Life without a Bank Account. Part 1
The holiday season is upon us so I figured this would be the perfect time to pull my life savings (not a lot frankly) out of the bank and experience what millions of Americans do everyday, navigating life WITHOUT a bank account.
Why?
9.6 million households in the United States are unbanked, meaning no bank account at all.
24.8 million households in the United States are under banked, meaning a bank account isn’t the primary way they move money and they likely only have a bank account because of a job.
35 million households at 2.63 people avg. (US Census #), that’s still close to 100 million people who are unbanked or under banked (92 million to be exact). https://www.fdic.gov/householdsurvey/
These households, on average, have annual incomes of about $25,500, and spend roughly $2,412 per year on alternative financial services’ fees and interest, according to a report released last year by the United States Postal Service inspector general.
The poor and unbanked in the US are largely ignored and often end up depending on alternative financial services- like payday loans with exorbitant interest rates that ultimately lead to greater economic insecurity.
A problem worth solving.
This FDIC survey is pretty shocking, and this hits pretty close to home for me, because at 21 I was one of these Americans, and I can speak to the struggles first hand. I was able to overcome some major obstacles in my life but millions of people will not. The banking system in this country is a big reason why.
My ultimate goal as a founder and as a person is to create a product/service that can *help people* in a life changing way. (and make some money doing it) The only way to do this is to make a product/service that people want/need. The only way to do that is to specifically know what your potential customers actually need.
Know Your Customer. (see what I did there)
Over the next few months I will be documenting my experience of what it’s like to live in the US without a bank account. At the time of this writing I actually have NO JOB (I left my previous start-up about a month ago) my goal is to work jobs that lower income Americans may work and experience first hand the difficulty of living with no bank account. I will explore the “on-demand” jobs that tech companies have created, good old fashioned hourly jobs, cash jobs ect. pretty much anything that pays.
FULL DISCLOSURE: I actually need to make money, I have a family to support and real world bills to pay. I’m not sitting on a large amount of money and this is not some fun social experiment where I go back to my comfy life at the end of the day. In fact if I don’t make enough money to cover my expenses my life will become very uncomfortable. So the pressure is on.
The Backstory.
I should probably shed some light on what my team and I are building. We are all absolutely obsessed with messaging and chat based interface products/services and in particular the underutilization of SMS messaging. SMS reach 5.4B humans. SMS open rate 98%. SMS read on average in 5sec. SMS response rate 33%. Response time? 3min. You get the point. We believe it can be utilized in a much better way then “Airport Terminal Updates” and spammy sales notifications from retailers. We also have SERIOUS app fatigue.
Over the past year we’ve seen some cool services pop up (magic, go butler, operator) which inspired us back in May to work on our own. We started a company called TxTAdvice, which aimed to connect users with professionals. The plan was to launch vertical specific services that connect users with industry experts/professionals. Our first service was called OutFitR, which connected users with professional fashion stylists to provide “on-demand” feedback and recommendations. We got some traction and had some nice growth (15k users in 3 months, with not a dime spent on user acquisition) we even got to the interview stage for Y-Combinators W16 class. But while working on OutFitR, my lead dev (now co-founder) and I got into a marathon discussion about other products and use cases for SMS. The discussion led us to the idea of texting money, no app download involved, and creating a service that gives people the ability to send and receive money and pay bills electronically, regardless of whether they have a bank account or not (M-Pesa Style). Unable to shake the idea and concept, we decided to develop a prototype in parallel with TxTAdvice. There was actually a lot of debate leading up to the YC interview on what to actually pitch them, we settled on TxTAdvice, it was further along with actual users.
They passed.
It was disappointing, but I figured since we were already here why not pitch them on the unbanked money concept, so the next day I emailed one of the partners who we interviewed with and pitched the other idea.
The response.
I think this sounds like a MUCH better idea and urge you to seriously consider pursuing it.
Well we didn’t get to pursue it at YC, but it did give us greater validation to what we already knew — that the unbanked problem was worth solving.
After a long discussion with my co-founders we decided to focus on developing this payments concept. This will be a much longer and harder road filled with massive amounts of regulations and stiff competition from entrenched players with DEEP pockets — BUT anything worth doing is going to always going to be hard and we believe that nailing the product and truly understanding the needs of our users (the 100 million unbanked) will give us the proper insight into where to start.
As I embark on this journey (with no domain expertise, no money, and no bank account) I’m almost certain that my eyes will be opened to many other problems I was unaware existed in this broken system, but rest assured whatever we build will help.
Stay tuned.
