Do you know what the last great consumer market is? It isn't iPad users. It's the opposite of your first instinct, people with disposable income.
The last great consumer market, ladies and gentlemen, is the poor. And hip-hop mogul Russell Simmons knows this. He's launching a new pre-paid debit card with Visa called the RushCard. But for what reasons?
The development sparks fireworks of questions about whether Simmons' venture, which carries activation and monthly fees to access your own money, is good for America's unbanked population of 10 million people, according to the FDIC. And they're good questions.
Uju Okasi of the Atlanta Post does a really fair job of exploring these questions about whether the card is good for blacks, which seems to be where it's being marketed. But really, the center of this whole thing is the question whether Simmons, whose product is priced higher than its competition, is really doing this to help his community.
"I don't know," says Jason Llorenz, a Brooklyn native and attorney who was part of the team that helped billionaire Bob Johnson transition to financial services, specifically supporting communications around the Black Entertainment Television founder's establishment of a hedge fund of funds, private equity fund and purchase of a commercial bank.
"Russell's brand is as both a money maker and community activist," Llorenz says. "I wouldn't discount the motivation of the card to make him money nor his motivation for the card to help the community."
Making money isn't hard for Simmons, who has been quoted as minimizing the art of making money by calling it "pedestrian." So Rocks Off doesn't question Russell's intentions, per se.
For him, making money is easy, but more telling is the fact there are much, much easier ways to make money than trying to convince people who prefer cash to plastic to deposit their money in an intangible safe they can't see or touch.
Just a few months ago, we were in a meeting in New York with an executive of the most prestigious credit-card company in America, who is ironically trying to launch a pre-paid product. This was a really smart lady who impressed us and was also dumbfounded on how to do it.
And Simmons knows this. Pre-paid debit cards aren't exactly a low-risk business venture. Though for the consumer adopting the product, the RushCard should be seen as a milestone toward success, says Llorenz.
"But you are not successful just because you have a RushCard," Llorenz says. "You're successful if you end up at a bank. My hope is that the RushCard is a motivator or eye opener to traditional banks that there is a market to be had if they figure out how to access the RushCard community."
But Russell has been clear: This card is for people that banks don't want.
"As long as it's a stepping stone," Llorenz maintains, "It's got its place in the market."
Right now, its place is a pre-paid debit card with more cachet than its competitors but also higher fees, so that raises more questions.
"The card's business model will be important," says Llorenz. "Is it using the power of Russell Simmons' brand to get people to banking or just keep people for the long term? Regardless, the market will work its magic. Successful card users will bear the higher costs or they are going to find cheaper options and leave it."
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"It's value is as on on-ramp to financial services," concludes Llorenz. "The more hip-hop entrepreneurs get involved in financial services, the smarter the community will get about non traditional products and the opportunities your local bank provides as well.
"I hope to see Lil Wayne talking about life insurance next to LL Cool J talking about $4.99 online day trades, and Daddy Yankee hawking a less expensive way to wire money as well."