CU Water Cooler

A Game of Leapfrog

Brent DixonComment
“Progress is the replacing of the best there is with something better still.” - Edward Filene

Most people working in the financial industry are familiar with "unbanked" and "underbanked" people.

Underbanked people may have a credit union or bank account, but tend to rely on alternative financial services like check-cashers and payday lenders. Unbanked people have no checking or savings account.

At this year's CU Water Cooler Symposium, Ron Shevlin introduced me to the term "de-banked."

Debanked: Mainstream consumers who willingly opt out of the financial system in favor of better and healthier options.

I hadn't heard anyone put a button on it quite like this. People are getting better at not needing you.

The tools for people to provide themselves with full-service banking outside of the banking system are here, many of them better than the tools traditional banks and credit unions provide.

Peer-to-peer lending (like Lending Club) is one of the earliest examples. Using a little bit of technology, people skipped the middle man and directly invested in and borrowed from each other. Solidarity lending circles, like those used by Grameen Bank, demonstrated that social accountability can reduce risk. The Cooperative Trust's Tru Account uses the same system of accountability to essentially create a revolving line of emergency credit that, rather than relying on a traditional or predatory lender, is entirely funded by your peer group.

Kickstarter has proven that it is comparitively easy to skip the small business loan and fund a compelling product.

Kenya's M-Pesa leapfrogged the financial system entirely with a mobile platform that allows users to deposit, withdraw, and transfer money easily with a mobile device. No bank or credit union needed.

Paypal's Zong also allows users to bypass traditional banking and pay directly for purchases directly through your mobile provider.

Square means small vendors all over the world can skip dealing with credit card processors and take card payments through your phone. If Square offered direct transactional capabilities (or, say, acquired Simple), they’d completely displace the need for financial institutions to offer transactional products.

Look outside of the financial world and you'll see this is a snapshot of something bigger. DIY (do-it-yourself) movements are disrupting other legacy industries across the world.

Independent musicians can build a following, organize tours, and sell and distribute music and merchandise with the same (if not greater) power that a label provided less than a decade ago. So labels are scrambling to rethink their model.

Small businesses can do the same, so advertising agencies and retailers are scrambling to rethink their model.

Mobile health tools like D-Tree and Voxiva are bringing certain types of self-service diagnosis, check-ups, and treatment to people who lack access to the healthcare system.

Cheaper equipment and unlimited access to communities and information means major breakthroughs in the fields of biotechechnology, robotics and artificial intelligence, and manufacturing are coming from "amatures," people choosing to tinker in their garage rather than working through large research and development institutions.

Open education platforms Khan Academy and MIT and Stanford's open courseware provide the world's best education without the entangelment and debt of the institutional learning.

Technology allows individuals to do things once reserved for billion dollar companies. "It's easier to build than to reform a system," MIT's William Haseltine said in a recent lecture.

When systems are broken, when complexity overshadows capability, people build.

The thing is, I don't think I'm telling you anything most of you haven't already heard. If you read the news, you know this.

But meanwhile, many credit unions still don't even offer online account opening. We're saddled by regulations. We're a weighty, slow-moving beast. We make excuses.

Consumer finance is not just begging for disruption, it's experiencing it. In a few short years, many traditional institutions will be passed over. Leapfrogged. It's easier to build than reform, and people are building.

Let's build with them.


Brent Dixon lives in Austin, Texas. He is a designer, educator, musician and doodler. Brent works with the Filene Research Institute to apply their research in the real world, runs the design studio The Habdash, and founded the young professionals' community the Cooperative Trust.