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Liran Amrany 9 yrs. derivative structuring @ JPMorgan 2015 Fellow, Startup Leadership Program Masters in Fin Engineering @ UC Berkeley
(valedictorian)
Co-founder & CEO
Jeff Hu Co-founder & CTO @ Postalgia Product Development @ CVS Health Yale MBA (Entrepreneurial Fellowship),
Duke Biomedical Engineering
Co-founder & CTO
Paul Sauer M.S. Computer Engineering @ UCF Vision Engineering Solutions Lockheed Martin Lead Engineer
Americans struggle to use credit cards responsibly
$115 Billion interest and late fees
38% in credit card debt
3rd leading cause of
bankruptcy
Source: Oliver Wyman “Consumer Payment Preferences: Debit Spotlight”; Federal Reserve
Many are switching to debit
9Y Growth
↑200% Debit
↑67% Credit
Why does more of your spending now go to debit instead of credit?
89% I’m trying to be more financially responsible
But is debit the answer?
Durbin Amendment
Restricted issuers’ interchange revenue
No rewards on debit cards
↓54%
Using debit does not help you build credit
56%
8%
11%
Unscorable
Credit Invisible
Subprime
So should consumers pay with debit or credit?
Monthly auto-pay is not sufficient
Harder to control spending Interest & late fees Big bill each month
Does not build credit No rewards
Less security
VS
Debitize automatically transfers funds to a Reserve Account after each credit card purchase
Checking
$ Daily
Issuer
$ Monthly
& pays the user’s credit card bill
Reserve
Users get the best of Credit + Debit
Card Benefits Peace of Mind Frictionless
Using Debitize
Build credit even faster
Debitize “Credit Optimizer” automatically targets your Amounts Owed
Featured In:
Competitive Landscape
PFM
Improve credit
Rewards
Bill pay
Frictionless
(patent pending)
Use Cases Paying off credit
card debt
Subprime households Students / First-time credit card users
24M
6M
11M
49M
Millennial debit card users
Use Cases: Millennial debit card users
Thin credit history
Wary of credit
Confidence to use credit responsibly
Build credit
Earn rewards
Use Cases: First-time credit card users
Never used credit before
“Training wheels” for credit cards
Avoid overspending
Stay out of debt
Use Cases: Paying off credit card debt
Automate debt payments
Less debt
Better credit
Hard to follow debt repayment plan
Use Cases: Subprime Households
Target top 2 components of FICO
Better credit
Lower interest rates
High interest or do not qualify for loans
We want to partner with you
Together, we can help Americans:
Build credit Stay out of debt
Contact us to discuss pilot programs or other partnership opportunities:
[email protected] 510-798-6092
The benefits of credit with the peace of mind of debit
APPENDIX
How it works
1. Sign up and link accounts
2. Use credit card normally
3. Funds automatically transferred to cover purchase
4. Bill paid with funds from user’s Debitize account
$ Monthly
$ Daily
Sample transactions
Issuers benefit by converting debit users to credit
$5.4bn
Interchange fees
Ave. debit interchange: 0.59%
$15.3bn
Interchange fees
Ave. credit interchange: 1.79% 22bn transactions
$910bn annual spend
Up to $10.9bn increase in annual interchange revenue
The Durbin Amendment (enacted as part of the 2010 Dodd-Frank Financial Reform)
Cap on Debit Interchange
• Banks with >$10bn assets lose ~50% interchange revenue on debit
• Big banks incentivized to get consumers to switch to credit
Anti-Circumvention
• Cap applies anytime funds automatically pulled within 14 days
• Banks reluctant to offer a competing product
Network Routing
• Debit cards must offer at least 2 non-related network affiliations for processing
• Visa/MC at risk of losing debit volume, also prefer credit
Anatomy of a Credit Card Transaction CONSUMER MERCHANT
MERCHANT ACQUIRER
CARD ISSUER
Au
tho
riza
tio
n
Req
ues
t
Authorization Request
Pu
rch
ase
Pri
ce
Pu
rch
ase
Pri
ce
less
Inte
rch
ange
Fee
an
d M
erch
ant
Dis
cou
nt
Purchase Price less Interchange Fee
(Visa and Mastercard govern the relationship between the Card Issuer and the Merchant Acquirer)
1
2
3
4 5
5%
7%
13%
14%
18%
20%
44%
0% 20% 40% 60%
Why does more of your spending now go to credit instead of debit?
Credit card has richer rewards than my debit card
Borrowing on credit
No longer get rewards on my debit card
Bank incentives to use credit
Other
Credit limit increased
Recently got my first credit card
People who switch to credit do so for rewards
Source: Oliver Wyman “Consumer Payment Preferences: Debit Spotlight”