Sorry NY Times…but installment plans are not innovation


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An article appeared in the New York Times today boosting about how financial innovation is helping the poor in Brazil. The author, Catherine Rampell seems to think that because teens can now buy consumer goods in Brazil using credit installment plans, that it happens to be innovative. If that’s innovation, then I guess having indoor plumbing is also a form of innovation.

Here’s the full article:

How Financial Innovation Helps the Poor


We have written before about the debate on whether financial innovation benefits or exploits the poor. (Even Russell Simmons weighed in.) Those who believe financial innovation necessarily hurts poor people may want to take a look at this perspective from Brazil, courtesy of NPR’s “Planet Money”:
I met a 19 year-old girl in a mall in São Paulo who had financed nearly every item she was wearing.

Célia de Resende paid for her red t-shirt in 3 monthly installments. Her sneakers were on a six-installment plan. She couldn’t remember how many more payments she owed on her black pants but she’s sure they were bought on credit.

This is the way Brazilians now shop. Consumer credit is a brand new concept and it’s wildly popular. Three Brazilian banks are among the world’s top 10 credit card issuers.

Here’s the takeaway: We’ve talked many times before about what constitutes innovation and what doesn’t. Consumer credit that is wildly popular in Brazil is not innovation.  Only true innovation creates an financial outcome so unique that competitors are either unable or unwilling to match.

Republished with author's permission from original post.

Patrick Lefler
Patrick Lefler is the founder of The Spruance Group -- a management consultancy that helps growing companies grow faster by providing unique value at the product level: specifically product marketing, pricing, and innovation. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.


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