Fintech Cuentas Courts The Unbanked; It’s All About Trust
What’s The Deal With Cuentas?
Or should I say: ¿Cuál es el trato con las Cuentas (Nasdaq: CUEN)?
Habló un poquito Español, Great Ones. Y tú? (I just know you’re already writing in to correct my Spanish…)
Anyway… What is Cuentas and why should you care?
At its core, Cuentas is a fintech that provides mobile banking, online banking, prepaid debit cards and money transfer services. The company focuses heavily on underbanked and unbanked customers, primarily in the Latino community — as its name implies.
In fact, “cuentas” in Spanish literally means “accounts.”
If Cuentas sounds vaguely familiar to some of you, that’s because CUEN stock muscled its way into financial headlines after it surged nearly 200% on Wednesday, June 30.
The catalyst for that move was an odd one. Cuentas announced a partnership with Wi-Fi 5G sharing company WaveMax to install 170 Wi-Fi access points in “Bodega Stores.”
Wait. An online banking firm rolling out Wi-Fi access points?
Forgive the phrase again, but … what’s the deal with that?
I’ll let Cuentas CEO Arik Maimon explain:
Basically, Cuentas is rolling out a kind of rewards program for its customers. Shop at your favorite bodega with Cuentas, and you get discounts and rewards for purchases. So, it’s kinda like Amex rewards for people who don’t like — or can’t access — traditional banks.
And it could be a major hook to draw in new customers … which is why CUEN stock surged on the news.
The rollout is part of a six-month test with WaveMax and, if all goes well, the duo plan to expand their partnership to an additional 1,000 “Bodega Stores” as part of a 50/50 joint venture. That could lead to more revenue and bigger gains for Cuentas investors.
Is Cuentas Banking La Vida Loca?
So … why? Why are you covering CUEN stock? Why would anyone not use a traditional bank? Why is Cuentas even worth considering as an investment?
Well, Great Ones, I’ll tell you (as if y’all had a choice). According to the FDIC, some 23 million Americans are either unbanked or underbanked — i.e., they have a checking/savings account but refuse to use banks beyond those services.
Now, in the nearly 20-some-odd years, I’ve worked in the financial industry, I’ve met quite a few people who refuse to use banks beyond what’s absolutely necessary. I have relatives who absolutely despise and distrust banks as a whole. I’ve also met others at actual financial conferences who “just don’t feel safe” using banks any more than necessary.
I’m not one to judge when it comes to how you handle your money. And if you fall into one of these categories, to each their own. However, 2020 laid bare some rather glaring issues for unbanked Americans.
Namely, they had no way to participate in the digital, remote economy that exploded during the COVID-19 pandemic lockdowns. Furthermore, these Americans also had no means of receiving pandemic relief funds via direct deposit, so they were left waiting on snail mail.
The point is, Cuentas has a readily available market of customers who have realized they need some form of digital banking presence going forward.
Meanwhile, unbanked or underbanked rates are higher among minorities. In fact, CEO Maimon says that there are roughly 60 million unbanked/underbanked Latinos in the U.S.
That is quite the revenue opportunity, and Cuentas directly targets this market … giving it a leg up on competitors such as PayPal, Chime, Cash App or Venmo.
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¡Muéstrame El Dinero!
All right, so we know that Cuentas is a red-hot fintech that’s growing quickly and targeting a sizeable, underserved and potentially very lucrative segment of the banking (nonbanking?) market. It must be doing well financially, right?
Well … about that. This is where Cuentas’ rosy story breaks down.
You see, Cuentas was founded in Miami, Florida, in 2005. It’s been around for 16 years. And in those 16 years, Cuentas has only reported four profitable quarters — the most recent being the second quarter of 2019.
The situation is starting to turn around, however. In February 2020, Cuentas launched its mobile banking app — right before the pandemic hit. The timing of the launch severely slowed growth and undermined Cuentas’ prospects for most of 2020.
That all started to change when the pandemic began lifting in early 2021. For instance, in its first-quarter report, Cuentas’ revenue spiked 39.5% to $274,000, while losses narrowed to just $0.13 per share from a loss of $1.03 per share in 2020.
This is why CUEN stock surged on the WaveMax news. The Wi-Fi deal promises to bring in even more Cuentas customers, thus boosting revenue and continuing CUEN’s rebound.
Cuentas: The Bottom Line
I’ll be straight with you, Great Ones: I’m on the fence when it comes to CUEN stock. With millions of unbanked and underbanked Americans — especially in the Latino community — the company clearly has massive potential to serve a greatly underserved banking market.
The problem is trust. To paraphrase the Prince song of the same name:
Trust — who do ya?
Trust — what makes you a real banker?
Trust — I put this question to ya, ’cause I want you to bank with me.
What? You didn’t think you were getting out of here without lyrics, did you?
Anywho, the real problem that Cuentas faces is getting those untrusting, under/unbanked customers to sign up. And this is doubly so for the company’s targeted Latino community.
I can see the potential for Cuentas to go gangbusters and revolutionize its particular niche in the fintech marketplace. But whether the company can bridge that trust gap remains to be seen.
I’m not officially recommending the shares, but if CUEN stock has piqued your interest…
You should probably wait until the shares settle down after last week’s breakneck rally. Specifically, look for CUEN to establish support — possibly in the $4.50 or $5 area — before buying in.
And with that, it’s time to say hasta la vista, baby.
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Editor, Great Stuff