Frugal retail banking innovation meets social need and could disrupt sector
In his book No Bank (available here in French) Hugues Le Bret tells the story of Compte Nickel, a start-up that he and his associates created for the purpose of providing people kicked out of the banking system with an ultra-low cost alternative to receiving and making ordinary card payments.
Although, in a heavily regulated sector, the project required 3 years of massive effort, chasing the funding needed to obtain regulatory approvals that were themselves needed to give enough confidence to investors, the business model is very simple:
- The customer buys a €20 ‘pack’ at a retail outlet that is licensed to sell state-regulated products such as tobacco and lottery games. The pack contains a Mastercard and an instruction booklet.
- Following the instructions, the customer scans their ID at a specially designed terminal, and provides a physical address and an email address. This 5-min operation opens the account.
- The retail outlet manager then swipes the card that was provided in the pack, instantly checking that the account has been properly opened, generating an IBAN number and activating the card.
- With a few additional steps the customer uses a mobile phone to generate a PIN and the codes for online banking.
10 minutes after having entered the retail outlet with an ID and a €20 banknote in their pocket, the customer is back in the banking system. They can receive their benefits and/or salary on an account from which they can withdraw cash (at a cost of 50 cents to €1) and make electronic payments (free of charge). Any automated banking operation, such as clearing a card payment abroad or wiring money on another account, which high street banks would charge for in spite of incurring no cost at all, are provided free of charge.
8 months after its market launch, Compte Nickel has found its public, and more. Not only has it provided a way for people kicked out of the banking system to get back in, but it has also enabled new usages to be found by more well-off customers. Such usages include dedicating an account and card to online shopping for consumers who are worried about leaving their main card details on the cloud, equipping teenagers with an ultra-low cost payment card that will not allow them to spend more than what is on the account and will therefore not impact their credit rating, getting a zero-charge card for a holiday abroad, etc.
What started as a single-purpose social innovation has created, thanks to its frugal business model, a paradigm shift in the card business. The company expects to reach break-even within a few months.
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