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Lisa Hronek Archive for 2010
Kardashian update
On my Monday blog post I made a comment that Kardashian fans would not be put-off by negative publicity surrounding the Kardashian Kard. It appears that the Kardashian sisters were put off though and less than one month after the Kardashian Kard was launched, the sisters have terminated the project.
The Kardashian’s have decided that the card is damaging to the Kardashian brand.
A spokeswoman said: “We don’t want anything to do with this,” referring to legal concerns that have plagued the card since its launch. According to an article posted on CNNMoney.com, only 250 consumers had signed up.
The project might have worked – given the size of the Kardashian fan base – with the right partner. The lesson is clear: stewards of strong brands need to ensure that potential partners are aligned with their brand values, otherwise they risk irreparable damage. The Kardashian’s have acted quickly to nip this one in the bud.
And the winner is…
The Chevy Volt! Motor Trend Magazine has named the Chevrolet Volt as the 2011 Motor Trend Car of the Year. I’m not even a car enthusiast and I found this interesting.
This car of the future is the industry’s first “electric vehicle with extended-range capability” and is scheduled to be available in the United States as early as next month. A true hybrid, the Chevy Volt uses electric and gas power but gets plugged in to charge the battery.
Experts are saying it can go as far as 40 miles on just battery power alone. There is of course a lot more science behind this unique vehicle, such as a lithium-ion cell battery and a liquid thermal cooling and heating system. And it’s no surprise it was a Motor Trend winner with an overall fuel economy of 72.9 miles per gallon. According to Chevrolet’s website, the average person’s commute in the Volt will cost around $1.50 per day – that doesn’t even buy me a Pumpkin Spice Latte!
Chevrolet, a brand owned by the General Motors Company, is in recovery mode now after receiving a $9 billion government bailout at the end of 2008, only to be forced into bankruptcy by spring 2009.
The old General Motors brand was recreated into the new General Motors Company and seems to be doing well enough. As word has it, the new GM will soon be looking to sell some of the government’s majority stake in the company (61%).
Perhaps this industry-changing new vehicle will be the boost the company needs to put itself back on the map. The starting price of the Chevy Volt is expected to be around $32,780, but the savings in gas make it more than a great deal. This is certainly the kind of car that could get me more interested in cars.
The Kardashian’s take on financial services
The Kardashians are everywhere at the moment. The Kardashian brand is in its ascendency and the three Kardashian sisters are doing the smart thing – milking it for all it’s worth while they still have the chance.
On October 28, the Kardashians entered the financial services arena by launching a new prepaid MasterCard in partnership with Mobile Resource Card. The card is issued by University National Bank.
The launch party for the new Kardashian Kard was held at New York City’s Pacha nightclub on November 9, attracting hundreds of Kardashian fans and the expected media hype.
As with many prepaid cards, the Kardashian Kard is loaded with fees starting with a monthly fee of $7.95, although you can sign up for six or twelve month plans.
However, Kim Kardashian is promoting the fact that cardholders can transfer money between accounts using a mobile phone. On her website she says: “To me, the coolest thing about this prepaid card is that when you get the card you also get a Mobile Money account for free and you can transfer your money between your accounts when you need it, using your phone. It’s like having an ATM in your phone, LOL. No one likes going to banks and ATMs and we’re constantly on our phones, so why not make it easy to manage your money from your mobile!?” Cardholders can even by-pass their bank completely by having their paycheck deposited directly to the card.
Non-fans might mock the Kardashian’s but Kim makes an excellent point that will appeal to her young, mostly female, fan base. And while it is easy to dismiss this launch, here is a striking fact: Kim Kardashian has 5 million followers on Twitter and more than 3 million on Facebook which is far more than most financial services firms. The Chase Community Giving Campaign – one of the more successful forays into social media from a financial services company – has just over 2 million signed up to its Facebook page. Furthermore, Kim Kardashian’s fans are engaged and willing to follow her lead. In an interview with NBC’s Matt Louer she explained how fans could “relate” to her brand. Not something that is often said about financial services companies.
The Kardashian’s are tapping into a growing market. According to a recent study by the Boston Consulting Group, the prepaid market is projected to reach more than $440 billion in value by 2017 compared with an estimated $120 billion in 2009. In July 2010, Green Dot launched its IPO as a result of rapid growth fueled by its partnership with Wal-Mart. Green Dot rival, Net Spend, followed with an IPO in October.
The Kardashian’s are not the first celebrities to enter prepaid card world: Russell Simmons, founder of Def Jam Recording and Phat Farm Clothing, promotes the Prepaid Visa Rush Card via his company UniRush. The Rush Card was launched in 2003 to provide “a set of basic financial services for over 48 million Americans who could not previously establish traditional banking relationships.”
There has been some negative publicity surrounding the launch of the Kardashian Kard related to it reportedly being targeted towards teens as young as 13. However on the website www.KardashianKard.com, it clearly states that you have to be 18 years or older to apply and Kardashian fans, the only applicants, will hardly be put off.
It is unlikely that the banks will be losing much sleep over the Kardashian Kard. However, the growth of the prepaid market is a significant development and this latest product launch illustrates how a strong brand can be used to tap in to a loyal fan base and target a group that are more open to non-traditional methods of accessing their money.
Securitization is a good thing?
I stopped in at the Chicago Federal Reserve’s Community Banking conference last Friday and I must say, it was the glummest room full of people I have ever been in. The Fed economist who spoke was the only one who livened up the place. THAT certainly doesn’t happen very often.
In between jokes about the Fed printing money and keeping it on pallets in the conference rooms upstairs, he made the same succinct point about the current economy that we have been using in presentations recently – that credit conditions have improved but securitization has not.
What does that mean? Banks have slowly been recapitalizing and their balance sheets are looking much better, but—poor loan demand not withstanding—until the securitization markets return to at least a semblance of their former selves, we will not have lending anywhere near levels we have seen in the past.
What is slowing the return to “normal” securitization markets that can help banks lay off risk and make more loans? Basically, it is regulatory—we are in the process of developing regulations that can deal with the fact that the process is broken.
As evidence of that fact, every day there is more news about how logistics in the marketplace were handled poorly, such as the news today about how Countrywide (now owned by BofA) failed to send documents to MBS trustees.
The primary issue being addressed by regulations such as Dodd Frank is transparency. Basically, when the loans were sold to be pooled into securities, there wasn’t a lot of communication between all of the parties involved. If you don’t know what you have, then you can’t price it correctly. And the ultimate investor (such as pension funds that many of us rely on) ends up not knowing what they have. Call it consumer protection with about eighteen stops in between.
It is going to take a few years for everything to shake out. As Mr. Tannenbaum characterized it (and I agree) we are trying to move from a pro-cyclical to a counter-cyclical banking system.
Fixing the derivatives markets will play a hand in that. Can that happen? Well something has to happen – because we can’t afford to take the chance of standing at the edge of the precipice again like we did in 2008. But we also can’t afford to ignore the positive impact that (healthy) securitization markets can have on economic growth.