BEND, OR / ACCESSWIRE / April 5, 2017 / I can't remember the last time I actually walked into a bank to deposit a check or withdraw funds. Come to think of it, I barely use an ATM anymore. My bank offers a mobile application for my smartphone, and like millions of other people, that's what I use for the vast majority of my banking transactions.
The shift to mobile banking and financial services, better known as fintech, is a trend that's grown rapidly over the past several years.
According to a December 2014 study by Bain & Company, banking customers completed more interactions with their banks via the mobile channel, i.e., smartphones and tablets, than through any other channel in 13 of 22 countries surveyed. And according to a Javelin 2015 report, the proportion of weekly mobile banking transactions exceeded that of weekly branch banking transactions for the first time in 2015.
Cachet Financial Solutions CAFN ("Cachet"), has been at the forefront of the mobile fintech movement since the company's inception in 2010. Cachet provides these traditional financial institutions and alternative financial service (or AFS), providers with innovative mobile solutions that enable them to offer mobile financial services to their customers.
For example, when you open the US Bank mobile app, it's actually powered by Cachet. The app just looks and feels like it's native to US Bank, but it's not. The app and all of the intelligence behind it, is actually run by Cachet. US Bank just customizes, or "skins", the app to look like their own.
Traditional mobile banking technology used by banks and credit unions has become largely commoditized; just about every major financial institution has a mobile app and some form of imbedded remote deposit capture (RDC) technology. RDC enables customers to deposit checks from a mobile app, simply by taking a picture of the check to be deposited. Historically, Cachet focused on offering a full suite of consumer and business RDC products, and while they continue to offer these solutions, they have recently expanded into prepaid mobile money solutions. These prepaid services are of particular interest to us.
Cachet's recently launched its, "Select Mobile Money" (SMM) platform, which links various mobile banking features with a prepaid debit card issued by financial institutions or AFS providers. SMM allows prepaid cardholders to deposit paper checks and direct payroll deposits into their prepaid card account using Cachet's RDC platform. The funds can then be accessed immediately via a prepaid card or ATM.
We believe the SMM service is both disruptive and compelling, because it caters to a vastly underserved segment of society - people aged 18-29, otherwise known as "millennials". Most of the 85 million millennials in the US have grown up with smartphones, so they're accustomed to using them for tasks like banking, and paying for things. They're also underbanked meaning they have no formal relationship with a bank or credit union, prefer not to use a traditional checking account. According to Float, Inc. Millennials represent over $200 billion in consumer spending power, and over 60% do not own a single credit card. (sources: FirstData.com/en_us/all-features/millennials.html).
Contrast that data with a study released by the Philadelphia Federal Reserve Bank in September 2014, which found that 45% of millennials said they did own a general purpose reloadable prepaid card.
The conclusion we draw from the aforementioned data points, is that financial institutions will need to include prepaid card services within their mobile apps. Cachet's SMM service is designed to do just that. Using SMM, customers have the ability to load their prepaid card from their mobile device in real-time.
For example, assume a customer receives his or her paycheck after work on Friday. If the customer's financial institution is using Cachet's SMM platform, the customer will be able to transfer the funds from that check to a pre-paid card, from the institution's mobile app. Those funds are instantly accessible, so the customer doesn't have to wait the traditional 3-5 days for a check to clear before the money can be spent. The entire transaction occurs almost instantaneously.
Since financial institutions are clamoring for a way to serve the underbanked millennial populous with a solution that meets their financial needs, in an expedient manner. Since Cachet is offering the best way to achieve this objective - in fact as far as we're aware, it's the only company offering a solution that can achieve this objective - we believe demand for SMM will be a significant growth catalyst for years to come.
Historically, our primary concern about Cachet was their low cash on hand and bottom-heavy balance sheet. However, earlier this month Cachet closed a $10,000,000 underwritten public offering at a price of $4.50 per share. The offering also triggered approximately $11.5 million of convertible notes, so the company's long-term indebtedness decreased from approximately $12.5 million to approximately $1.0 million. In one fell swoop, Cachet strengthened its balance sheet, acquired cash reserves, and eliminated the largest impediment to their success.
We now believe Cachet has the financial resources necessary to execute against its business plan, and achieve widespread adoption of its SMM platform. It's clear that financial institutions are going to target the heretofore untapped millennial demographic, and our belief is that Cachet will supply the technology they use to do it.
With financing in hand, and a large market in their crosshairs, Cachet is our best idea in the fintech sector.
As always, consult with your financial advisor regarding the suitability of an investment in a company like Cachet or any company mentioned on our website, www.sylvacap.com.
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SOURCE: Sylva International, LLC
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