As posted on the Gaston Labs Tumblr:
After firing our first idea two months ago, we decided to start exploring an enormous opportunity in the finance space: fixing the checkout problem. You see, in the United States, we have enormous credit card penetration (over 300%, meaning the average American has more than three credit cards), so it’s no big deal to ask someone to enter a credit/debit card at checkout. Even for those without credit cards or even bank accounts, services like GreenDot exist, letting you stroll into 7-Eleven, plonk down some cash, and walk out with a prepaid debit card that works online.
But it’s not that easy in other geographies. As a founder of Mexican.VC, Silicon Valley’s first discovery fund for Mexican Internet entrepreneurs, I got to know that market much better. And with less than 25% credit card penetration rate, checkout is a serious issue. Especially since banks issue customers Visa Electron debit cards which mostly don’t work online. Coupled with low PayPal adoption, Mexican consumers complete their web purchase experience by printing a receipt, walking to their local OXXO (basically, 7-Eleven) and paying in-person. If you believe that e-tailing is going to be a popular global phenomenon, you probably believe that consumers would find an easier checkout experience appealing.
So Nathan and I dug in and started researching, neither of us having a background in payments. We attended The Future of Money and Technology Conference. We sat down with Greg Kidd who helped fund Square and worked at the Federal Reserve, and Gene Hoffman of Vindicia who walked us through how Visa actually works. We bought a small library worth of finance and banking books. We met with TurkCell to learn how mobile banking works in Turkey, learned how Mokipay is rolling out NFC payments in Lithuania, and talked with SingTel about payment services across Southeast Asia. We learned a lot.
And the conclusion we came to was that the right solution would probably be something like rolling out disconnected debit to the Mexican market, issuing “real” Visa debit cards and cleared realtime against a user’s existing bank account. The only issue is that to do this, we’d need to parter tightly with a local bank, acquire a bank, or create a bank.
It became clear that most of the issues in this arena are not of a technical nature but are relationship and regulatory driven. Nathan and I are a pair of nerds, not bankers. We decided that while there’s a huge potential there, that we might not be the right people do tackle this market. So for now we’ve decided to table working on this more.
One interesting possibility did jump up, however, so here’s a freebie idea to throw out to an aspiring entrepreneur: privacy laws generally prevent telcos from handing over customer data directly to banks to assess creditworthiness. However there’s apparently not much that would prevent the telcos from handing over the data to a third party that could munge those records into a credit score that then could be sold to the banks…coupled with social media data, this could enable personal credit rollout in geographies where credit has been hampered due to lack of risk data (i.e. there are no longstanding credit agencies).
Three weeks ago, Nathan and I started digging into our third idea, connecting extended families by letting them share and gift experiences – letting you be the “Good Uncle” or “Good Auntie” you’ve wanted to be. Did you remember your nephew’s birthday is coming up? (Know what to get a six year old who likes rock music?) Wish you could chip in to their college fund with a click? With our platform, you can give a perfect gift every time. AND get adorable “thank you” pictures.
This, we actually know how to build, though it’s plenty clear we need to hire a designer. 🙂 (Know someone? Please write me!)