Zerocard: A Debit Card with Credit Card Rewards
What is Zero?
It's a credit card that acts like a debit card. Check out our interview with Zero Financial CEO Bryce Galen about the Zerocard and the future of the banking industry.
FC: Does Zerocard essentially take the best of what a credit card has to offer and the best of what a debit card has to offer?
BG: That's a good way of characterizing it. And so really if you think about it debit cards are great because they give you oversight over your balance, but the one thing they can't provide is rewards. And the reason why they can't is because of regulations that dictate differences between the merchant processing costs for debit cards and credit cards. Banks make more from merchant processing costs when a credit card is swiped so they are able to offer those cash back rewards. Debit card providers can't do that. So costumers have this trade off that they have to face when they decide which type of card they want. They're either choosing between oversight and knowing where they stand that debit cards provide or the rewards and perks of a credit card.
FC: Did your personal history with credit cards and debit cards help you come up with the idea for Zero?
BG: I was someone who played the credit card rewards game myself. I used a different card for gas and groceries and travel. And they all have their perks. But there was no single card that kind of fit the bill for everything I wanted. I was juggling between cards, apps, and statements and I wanted something that gave me a good high cash back rate across the board with debit style functionality. So that's what Zero does. It is a product that brings together the best of both worlds in a new novel way that no bank has done before. Since it's technically a credit card we can offer those rewards, but it's a credit card with which you can only spend the amount you put into your account.
FC: How are you able to merge these two functionalities?
BG: The way we do it is actually very simple. It's similar to the way that apps like Prosper Daily work. They aggregate your accounts - debit and credit - in one screen. So you see when you make a deposit in your checking account and you see when you make a purchase. Everything is right there in one spot. That's kind of like what we do. We use a mobile app that's easy to use and understand and it gives you the single view so that you see the net balance. Imagine if you put 1,000 dollars into your checking account and then you spend 100 dollars on your credit card. Typically you have to look at two different places to see the transaction and then sum them together but Zero puts those two accounts into one view so all you see is one account.
FC: Why haven't other banks done this?
BG: They want you to spend more on credit cards. They want you to lose a little bit of control because they make money off of interest and fees. Interest and fees when you pay late or not in full account for more than half of credit card portfolio revenue at big banks. We make all of our money from merchant processing costs which are already baked into the credit card system. So we aren't charging people interest or fees and we are also not letting people spend more than what they have deposited in their accounts. That's the debit card functionality. And then we put those rewards on top.
FC: Technically speaking you're not a bank?
BG: No we don't hold a bank charter. That's a very long process and we feel like we can do what we want to do in terms of giving people an interface and a better product with a partnership with an existing bank player. So we are focusing on the technology and we allow that partner to provide the regulatory framework through which we operate.
FC: Will these accounts collect interest?
BG: The leading savings account online are paying around 1 percent interest. We are in a time of low interest rates. Given where we are we pay out the competive interest rate in the industry.
FC: The name is pretty interesting, Zero. Can you tell me how you decide on that?
BG: Well Zero is a little unorthodox for a name for a financial company. People say what would you call it Zero? Doesn't that mean no money. We think of it as zero compromises, zero fees, and zero debt. And at the end of the day more zeros in your account.
FC: Do you view your company as a disruptor in the banking industry?
BG: We do view ourselves as a disruptor. We are not trying to topple traditional banks because they do play an important role in the financial ecosystem. But we are trying to give people something the traditional banks don't offer. We're giving people rewards and without the tack on fees that the big banks charge. We are disruptive but we are disruptive in a empowering way.
FC: What other features does the app offer?
BG: We have an intelligent advisor that looks at your balance and can predict based on your income and spending trends what your balance will be a week from now, a month from now, a year from now. This is important because your balance today doesn't always show exactly where you stand if for instance you have a big rent check you have to pay next week. Basically this technology tells you how much money you actually have.
Zero Financial announced the launch of Zerocard last week, but they won't roll the product out until next year. If you're interested sign up today.