Credit, done right.

The Apple Card and most credit cards are the bad apples of credit. Will mobile be the game changer?

Access to credit and the ability to use it with ease when you need it adds to your financial freedom. With credit you can get out of a financial squeeze, buy what you need when the price is low, and cover critical costs if they arrive. It provides a buffer for costs that must be covered, even when savings are low or salary has not arrived.

On the flip side, using credit when you know you can't pay it back in a reasonable manner is obviously terrible. And while I’m a fan of the freedom to choose and a lack of parental control on adults applied by overly eager governments through regulation, we consumers are constantly and with more push than ever before tempted to draw out credit. This occurs mostly through Credit Cards with perks, miles, bonuses, and points to deepen the draw on a revolving credit from a growing number of players, including new brands in the credit industry, like Apple, Amazon, Uber and many others, alongside the usual suspects; banks, airlines and petrol brands.

What most of them have in common is that you have to order a card to get access to the credit, and the provider is utilizing well known psychological techniques (popularly known as Gamification) to help and ensure you drown in debt.

I will not bore you with a lengthy piece on gamification. There are plenty of books, podcasts, articles and studies on the subject. But in summary, it revolves around applying rewards for what is considered the right behavior, in order to stimulate you to do more of that. In this case, take out more credit. How? Points, Badges, Levels, Rewards and so on.

You earn points by simply spending. You may receive badges along the way (I just got a “Captain” badge on my airline credit card). Levels are well known; silver, gold, platinum, black cards etc. and rewards and perks such as access to lounges, insurance etc. Aspiring to reach these various levels drives people into debt, justified by the experience of winning, earning, leveling up and being rewarded along the way. You may say “not me” but it works on everyone. The difference between making it out alive (not poor) is that you have financial security and structure in your life to game the system, beat the urge to go beyond your financial capabilities, collect the rewards and pay on time. Most people don't. That's why this way of credit is a bad apple, and still extremely popular, like other things that are not good for you.

So, how to provide Credit the right way?

First we need to agree on a few fundamentals. Gamifying the deepening of a revolving credit is morally wrong, so doing it right means removing that. Secondly, the credit should be easily accessible if it is to work as a financial buffer when you need it. If you are the type of person who has no issue waiting 3 months for a points heavy platinum card with lounge access to arrive, you are not the type that actually needs credit to expand your financial freedom. So removing the complex and often analog enrollment process, followed by removing the issuing of a physical card in the mail seems reasonable. We will replace it with a mobile only journey, with instant access to the approved credit.?

Then you should make it super easy to use the credit; enabling people to send money to themselves, to friends, family or pay to merchants, even transferring out to a bank account. The latter is often expensive or even disabled for cards, as it does not generate interchange (revenue from the merchant to the card issuer) and making cash available at the ATM typically has a high fee. Doing it right means no fees or restrictions on any such usage of the credit. Use it as you see fit, when you need it, in the way you need it, even transfer for free to your bank account.?

And then finally, make it easy, in fact, just as easy as pulling the credit, to pay down the credit. In the same channel as you pulled it, on your phone, you can pay it back, as easy as sending a text message. No paper bills in the mail, no lengthy account numbers, reference numbers, or calculation of outstanding balances. When a payment is due, the credit provider asks for the money back as a ready-made payment request that the user can simply approve with a swipe.

The access to capital on your bank account, stored value account, or on a linked payment card is still needed to pay down the credit, just as for any other line of credit. But I would assume that part is not debated, as we are talking about credit after all.

So comparably; no gamification, no lengthy process, no paper, no mail, no card, no costly fees for the pulling of the credit in a channel that cards typically charge for. Instant access on your phone, and one swipe to pay it back, also on your phone! That seems like Credit done right.

We will do this.

Not to make this piece an advertisement for our own business, but then again, yes; Settle will make this “Credit done right” proposition available as a trial in Bulgaria in partnership with leading consumer finance player Viva Credit, part of MFG. The goal is to see if near instant and easy credit access can work for an audience to be empowered financially based on the proposition explained here. I will come back with the outcome once launched this June, as the real world will be the true judge of our offering to the credit fruit basket.

About Viva Credit

Founded in 2012, with 230+ employees across 62 offices, providing consumer loans and mortgages in Bulgaria to more than 108.000 customers.

About Settle

Settle envisions a world where money is digital and democratized.?

With the Settle app, people can send, receive, and manage money instantly from their phone. With Settle for Business, a suite of self service payment and commerce tools, and the Settle API, any business can accept digital payments, in any situation, without relying on hardware. Settle is available in 28 European markets.

Settle is the culmination of 10-years worth of mobile payments history. The team behind Settle have been making a name for themselves as leaders in mobile payment and commerce since 2010. From their headquarters in Norway, they’ve spent more than a decade developing an award-winning and world-class financial services platform. They developed the first mobile payments platform in the Nordics and launched the first mobile payments scheme in Norway (mCASH), impacting the lives of millions of people and helping to fundamentally change the way people and businesses pay and get paid. This experience and technology is now being applied by Settle Group to establish the largest collaborative mobile payment network across Europe.