Speak to as many potential customer acquisition and customers as possible  ask  Built empathy around customer retention for an actual commitment prepaid needs  Immediacy Channel: Assisted sale at POS  Security fears trumps current passive j-hook  Fees sale  Channels  Active sale enhances  Discovered other needs awareness & education  Job-seeking  Saving for kids’ education Product: Combining prepaid +  Understood observed behaviors loyalty  High churn  Cash rebates improve  Lack of reloading retention and incentive to  Lack of regular usage reload  Loyalty component not required if you can service the true pain points

Alternative• Need: active vs. passive Employment Services • Need: acquisition channel immediate, convenient, and• Solution: sell prepaid at POS • Need: lack of services for cheap with loyalty tie-in untraditional employment • Solution: ATM with complete• Incumbents soon to launch a • Solution: turn-key day labor payday lender functionality similar strategy  pivot SMS program (TaskRabbit) • New enhanced functionality • Serious legal and labor code ATMs to be released  pivot obstacles  pivot Prepaid + Loyalty PayDay Lender ATM Card

Day 1 Financial Services for•Need: Bridge from cash economy to traditional banking Immigrants•Solution: display card – touchable, transparent, trustworthy •Need: Financial services for those without credit history or US•Lack of infrastructure  pivot identification •Solution: New risk algorithm to evaluate creditworthiness Prepaid Display Card

Hypothesis Test Results Day Labor TaskRabbit  better  Interviews in Sonoma and San  TaskRabbit idea fraught with way to find jobs for the Jose w/ day laborers legal issues – unrealistic to get underbanked  Interviews w/ Mastercard & to market ATM check cashing  more nagraID to test display card  Display card idea faces two convenient way to receive feasibility issues in the US – IP protection money  Interviews outside payday and infrastructure constraints Balance display card  faster lenders / check cashers  ATM check cashing already way to check balance  Legality research on being pursued TaskRabbit idea  Back to the drawing board DAY LABOR $ BALANCE =

Day 1 Financial Services for•Need: Bridge from cash economy to traditional banking Immigrants•Solution: display card – touchable, transparent, trustworthy •Need: Financial services for those without credit history or US•Lack of infrastructure  pivot identification •Solution: New risk algorithm to evaluate creditworthiness Prepaid Display Card

Hypothesis Test Results Focus in on a sub-segment of  Interviews with students to  Pain point is real for this the unbanked understand segment. We learned:  Immigrants / New to US  How many have credit  Can take 1yr+ to get a This segment are underbanked cards credit card because of lack of credit  How long it takes  Many stick with debit information, not bad credit  How many would sign up permanently In addition to financial for our service  Can capture 30-40% of ‘Day 1’ products, this segment needs  Detailed mapping of ‘Day 1’ wallet share by leading with myriad services on ‘Day 1’ experience to understand pain credit and providing an points, costs and potential integrated service value added services

Hypothesis Test Results Stanford student network is  Set up trial website and  10 signups over first weekend – the best launch market promote to Stanford network + less than we hoped Current ‘credit builder’ international forums  Potentially more products do not meet user  Scan credit card landscape to reflective of our need ensure no competitors exists marketing efforts vs. our There are sources other than  Research metrics for a better solution FICO we could exploit to algorithm (new alternative  ‘Secured’ credit cards are the provide credit services lending competitors) only viable competitor  Target at rebuilding poor credit  Low limits, high fees  Alternative scores targeted at other US information, not international  Anthem report  eFunds Debit report  PRBC

International Graduate Student at Stanford  Engineering graduate student  Receives financial package to cover tuition, fees, insurance and living expenses Xing Art  Chinese 4-2-1 family  No siblings, spoiled by parents  High disposable income  1st time to America  No credit score, SSN, or US address  Strong ties to his community in China  Academically responsible  Completes all homework on time  Financially responsible  Pays all bills on time and in full  Social network is similarly responsible

Invent a better risk algorithm that is fueled by better data Alumni •401K/IRA investment •Connect w/school Larger Opportunity US population without traditional credit history Campus Capital Network International Students Graduated •Access/cheaper Students funding •Future investors •Build credit

our communityA NEW WAY TOFund the Future Project of the Day My story…

Know thy Fail Fast Beat out Lesson #3Lesson #1 Lesson #2 Customer • Be willing to be your MBA • Our key insights wrong • Know the limits came when we • Stay flexible of theoretical connected with despite models real people emotional and • Hit the streets • 15 mins with a time investment early and often customer = 10 • Encourage and • Be humble hours in the internalize classroom criticism

Viablebusiness? • Unearthed a huge need Next Steps? • Large market • Proven model • Capital • Partners Post-class? • Legal set-up • Customer Acquisition • Recruit board of advisors • Raise angel capital • Let’s do this!

Pilot trialRetailers Retailers Relationship with Channel relations RetailersBanks Increased foot retailers Technology End UserTechnology traffic Vendor-assisted Branding ManufacturersManufacturer Industry data relationship Branded card with end user End User Discounted products Partnerships Economic Supermarket Brand freedom point of sale Data & tech (POS) People People Interchange fees Card Manufacture Prepaid card fees Marketing & Sales Data analytics Risk & Fraud

Pilot trial Retailers Relationship withRetailers Channel relations Increased foot retailers RetailersBanks Technology traffic Relationship with End UserTechnology Branding Branded card end user User education Cost-effective Direct end user User retention data tracking awareness + education End User Discounted products Partnerships Economic Supermarkets Brand freedom Direct (online) Data & tech Personal finance Payroll People tools Pyramid Mkting People Interchange fees Card Manufacture Prepaid card fees Marketing & Sales Data analytics Risk & Fraud Processing fees & bank sponsor fees Data storage

Channel relations Retailers Relationship withChannel Partner Technology Increased foot channels End UserBank Sponsor Branding traffic Relationship with Channel PartnersPayment User education Branded card end user Processor User retention Cost-effective Direct end userTechnology Empathy data tracking awareness +Private label mapping education prepaid card End User Discounted Partnerships products Brand Economic Retail POS Data & tech freedom Direct (online) People Personal finance Payroll End user expertise tools Other People Interchange fees Card Manufacture Prepaid card fees Marketing & Sales Data analytics Risk & Fraud Processing fees & bank sponsor fees Data storage

Channel relations Retailers Relationship withChannel Partner Revenue share channels End User TechnologyBank Sponsor New customer Relationship with Channel Partners BrandingPayment data end user User acquisition Processor Direct end user and retentionTechnology awareness +Private label education prepaid card End User Economic freedom Partnerships Personal finance Brand Retail POS tools Data & tech Direct (online) Free bank People Payroll substitute End user expertise Other People Interchange fees Card Manufacture Prepaid card fees Marketing & Sales Data analytics Risk & Fraud Alternative monetization outside Processing fees & bank sponsor fees of card fees

Channel relations Relationship withPrepaid card Technology End User bank partner Unbanked program Infrastructure Bridging tech: Relationship with Underbanked manager R&D - Transparent end user BankedPrivate label - Tangible manufacturer - Trustworthy Partnerships Direct (online) Brand Retail People Banks Alternative People Display cards Card Manufacture Tech license fees Marketing & Sales Risk & Fraud Tech R&D

Channel relations Prepaid cardPrepaid card Prepaid Card manager Unbanked Prototyping program Manager Channel partners Underbanked R&D manager Fraud prevention End user Banked Pre-salesPrivate label Customer service Prepaid card manufacturer cost reduction manager Premier card End User Bridging tech: - Transparent Partnerships Prepaid card - Tangible Brand manager - Trustworthy People - Immediate IP People Display cards Card manufacture & distribution License technology Marketing & Sales Risk & Fraud Tech R&D

CustomerBank Sponsor Lender Instill trust and acquisition InternationalPayment Better priced confidence Non-financial students Processor risk/return Social/community lender status H1-B Visa holdersPrivate label or Investor relations Tie to affinity L1-A Visa holders co-branded Branding group Immigrants partner Channel partners Lenders andInvestors to raise investors capital Borrower Credit source Credit builder Schools Partnerships Day 1 solution Employers Brand Better rates Institutions People Channels Direct (online) Processing fees & bank sponsor fees Interchange fees People Annual fees Card manufacture & distribution Interest Marketing & Sales Data analytics & monetization Legal & regulatory fees

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Parkpoint E245 final presentation

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