During my daily review and read routine, I always check out PYMNTS.com, as I find their articles relevant and well written. Here is a story from their December 21st feed. This article highlights the plight of an internet-only entity posing as a financial institution called Robinhood, and the issue of deposit insurance. As I have written before, all regulated financial institutions have deposit insurance either through the FDIC (banks) or the NCUA (credit unions); both of these organizations ensure deposits at their institutions up to $250,000. This is a critically important element for members who are placing hard earned money into a financial institution. If the institution were to fail, the FDIC or NCUA would make the depositor whole, up to the $250,000. I think that’s pretty important.
Apparently, Robinhood thought it was important too, so they claimed their deposits would be insured up to $250,000 as well. Since Robinhood is neither a bank nor a credit union, they did not qualify for FDIC or NCUA insurance coverage. They instead claimed to have deposit insurance through SIPC, the Securities Investor Protection Corporation. As its name implies, this is an entity that secures investments and is not even in the deposit insurance business. In fact, the CEO of SIPC stated he did not believe his organization would provide insurance to Robinhood.
All of this comes from a shifting story about what services Robinhood was even providing. Now, I’m not making any commentary on the efficacy of the Robinhood service; maybe it’s a great company that just stubbed its toe a couple times in a row. My point is, if Robinhood thought it needed to offer $250,000 of insurance to depositors, it’s an indication that deposit insurance is a desired element, a measure of legitimacy, or both. However, very few FDIC- or NCUA-insured institutions make any mention of the $250,000 coverage for depositors, other than the perfunctory references required by law. Why not make it a key element of the critical differences between regulated financial institutions and Internet wannabes?
Even if you’re not a financial institution, take a look at the elements of your service you feel are table stakes and are not regularly reinforced to customers and prospects. You may be leaving critical information on the table (or under it) that would allow a prospect to analyze the difference between your business and an upstart competitor. Don’t let flash and sizzle outweigh the key business elements that truly make your business stand out. You can always take the old and boring and make it exciting and relevant—we need an FDIC and NCUA jingle! Something catchy and fun.
If you have an idea, send it to me. I have a recording studio on standby.