CardsFTW #9: Cash Over the Internet

Plus, polymorphic cards, whatever that means

CardsFTW #9: Cash Over the Internet

Payments are digitizing, but cash is not disappearing. Watch any history of payments presentation and you’ll be reminded that we’re still using coins, invented millennia ago, let alone still using more recent innovations like cash and checks. The current pandemic has accelerated e-commerce and digitization tremendously, but transactions still occur in cash.

Although peer-to-peer payments tools such as Square Cash, Venmo, and PayPal are growing at near-exponential rates, people still pay each other with cash. This is especially true for consumers in the lower-income brackets. For many people cash is reliable, understandable, and secure. There are certainly downsides: Cash can be easily stolen and lost. Governments fret about the underground economy. Consumers may have had their electronic funds frozen or had errors or technology problems limit their access.

For these and other reasons, cash persists. Which brings us to a problem: How do you get your cash on the Internet? Traditionally, digitizing cash was straightforward. You could take your money to the local bank branch, deposit it with the teller, and receive a receipt. Now your cash was in the financial system and you could use it. Over time, this experience was upgraded so that you could deposit in an ATM at your local bank or in certain bank networks, like those run by credit union organizations.

For neobanks and their consumers, however, getting cash onto cards has been a challenge. Most mobile or web-first neobanks have relied on consumers receiving ACH direct deposits of their incoming funds, which loads the balance. This process makes a lot of assumptions. Solving for getting cash out has been easy. Neobanks partner with ATM networks like Allpoint or MoneyPass to acquire nationwide fee-free ATM access for their cardholders.

Green Dot solved the cash-in problem early on through its direct integrations with its retail partners, effectively turning their locations, like Rite Aids, Walgreens, and Walmarts, into bank branches. Consumers can go to the register, hand over cash, and load their card. In some cases these loads were indirect, requiring consumers to enter a number from a MoneyPak or other receipt-like paper into a website to move the digitized cash to their account. In other cases, the card could be scanned or swiped directly with near-instant loads (sometimes delayed for fraud prevention).

Reload at the Register

The catch with the Green Dot load network is that you have to pay a fee for loading your cash (usually something in the $3-$5 range). Green Dot isn’t the only load network. InComm, which sells prepaid phone cards, gift cards, and similar products also operates a load network called Vanilla Direct (also with a fee).

With this in mind, a press release this week stood out to me around cash loading for mobile-first neobanks. MoCaFi, a Black-owned and led neobank announced it would be accepting cash deposits via InComm’s network for no fee. What isn’t clear here is if this is truly no fee and MoCaFi or InComm is rebating load fee at retail, if it’s simply that MoCaFi doesn’t charge users but InComm still can, or if I’m way behind and these load fees disappeared altogether. The Vanilla Direct website still carries the “*Additional fees apply.” disclaimer (although the site seems out of date in other areas).

I think MoCaFi, which is a four-year-old, seed-funded neobank, has a strong offering. They go beyond the standard debit card to include a build-rent-through-bill-pay offering and a credit score tracking and educational program. The company’s mission to help the financially underserved is a good one. Bringing fee-free cash deposits to a mobile-first neobank would be very compelling. I’m hoping this is a big step forward in enabling cash users to stop paying the tax on cash, but I’m afraid it’s not truly no fee.

More Challenger Credit Cards

Last week saw the surprise pop-up of Mythra on Product Hunt. Mythra is an unreleased credit card for gamers (one of two startups that I am aware of in this space). They had a slick video and are aimed at a great demographic. The card, like the similarly unreleased debit card Lucky Card or savings sweepstakes app YottaSave, relies on a sweepstake approach to incentivize usage.

Mythra users will earn something each time they swipe, but it could be a point in their system, a free game, or a laptop. Who knows? Swipe more and find out! This is very gimmicky, but American love, and love to hate, gimmicks.

It could all just be a distraction–this product doesn’t exist yet. The video has a card behind a phone cleverly hiding any network logo. There is no known issuer and questions on the Product Hunt page went unanswered. I didn’t even get a confirmation from entering my email to receive more info! I am not a fan of these gimmicks, but they do work and even the Walmart MoneyCard has a savings sweepstakes (a $1,000 grand prize each month). At least we know who issues that Walmart card (Green Dot).

Another Card to Rule Them All

Lanistar Card
They do look pretty, though!

EU-startup Lanistar announced the first-ever “polymorphic” payment card, which I think is basically what Curve is with a 10-point vocabulary word. While Curve does let you use a single physical debit card as a bridge to a digital wallet to many debit or credit cards, Lanistar’s product (in pre-registration) appears to have the physical buttons and screen of a Dynamics Card (or Coin, Swype, Plastc, etc.). Lanistar’s marketing is very aggressive and the cards are very pretty, but I think there is a limited number of folks who want to push buttons on their card to switch how they pay for things. If consumers want to electronically control how they pay, they can simply use their iPhone or Android device.

Wells Fargo Moving On?

Bloomberg reported that Wells Fargo, the beleaguered bank with more scandals than branches, is looking at trimming its business by selling it’s private-label card unit. While Wells is among the nation’s largest banks, it has lagged in credit cards (especially ones that consumers actually applied for) and lags further in the private label space. This space is owned by Synchrony at 40%. It’s becoming increasingly hard to get a private label card to market, as there are fewer retailers of scale to justify the effort on a large bank’s behalf. I wouldn’t expect that big private label issuers like Synchrony, Comenity, Citigroup, or Capital One will take up the slack. While Goldman-Sachs has been getting in the game with Apple and GM, only the largest brands can command attention here. A number of startups are attempting to take on Synchrony, but it’s no longer true that every retailer needs its own point-of-sale financing or card product. With buy now/pay later schemes like Affirm and Klarna and strong general purpose cards, only the biggest of the big will resonate with customers to go the full length to acquire a card.

CardsFTW

Thanks for reading CardsFTW, a weekly newsletter about all things debit and credit. CardsFTW is written and curated by Matthew Goldman, Founder, and CEO at Vertical Finance, a challenger credit card startup. If you're looking for insights into everyday payments beyond deal blogs, please subscribe for free at cardsftw.substack.com. If you enjoyed this, please share it with a friend! Follow me on Twitter @magoldman.

Lead photo by NeONBRAND on Unsplash

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