Bank Clerk: How can I help you, young man?
Stan Marsh: I got a hundred-dollar check from my grandma and my dad said I need to put it in the bank so it can grow over the years.
Bank Clerk: Well that’s fantastic. A really smart decision, young man. We can put that check in a money market mutual fund, then we’ll re-invest the earnings into foreign currency accounts with compounding interest aaaand it’s gone.
[Blank stares and silence as it goes from the Bank Clerk, to Stan, to the Bank Clerk, to Stan]
Stan Marsh: Uh… what?
Bank Clerk: It’s gone, it’s all gone.
South Park geeks will remember the episode ‘Margaritaville’ where the US economy goes into freefall due to bankers behaving badly. All trust in the financial system erodes and chaos ensues. Ah yes, that’s right; this actually happened!
In the episode, Stan Marsh goes to bank a cheque and has his savings almost immediately wiped out by the bank. The bank clerk then dismissively asks him to move along. In the real world, many people, like Stan, don’t trust the US banking system.
The Federal Deposit Insurance Corporation (FDIC) has conducted a yearly survey since 2009 to assess the inclusiveness of the US banking system. It’s astonishing to us that 6.5% of US households (that’s over 20 million people) have no bank account whatsoever. They are dubbed the “unbanked”.
Imagine life without a bank account and all manner of simple tasks become complicated.
It’s the norm to get paid and pay others through a bank account. We can purchase things at shops and online with a single piece of plastic. If you do want the physical stuff, just take it out of a hole in the wall. We can set up direct debits to pay bills and forget how much we are paying for the sports channels. Using a bank account protects our money from fire, theft and accidently throwing out the cash-stuffed mattress. It can also help us access credit for larger purchases, like a house. Heck, they even pay us interest for all of this goodness!
So who can the unbanked trust? One place to turn could be Green Dot, which has been providing an alternative solution since 2001.
Green Dot began life as a tech company before buying a bank and we believe this gives them an edge over the industry’s incumbents. Possessing the ability to build and distribute their own financial services products directly to the consumer has proven successful; they found their niche in pre-paid debit cards and largely helped develop the market into what it is today.
The idea is simple – it works much like a credit or debit card, except 1) you pre-load the card and 2) you do so at your local grocers. This has proven massively popular with the unbanked for the following key reasons:
- Pre-paid cards are not linked to a bank account and there are no credit checks as no credit is on offer;
- They can be used to receive wages and government payments such as social security and unemployment benefits for people without traditional bank accounts;
- Transactions are made on a pay-as-you-go basis;
- No overdraft allowance and no overdraft fees. Only use what you load onto the card;
- Access the card at convenient places and convenient times, rather than queueing forever at your local branch
They aren’t perfect and certain fees still apply. But they can provide a great solution for the many millions who are currently excluded from the traditional banking system in the US. This hasn’t gone unnoticed; Green Dot won the Economics Inclusion Award 2017 at American Bankers Association.
If only Stan Marsh had known!
The South Park scene – there’s nothing rude don’t worry!
About the author
Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 5 years’ industry experience (as at 30 November 2018).