Financial Responsibility: How Payments Innovation Can Help People Manage Their Money Successfully

In last week’s post, I spoke about the issues consumers face in managing their finances and shared my view that we as an industry should and can do something about this. One of my core beliefs is that we should focus on consumer needs when creating financial tools. As CEO of i2c, I‘ve always focused our product development efforts in the belief that when consumers are presented with products that help solve their problems or add value to their lives, they become more loyal, profitable customers. We have seen the results in the portfolios of our client base. Consumers will engage more, transact more and form a longer-lasting connection with our clients’ products if they are getting this value.

If you consider the most popular financial tools used today, you’ll see why I feel the financial services industry has failed consumers. First, we have credit cards, which effectively train people to spend money that isn‘t theirs, making it very easy for them to overextend. Next are debit cards, which allow people to access only the funds in their bank accounts. But debit cards, at least in their current form, lack controls that can determine where and on what the money is spent. Also, most debit cards offer overdraft features, which are certainly not helpful to people in need of financial discipline.

There are also many budgeting tools and apps out there that aim to help people make better financial decisions but offer close to nothing in terms of tangible tools that assist people in changing their behavior. I love the theory behind them – and some of them do a great job of generating fancy charts and statistics – but the problem is that they take a retroactive approach. They tell me I went off track after I‘ve already spent my money. In a way, they smirk at me suggesting, “I told you so.” What we really need is a way to prevent financial mismanagement in the first place.

Prepaid, an industry which i2c has helped shape, has served as an enabler for many payment innovations and has moved commerce forward significantly. Its ability to bring about additional innovation depends directly on the prepaid processors and their ability to handle unique requirements and offer flexibility. Some established processors have struggled in this area and the result has had a stifling effect on innovation. I believe it’s time for the prepaid industry (and financial services companies everywhere) to innovate by embracing next-generation processing technology and creating new tools that help people improve their financial behavior. I say “behavior” because I see this as the problem with most financial tools– they don‘t stop people from making bad financial moves.

So one of the questions I asked my team last year was, “How can we help consumers when they are about to make a financial mistake?” Answering this question resulted in the creation of a new “actionable budgeting” module. It not only helps consumers create a budget by using different spending purses– it also helps them stick to it. The module prevents impulsive spending and actually enforces the budget by declining transactions that violate the financial plan.

The thing I love the most about our actionable budgeting solution is that customers can invite a “buddy,” or mentor, to help manage their accounts. The buddy can be notified when transactions outside of the financial plan are made, and they can even be asked to provide approval before the transactions are completed. Having a support structure like this is very valuable in helping people stick to their plans.

This budgeting tool is but one solution to the problem of financial mismanagement. Imagine what we can come up with if we, as an industry, give this problem the attention it deserves. I would enjoy hearing your perspectives and ideas on this. It is this kind of dialogue that we should be engaging in if we are going to make progress in helping consumers get ahead financially.

Have fun innovating!

Amir