Fintechs Fight For The Unbanked: How The Future of Banking Won’t be With Banks

DailyPay is a unicorn Fintech company with a private valuation of a couple billion dollars.

Their goal is to be the bank for the “unbanked.”

The unbanked are the people that traditional banks leave behind because maybe they:

  • Lack access via a nearby bank branch or mobile phone
  • Can’t afford the minimum balance nor the fees
  • Have distrust of the banking system
  • Have no access to government-issued ID, which is required to open a bank account
  • Prefer to use cash out of distrust for the government and banking system

So companies like DailyPay are trying to partner with businesses and companies to have their unbanked employees’ payroll direct deposited to the employee’s phones for use in any way, shape, or form that they want.

Imagine not having a bank account with a traditional bank, but your phone’s wallet app gave you a debit card you could go to any ATM to withdraw cash money out of to do your business?

Or from the phone’s wallet app, you can buy stuff online from your direct deposit, transfer funds to friends and family, pay your bills, all from your phone and not from a bank’s website.

That future is grand indeed.

But DailyPay isn’t the only Fintech company heading into this future for the unbanked’s business.

Square and Robinhood (not a Fintech?) are hot on their heels.

From Wikipedia:

Square, Inc. is an American financial servicesmerchant services aggregator, and mobile payment company based in San FranciscoCalifornia. The company markets software and hardware payments products and has expanded into small business services. The company was founded in 2009 by Jack Dorsey and Jim McKelvey and launched its first app and service in 2010. It has been traded as a public company on the New York Stock Exchange since November 2015 with the ticker symbol SQ.

Wikipedia, Square Inc

Also from Wikipedia:

Robinhood Markets, Inc. is an American financial services company headquartered in Menlo Park, California.[3][4]The company offers a mobile app and website that offer people the ability to invest in stocks, ETFs, and options through Robinhood Financial and crypto trading through Robinhood Crypto.[5] Robinhood operates a website and mobile apps for iPhoneApple Watch, and Android.[6][7][8] The company has no storefront branches and operates entirely online without fees.[9]

Robinhood is a FINRA regulated broker-dealer, registered with the U.S. Securities and Exchange Commission, and is a member of the Securities Investor Protection Corporation.[10][3] The company’s main source of revenue comes from interest earned on customers’ cash balances, selling order information to high-frequency traders (a practice for which SEC opened a probe into the company in September 2020[11]) and margin lending.[12][13] The company has 13 million users.[14][15]

Wikipedia, Robinhood Markets, Inc.

The Implications of Square and Robinhood Joining The Fray

Square is starting to allow businesses and staff of those businesses to access their direct deposits immediate after processing instead of waiting the couple of days till it finishes processing.

The only caveat is that employees need to have the Cash app, which is owned by Square.

So Square is trying to keep the cash digitally in their ecosystem because, in theory, if employees opt for direct deposit to be transferred immediately into their Cash app instead of waiting days for the money to arrive in their traditional bank accounts, they’re essentially serving the same purpose as DailyPay.

Not only that, if the employees were to use their Cash app to pay for stuff while shopping at physical or online stores, and if the stores were using Square’s systems, then you can imagine the money flowed digitally from a Square merchant, through Square’s systems, to the employee who uses Square’s Cash app, to pay for stuff to a vendor who uses Square’s payment systems.

On and on the cycle continues while Square collects more interest payments in its bank accounts the longer the money stays in their banks instead of leaving.

The idea is that as long as Square can keep the money flowing in their Square ecosystem and not any other financial institution’s, Square can just digitally adjust the numbers on vendors’, merchants’, employees’ accounts to be whatever it needs to be to keep up the semblance of commerce and normal cash flow.


Same goes for Robinhood.

Robinhood, the trading app that charges zero dollars for commissions, is now allowing people to input their direct deposit right into Robinhood and earn 0.30% interest on their checking account while waiting to use their money for stock investing, options trading, etc.


Here are some pictures from my Robinhood app that show such a thing:

So you can see, imagine someone can’t open a bank because they can’t afford the minimum balance required to keep a bank account open otherwise they get charged fees.

Robinhood doesn’t charge any minimum balance fees.

You make an account, set up your direct deposit, and because Robinhood is now offering the ability to buy fractional shares of companies, the unbanked can start investing in stocks to build their wealth where they otherwise wouldn’t be able to with a tradition brokerage company.

Robinhood ALSO offers a free debit card linked to you checking account.

So you can set up your direct deposit, access the money via your debit card, and invest with zero commission trading to start building wealth, all from the Robinhood app.

In the future, imagine they allow a bill pay feature, right from the app too.

Then you would never need a traditional bank again.

Where Do We Go From Here?

In the near future, probably within the next 10 years, we might see a merger or takeover/acquisition between Fintech companies like DailyPay, Square, Robinhood, and any other of the myriad companies vying for the business of the unbanked.

If I were a big bank, I would see the writing on the wall and try to buy out one of two of these fledgling Fintech companies now to get into the unbanked sphere, pending government approval of course.

Or, the cheaper alternative might be to just ease up and chill the fuck out with their high standards.

Get rid of balance minimums.

Get rid of balance minimum fees.

Get rid of overdraft fees.

Get rid of paper fees.

Get rid of late payment fees (like how Apple Card does it).

Offer higher savings account rates (if Robinhood can offer 0.30% in their CHECKING, there’s no reason why these big banks can’t do it too, at least increase their savings rates up from near zero…).

Basically the big banks and big credit card companies should be afraid, because if these Fintech companies band together and bank together to create an ecosystem of their own where the money doesn’t leave it to flow to other systems, then the banking and credit industry might be in trouble.

And if they’re not in trouble, they might see reduced income and less growth in the decades ahead.

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