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CEO Message: Despite Cool Factor, Some Fintech Warrant Close Examination

Contributed by: Heath Combs

CEO_Marc_SchaeferThe following message was written by Chief Executive Officer Marc Schaefer.

Is a cold wind blowing through the favorable economic climate we’ve experienced for the past few years as we climbed out of the recession? Or is the “new normal” “continued, but perhaps slower-paced,” economic growth?

Clearly, we’ve reached an inflection point as the economic cycle matures into one that is less predictable. Most notable is that interest rates – as they move well above zero for even short-term money – now matter. The returns you will earn on the money you save, invest or just park until you need it will impact your future financial health.

Much is made of the role of the FAANG (Facebook, Amazon, Apple, Netflix, Google) crowd, as well as financial technology (fintech) start-ups and how they threaten more traditional financial institutions like Truliant. With 65% of Amazon Prime customers indicating a willingness to try a free online bank account,1 there is some substance to the claim. But their offers – no matter the “cool” factor or the public personality spokesperson – warrant close examination as they are not always in the consumers’ best interests.

No doubt Amazon, Google, Facebook and others can use information they glean about you to try and make you compelling offers that fit your social, life-style and purchase profile. They might even use a bit of behavioral economics to convince you to make an important financial decision. What’s lacking in the “analytical, data-driven digital” approach is a true understanding and empathy for what the consumer really needs – especially for the long term.

A quick survey of the “fewest clicks” fintech lenders reveals generally higher rates and less customization for the actual interests of the consumer. A consumer with an average credit score can easily find themselves paying over 20% APR2 on a 36-month loan.

An origination fee is taken from the proceeds. By comparison, Truliant does not charge retail origination fees and our rates are capped at 18% APR.2 With Truliant’s online and mobile lending options, why would you pay more?

The other less-than-obvious goal that may be imbedded in the fintech transaction is to capture as much data as possible on each consumer and resell the information to other vendors that will then proceed to blitz your email and phone with offers that may or may not be of interest.

It is also interesting that consumers have been willing to “store” money on pre-purchase cards – interest free. From PayPal to Starbucks to Amazon – consumers are parking billions of dollars without any return for substantial periods of time. When rates were at zero that may have made sense – with two-year U.S. Treasury note yields at more than 2.5%, it does not.

Not all fintech options are necessarily bad for the consumer. But their motivation is usually to make money for their investors and/or sell the company for profit. Recognizing that Truliant’s members build financial security over time and that we all face the ups and downs of the general economy along with those in our own personal lives, the best time to build your foundations is when times are relatively good. How much, when and how to save and to borrow can figure prominently into each member’s financial outcomes. Truliant cares about how your finances impact your life.

We want to be the trusted partner helping you make the best decisions in your own best interests throughout your life.

(1) Bain/Research Now Loyalty in Banking Amazon Survey 2018
(2) Annual Percentage Rate

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