Launching: “The Guarantors” Helps NYC Renters Qualify for an Apartment


As a blogger/analyst/entrepreneur, it’s a mixed blessing when someone delivers on a market need you’ve been ranting about (here and here). You feel vindicated and you have a blog post that writes itself, but it knocks one thing off the top of your businesses-to-start list.

So begrudgingly, I introduce you to The Guarantors, an N.Y.C.-based startup that is stepping up to meet the needs of renters trying to qualify for an apartment in New York City, and eventually other markets such as Boston, Chicago and California. I was directly involved in one such qualification excercise two months ago.

The company essentially acts as your parent (if your parents could fill out reams of paperwork within 12 hours, were extremely well heeled and backed by surety bonds), stepping in to co-sign and guarantee your rental agreement. To make landlords trust the stand-in parent arrangement, the startup backstops its guarantees with insurance from The Hanover Insurance Company. If the renter does not fulfill the terms of the lease, The Guarantors, makes the landlords whole. It is a brilliant idea, and perfect for financial institutions to license or build themselves.

The only problem is cost. Depending on risk profiles, The Guarantor charges U.S. citizens 5% to 7% and international renters 7% to 10% of the annual rent, about 3 to 4 weeks’ rent to backstop a 12-month lease; leases up to 18 months are a higher rate). But by eliminating deposits that can equal that amount or more, it can be cash-flow-positive to the renter. Though, unlike a deposit, that money is gone for good. So it doesn’t help first-time renters without the initial cash surplus of two-month’s rent. However, a financial institution offering the service could loan the renter all or part of that. There is no cost to the landlord.

The company, currently operating in NYC, is open only to renters with a 630 or higher FICO score and annual income at least 27x the rent. Alternatively, the company allows co-signers with at least 45x the monthly income, or liquid assets of 75x the monthly rent, to guarantee the guarantee. Applications are approved with 12 hours.

The company launched in 2014 and spent 18 months nailing down the insurance deal with Hanover. It has taken a seed investment of an undisclosed amount from nine investors (50 Partners, Alven Capital, Arnaud Achour, Fides+Ratio, Kima Ventures, Partech Ventures, Residence Ventures, Silvertech Ventures and White Star Capital).

Bottom line: Renter financing/assistance is a promising new lending/customer service for financial institutions. You not only get new customers, new loans, new checking accounts, a foothold in the millennial market, a unique service to offer employers, satisfied renters (and their parents), but also become a local hero with write-ups in every newspaper, blog, and housing forum in your market. And, with a phone call or two, you will be on the nightly TV news every fall when it’s “apartment hunting” season.

Contact The Guarantors now and offer to be their first distribution partner outside New York City, or their first strategic investor. And if you are Wells Fargo, Capital One, American Express, or Chase, just buy them outright already.

Have a fantastic weekend all!

Friday Fun: Berenstain Bears Bring Banking to the Under-10 Set

berenstain-cu-book-coverI thought I’d left behind Berenstain Bears 15 years ago when my youngest graduated to Animorphs books. But they made an appearance today when I discovered how they are helping kids get involved with saving and managing money. And before you dismiss their appeal, did you know the Bears have sold 300 million copies in a 54-year run which includes 300 titles!

Three years ago, Franklin Mint FCU, through its CUSO CUNFL, developed a financial literacy program based on the series. It includes a book written by none other than Mike Berenstain himself, called Berenstain Bears Visit a Credit Union. It is licensed to other credit unions to appeal to grade schoolers.

obee-cu-cub-account-benefitsThe book is in use at a number of credit unions, but none more prominently than O Bee FCU in the Tacoma, Washington, area. Its Berenstain-themed Cub Account for under-12 members includes a 7.5% rate on the first $500 in savings, an important feature so you can use something other than pennies to show your youngster the benefits of savings. More impressive for the kids, every branch-deposit earns a free Dairy Queen ice-cream cone coupon (see inset for full list).

O Bee also offers a classroom financial literacy program with visits from the bears themselves, along with a jumbo version of the book to read to the class.

O Bee Credit Union’s Cub Account landing page


Bottom line: Efforts aimed at banking the kids of your customers are a clear win-win. It’s the right thing to do; kids, and their parents, need these services. And it helps keep both the child and their parents as customers for the rest of their lives. See our previous posts for more examples.

Tactics: Helping Students and Other First-Time Renters

SF Fire Credit Union offers loans up to $10,000 to cover rental expenses
SF Fire Credit Union offers loans up to $10,000 to cover rental expenses


Looking to provide real value to younger customers, especially the children of your core deposit base? Help them get started in the rental game. I have five family members who have recently rented in the Seattle and Los Angeles metro areas, and it’s a brutal seller’s market for apartments. Landlords are picky and require financial assurances similar to, or even more stringent, than a mortgage (pre-2008 anyway).

For example, as a co-signer on my son’s lease, I was asked to provide two years of tax returns despite the fact that he has a good job lined up (albeit not until after graduating in May) and sufficient current resources to pay the monthly tab. And then there’s the initial cash outlay (in his case, $4,000 in certified checks). All this is quite daunting for new renters or anyone looking to make a move.

Where financial problems exist, banks and credit unions have opportunities. Ideas include:

  1. Make it easier to save with a goal-based account: First-time renters often don’t realize the financial cost of getting started in an apartment. Offering a systematic savings program to help build the required balance is a win-win. For extra credit, provide a bonus when certain milestones are met and/or allow parents, aunts, uncles and grandparents to contribute as well. Simple, Moven, Mint and most PFM platforms offer goal-based savings; most financial institutions do not.
  2. Provide rental-deposit loans: If savings won’t cover it, offer a modest installment loan with an easy co-sign option. These small loans can also help build a positive credit history. Though rare, a few U.S. credit unions offer small loans specifically to cover rental deposit, first/last months’ rent, utility deposits, and so on, but it’s not typically something you see at banks. See the SF Fire Credit Union page above for an example.
  3. Help students in their apartment/roommate hunting: Team up with companies helping students and others find a place to live. For example, Rent College Pads, recently raised $1 million.
  4. Offer renter’s insurance: A low-cost, but valuable bit of peace-of-mind for young renters who can ill-afford to replace stolen or damaged items.
  5. Encourage more low-cost housing options: In tight rental markets, use your resources to find spare rooms within the community that could house students or others needing housing. A bank or credit union could offer loans to remodel or build new rental spaces.

Bottom line: One of the best ways to cement a long-term relationship is to help someone (or their kids) find a place to live, and provide a means of handling the initial financial burden. I encourage financial institutions, and their fintech partners, to make a home for this strategy in your 2017 gameplans.

Marketing: Alliant Credit Union Pitches Kids Account on Logoff Screen

The logoff page that pops up following a secure session is one of the choicest real-estate parcels in a financial institution’s inventory. Typically, this logoff page is seen on a desktop pc, but the same opportunity exists on mobile. Earlier this summer (late June), we spotted Chicago-based Alliant Credit Union pitching its Kidz Klub savings account with a 1% APY (adults get the same rate).

alliant fcu logoff kidz klub

Bottom line: The logout screen is well-designed and the green call-to-action button is easy to see. The button leads to an attractive Kidz Klub landing page (see screenshot below). While The Klub is a savings account that mirrors rates available for adult members, the thrill for kids is that each Kids Klub member receives an individual member’s card and account kit.

Given that today’s 10-year-old could be a bank/CU customer for the next 70 or 80 years, it makes sense to cater to members’ children with a dedicated account.  But it needn’t be a fancy standalone account. The primary goal is to get kids (and their parents) to start saving together and that can be done with a repurposed basic savings account.

alliant kidz klub lander

Pokemon Banking for Fun (and Profit?)

sberbankgo facebook page

The Pokemon Go craze doesn’t surprise me at all. Both my boys grew up with the little beasts so I get their appeal, especially with the AR boost. But what I didn’t expect to see were multiple financial institutions jumping on board, during the first week no less. And one, SberBank, that would pull off a clever product tie-in that might actually have a positive ROIsberbank go site.

Coinciding with the official countrywide Pokemon Go release (expected any day now), the Russian bank and insurer (and Finovate alum) is offering free accident insurance for anyone while they are playing the game. Users must register with the bank first (nice monetization through lead-gen) and provide evidence in the case of a claim (and some big costs).

The bank plans to use special game pieces called Lures, to drive players to branch locations. They are also providing additional bonuses for anyone catching a Pokemon in the branch.

SberBank created a special website just for the promotion at which explains the offer in both Russian and English (screenshot right). In addition, they’ve added a Facebook page to support the promotion (screenshot above).

pokemon go cu brandedWhile the free insurance promo is probably too costly to work in litigious U.S. markets, banks can still use the game to drive traffic. For example, Florida’s CenterState Bank has already experimented with lures at its branches (see full writeup on its promotion). Or if you just want to have a little fun on social media, drive your branded truck into the background while capturing one of the little critters. Kudos to CACL FCU in Pottsville, Pennsylvania, for acting on that first.

Bottom line: Jumping on the Pokemon Go bandwagon isn’t going to replace anything in your 2016 marketing plan; however, it could be a  low-cost way to:

  • Provide interesting content for your social media outlets
  • Gain some free PR (limited to first bank/CU that does it in a given market)
  • Provide leads for certain products (youth bank accounts, insurance, mobile banking)

BECU Helps Parents Teach Savings Ethic with 6.17% APY

smartypig_retailgiftcardBack when my kids were able to save—both are in college now, so that’s not happening—ING Direct and others offered interest rates that actually created an incentive to save. My oldest even enjoyed 5% rates for a while, quite helpful in showing how the “free” $5 to $10 per month he earned at the bank grew his total over time.

But today’s middle-schoolers and younger teens have come of age in an absurdly low interest-rate environment (see note 1), with little chance to experience the joy of compound interest. SmartyPig (inset, note 2) and others have created savings bonuses centered around merchant gift cards. That’s a clever way to add value, but it can also send a mixed message, “Hey Junior, save $250 and you’ll get an extra $5 if you spend the whole thing at Best Buy.” For parents who’d like their kids to hold onto that cash (at least until college), few options exist, other than bribing your kids with parent-funded bonuses.

But a few financial institutions have addressed the forlorn kiddos and their disappointed parents by dramatically boosting the rates paid on the first few hundred of a balance. For example, in the greater Seattle area, BECU pays 6.17% on the first $500 deposited in its Early Saver account (see screenshot below). Granted, the rate reverts to pretty much zero (0.1%) after that, but kids at least get enough interest every month ($2.50/mo on $500 balance) to make it feel like it’s worth holding the money at the credit union (note 3).

Bottom line: Your customers’ children are your future. It’s worth investing in services to keep them at your FI for the next decade or six. If the $30 annual subsidy is beyond your budget, enable parents to pay for the rate bonus. Let parents “boost” the interest paid on their child’s account as much as they want. To provide an extra incentive, you could match parental contributions up to a certain point (e.g., $10/year).


BECU Youth Savings landing page (link, 11 Jan 2016)
Note: BECU has elevated Youth Banking to one of six choices on its Everyday Banking primary navigation item.





1: For example, Bank of America currently offers 1 basis point interest on a child’s account, which means your child’s $1,500 average balance earns 1 cent per month!
2. Social Money, owner of SmartyPig, was acquired by Q2 Holdings last month (Dec 2015).
3. BECU offers a similar boost for the first $500 banked by 18+ year-old members as well, but the rate is only 4%.
4. Off topic: BECU has done a great job optimizing its homepage for responsive design. Open it in your browser and then shrink the window and watch how it resets. Very nice!

Tuesday Tactics: Creating an Interconnected Family Bank Account

Yodlee_tandem_positioningA major consequence of ubiquitous digital banking will be a long-term improvement in customer retention, at least for the “primary” bank/checking account. Digital natives will perceive little need to change banks as they move from home to college and then to multiple jobs. Assuming you keep them satisfied and connected to family members, today’s 15-year old might stick with their primary bank or credit union for seven or more decades.

But you can’t retain a customer who never opens an account.

That’s why I believe FIs should do their best to get an account started for every child in every customer household, probably bundling them into a “family wrap account” which could carry a premium fee (though the individual kids’ accounts should probably come at no additional fee).

And the family account needs to be fully connected and in sync with the parents, guardians, and other current and potential family members. That enables real-time money movement along with expense tracking. And yodlee_tandem_streamas children grow into adulthood, the accounts should be able to be easily be converted into their own family account, and the cycle can be repeated with their kids.

Building it

We’ve seen a number of youth-oriented platforms at Finovate, but they have rarely focused on inter-connectivity and communications. Two exceptions are Yodlee’s Tandem app (inset) which debuted at FinovateSpring 2013 and FamZoo, which demoed its new platform the same year. Watch their demos and be inspired (Yodlee, FamZoo).

For more info on the mobile side, see yesterday’s post.

Mobile Monday: Fintech Through the Ages

There’s a big, missing piece with today’s money management (aka PFM) offerings:

Age appropriateness

What I mean is that most FIs offer a one-size-fits-all mobile app and that just won’t cut it going forward. As capone360_teen_checkingdevelopment costs drop (see Building it Out, below), it will be easier to cost-justify tightly segmented apps. One of the better examples (from the desktop), is CapitalOne 360’s Teen Money a program it inherited from ING Direct (which launched it exactly four years ago with a $10 million ad campaign).

How will this multi-app trend manifest itself? One of the more likely initial phases will be segmenting by life stage. For example, here’s a common example of 10 stages, along with key money-management issues along the way:

  • Pre-teen: learning, saving, chore management, light spending
  • Teen: learning, saving, college planning, spending
  • College: learning, spending, expense sharing with roommates/parents, automobile
  • Singles: spending, renting, insurance, expense sharing with roommates, investing/401(k), saving, credit
  • Young marrieds: mortgage, insurance, expense sharing with spouse, investing, saving for home
  • Family with little ones: insurance, spending controls/budgeting, investing, tuition, home equity
  • Family with teens: spending/budgeting, investing, saving for college, sharing expenses with kids, retirement planning
  • Empty nest: retirement planning, asset management, investing
  • Active retirees: asset management, estate planning
  • Homebound seniors: sharing control with kids, health insurance management, estate planning

All of those segments will likely have their own app or at least a way to easily customize a general app in a way that syncs with their needs without the clutter typical of many banking websites (though they are getting much better as building for mobile (responsive design), demands prioritizing features/content.

Building it out

Given the 6, 7 and even 8-figure costs of major mobile initiatives, building 10 apps may seem ridiculously expensive. And it would be if it weren’t for cost savings enabled by third-party and SaaS services fed through APIs, a subject we touched on recently in a post about the coming Golden Age of Fintech APIs.

If you are willing to forgo branding, you could provide age-appropriate apps for virtually no cost. For example, some smaller banks gladly refer their customers to Mint for budgeting/money management help or Credit Karma for credit management. It’s not a bad strategy. Sure, they’ll see targeted financial advertising, but that’s not going to matter if you provide a valuable service.

But we expect most banks and credit unions will eschew custom development and choose a full white-label solution such as MX, Backbase or dozens of others. Or alternatively, go with a hybrid co-brand, such as BancVue’s Kasasa or FamZoo for the teen/pre-teen crowd.


We’ll be looking at these issues and more at our second annual financial services developers event,FinDEVr, in October.


Graphic source: Linkedin

Mobile Youth Banking: Union Bank’s Yuby is a Good Start for the Grade-School Set

yuby_homeEven if you don’t have young children, I’m sure you’ve noticed how even pre-teens these days are hunched over their smartphones. So, if you want to get your core customers’ kids engaged with the bank, your strategy pretty much must begin with, and can probably end with, mobile.

Banks haven’t really been able to devote resources to mobile youth banking as yet. The financial crisis hit at the same time the iPhone came out (unrelated, I believe), so it wasn’t really until the dust settled a few years later that v1.0 (adult) mobile banking was introduced. Now, most banks have a solid v2.0 in place and can start developing niche services for certain segments of their customer base.

Union Bank is one of the early entrants in mobile youth banking. It launched a dedicated app a year ago (press release) called Yuby (see landing page below). It was built for them by Mutual Mobile, an app developer which has also worked for Finovate alum Clover.

How it works
The app is very basic (see inset) and includes no ties to actual account data at Union Bank or anywhere else. Basically, it does just three things:

  1. Money tracking: Kids can add or subtract money from their virtual account, but only if a parent authorizes the transaction with a parental PIN—to be typed into the app on the child’s phone; there is no dedicated “parent app.” A simple transaction feed (below) shows the flow of funds in and out of the account.
  2. yuby_transflowBasic chore list: It’s easy to add a chore, but there is no tracking or integration with the child’s allowance.
  3. Wish list: The app includes an area to establish multiple savings goals. And it automatically explains how long it will take to save for the goal if the child’s entire allowance is devoted to it.

This is a great way to start. It’s a simple app, which means no integrations, no security audits, or compliance issues. No personal info is saved (other than a photo), so privacy is not an issue. Basically, it’s a mobile version of a sheet of paper and a pencil. But it’s much more engaging to port those simple functions to a mobile app, where a child/parent can always find it.

This is a good app for the grade-school set. However, it needs a functionality upgrade for the teen crowd. While older kids can still use it, once they are old enough for a debit or prepaid card, the app needs integration to actual bank accounts, both the child’s and parents’.

At our Finovate events, we’ve seen a number of youth-banking use-cases presented, usually around debit and/or prepaid. The most recent from CBW Bank, who just last week showed us a glimpse of the future with an iOT integration that would allow parents to control fuel purchases for a specific vehicle (video coming later this week here).

There have been a number of memorable youth banking demos over the years, though none were specifically mobile-optimized. Of the six listed below, only FamZoo and PlayMoolah are known to be active at this time. The other four, in our view, were simply too early, or too complex, to make a business out of youth-banking services. Here are links to the demo videos:

Finally, there is Skill-Life’s Money Island, which was Finovate’s first youth-banking demo in fall 2009. The company was snapped up in 2010 and is now the basis of BancVue’s financial education service.


Union Bank Yuby Landing Page (link)


Tuesday Tactics: Attracting Young Customers via the Parents


This is a continuation of Friday’s post about using apartment rent-and-chore-tracking app HomeSlice to attract younger customers. The app is a classic Trojan Horse tactic, though not a nefarious one. The thing is, once you get customers digitally locked-in to your platform, they may never leave. And while this works on any age group, the younger set is more attractive in many ways, because they are not already set in their financial ways, and they have massive revenue potential if you are able to hold onto them through the next few decades.

Today, automated investment management platform, aka a robo-adviser, FutureAdvisor launched its own youth play, but targeted it to the parents of the kids it hopes to serve for the next 70 years. The service, dubbed FutureAdvisor College Savings, aims to get funds earmarked for college into its managed savings plan. The startup is forgoing its usual 0.5% wrap fee and is offering the account at zero cost. An impressive graph (inset) charts the savings growth in its plan (optimistically predicted at a 7.1% annual return) vs. a bank savings account (pessimistically pegged at 0.5%) over 2o years. Even though the spread is likely to be less dramatic than the indicated 6.6%, the benefits are large.

Bottom line: For most financial institutions, the parents are probably the easier path to landing the under-21 crowd. So financial services companies should consider similar offerings whether it be student-loan management, regular savings accounts, starter credit, apartment loans, first-car loans, and so on (for more ideas, see previous posts).

FinTech at TechCrunch Disrupt

imageThis past week, NYC hosted TechCrunch’s semi-annual tech event. TechCrunch Disrupt covers the entire tech spectrum from software to 3D printers to gaming and ecommerce. Generally, the financial vertical accounts for 2% to 3% of the companies involved. That said, several notable fintech companies have done well there. Notably, Mint won the first event in 2007. And in 2011, both InvoiceASAP (demoing at Finovate next week) and BillGuard (see post) made it to the final round, (with BillGuard finishing second overall).  


Startup Battlefield

This year, three of the 30 "battlefield" companies that made it one stage were in fintech. One of those, Zenefits, was one of seven finalists called back to demo again to the judging panel. Enigma a public-dataset discovery and analytics startup, was the eventual winner.

1. OK’d by PaidPiper (description | demo)

  • Kids payment tracking and authorization service
  • Partnering with Vantiv
  • Mobile first…team has mobile background
  • Can also be used by small biz with their employees
  • Charging parents 5% of value transferred (non-starter…needs to get to monthly subscription)

2. Trustev (description | demo)

  • "Social fingerprinting" to provide a "Trustev score" pulled from social media and other data sources
  • $20 billion lost in 2012 by online merchants
  • 27% of all online orders are reviewed by humans for potential fraud
  • Call themselves "Stripe for fraud"

3. Zenefits — Battlefield Finalist (description | demo)

  • Free, comprehensive HR-benefits platform, monetized with health insurance commissions only
  • Displaces client company’s health insurance broker to fund the free HR services
  • Co-founded by Wikinvest’s Parker Conrad
  • Y-Combinator alum
  • Typically, small customers can pay up to $2,000 per year for similar services


Startup Alley Tradeshow

The "startup alley" is the tradeshow floor where more than 100+ startups and event sponsors have tables to talk to interested parties. There were eight more fintech companies there:

  • ePaisa: Mobile POS startup
  • EXP Commerce: Futures market for consumer products
  • PayTango: YC company authorizing payments with fingerprint biometrics
  • Peela: Brazilian gift card provider "gift cards on steroids"
  • Purchext: Parental spending control system using sale receipt capture/OCR (now) and/or NFC (soon)
  • Brazilian online insurance supermarket
  • TouchtoPay : Fingerprint-based payment system
  • YourCapital: Algorithmic financial advice for DIYers


Panel Discussion

Financial subjects come up throughout the program, for example three VCs over the three days mentioned that they were putting money into Bitcoin. But there was only one focused financial-services session, a panel entitled, Show Me the Money.

Panel members: PayPal (Hill Ferguson, VP), Stripe (John Collison, Co-founder), Gumroad (Sahil Lavinga, Founder)

  • PayPal launched "login with PayPal" today
  • Stripe is powering Walmart’s new Goodies food-subscription service
  • PayPal used to buy $7 billion annually in digital goods (music, online gaming, etc)