Total US revolving debt (think credit cards and more) is nearing $1 trillion. This sector of credit is growing rapidly at around 7% a year. Simultaneously, there is an emerging generation of consumers that is highly mobile, technologically savvy, and extremely skeptical of traditional financial firms (think banks). The combined Millennial and Generation Z demographic holds about 7% of that overall revolving debt number and they, as a consumer group, are growing rapidly. Credit card companies really love college students. Start them early and get them hooked. Marketers know that college students are gearing up to enter the workforce – hopefully with a stable job and growing income. They also will be establishing credit histories. But rules today make it more difficult than in the past for credit card issuers to sign up students.
Skate to Where the Puck is Going
Enter Timothy Li, a regular suspect on the global Fintech circuit having worked for, or consulted with, a growing list of well-known financial service platforms. Li, through his newest company
Li, through his newest company Mobilend, has created Fluid; a new “Social Credit” application that allows students to access interest-free loans of up to $500 – all on their mobile phone (ofcourse). The fact the borrower will not have to pay any interest is predicted to be a sizeable hook for potential users. Once Fluid has established a relationship with the individual they can then graduate to Mobilend’s more advanced credit products. So how will Li cover his costs – and then some?
Fluid will charge “swipe fees” just like other credit card providers. But Li will also be opening up the user to customized offers and services based on location and personal preferences. Smartphones have the ability to provide a world of actionable data these days and Li sees profound opportunity to monetize this information. Li has already received regulatory approval to offer his services in multiple states, including California and Florida. During a recent interview, Li predicted his new platform will be generating up to $150 million in originations by 2018.
Crowdfund Insider recently spoke with Li about his newest venture. Our discussion is below.
Crowdfund Insider: You are launching the world’s first Social Credit card. Can you please explain what this is and how it works?
Timothy Li: The idea is to have students and parents lend to other students (their own kids or other kids on the same campus, state or different campuses all together.
The way they will spend the money is via a virtual debit card. It’s not really a credit card in the traditional sense. It’s just a virtual debit card fueled by an installment loan or Social Credit.
Crowdfund Insider: How long did it take to develop this application?
Timothy Li: 4 months (since August’16)
Crowdfund Insider: How will you provide the capital to finance these “loans”?
Timothy Li: Crowd, VCs and our own equity (initially).
Then a warehouse or LOC [line of credit] from a bank.
Crowdfund Insider: The current online lending market is challenging. Why is this different? How will you be using the data generated?
Timothy Li: This product is fundamentally different in three ways:
1. Zero percent interest.
2. It helps college students (20 million+) to build credit. The 2009 credit card responsibility act stopped banks from advertising to this population. They are the new “underserved”.
3. It creates yield for spare changes from students that has part time jobs and to parents can put their money into a fluid account to let their kids spent it and whatever that’s left over can be put to use and lend to other students.
We have mobile data (thousand of attributes) that we can profile people based on that information. For example, we can tell whether the student has a car or a metro rider.
Social behavioral: we let students donate a few dollars or cents to help other students on the same campus that are behind on their payment.
Crowdfund Insider: Are Millennials really being ignored? How big is this market?
Timothy Li: Millennials aren’t.
The aforementioned laws are passed that is more prohibitive to Generation Zs.
GenZ is the biggest population cohort in the world (2 billion+). And it is also the biggest population cohort in the US (80 million).
Crowdfund Insider: How will you get this product in front of this generation that is notoriously skeptical of things?
Timothy Li: 0% Interest. The only way to get them is a free or freemium product.
Crowdfund Insider: Does this help traditional financial firms like commercial banks?
Timothy Li: The banks and especially credit bureaus have lost track of this generation due to (again) the aforementioned laws.
They can’t actively advertise to this generation by law, but I can help them to get to this generation by properly assessing their credit/social/mobile/payments/buying behavior and offering them a bank product that fits their lifestyle.
Think Credit Karma on steroids.
But it doesn’t stop there, I can also offer retail, lifestyle products right in the app as well with the spending data and behavioral data that I can collect from the mobile app.
I can generate foot traffic to local retailers and online retailers alike. Think Waze on steroids.
Crowdfund Insider: When do you launch?
Timothy Li: January 2017.