AI Native Bank P2

Last week, I kicked off this series on visualizing the AI native bank with a philosophical approach. I think I convinced a few folks to read Ender’s Game…which is a win in my book. On the other hand, to the two people that unsubscribed…their loss 🤷

Time to get practical. 

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I think ideations make the most sense if we consider a real world use case and build around them. I'm nominating Homeowners Associations (HOAs). To me, these are a one chart phenomenon (see below) that can be capitalized upon from multiple angles. So why not start with banking? 

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‍I’m christening my bank “Commonground.” 

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Some details to back up the effort:

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1. HOAs are growing like crazy: According to a 2019 study, almost 60% of newly built single-family homes and 80% of houses in new subdivisions in the United States are part of an HOA. some text
   • HOA member contributions were valued at $371.2 billion in 2023.
   • Between 2005 and 2015, estimated yearly collections of all fees rose by 32.4%
2. You can’t escape them: Increasingly municipalities require new construction to include an HOA, since it allows them to pass on costs to maintain streets, remove trash, and other public area upkeep to homeownerssome text
   • Current solutions are dated AF: HOAs generally bank with local community institutions that provide limited upside, features, and integrations with property management services
3. It’s personal: I've served on the Board of two of them so far. Frankly they’re irritating to be in and even more so to run. Build what you’d use, I guess?

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Commonground is built around core pillars of Fintech. I stole these directly from a conversation in the This Week in Fintech WhatsApp group last week:

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1. Deposits & Savings (“store”)

HOAs need a multi-account structure that holds operational funds as well as a reliable place to hold reserve funds for long-term projects or emergencies. 

Commonground will offer a checking account for day-to-day use while augmenting with a savings product that automatically optimizes returns while ensuring liquidity for unexpected repairs or expenses. 

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2. Payments ("Spend")

From collecting dues to paying landscapers, HOAs have numerous transactions to manage. An AI-driven payment orchestration system will automate dues collection, sending gentle reminders to residents and reconciling payments instantly. 

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‍3. Investments (“Grow”)

Idle cash is a depreciating asset, but HOAs are constrained in the types of investments they can make (read no YOLOs on TSLA). 

Commonground will use AI-driven investment strategies tailored to HOAs' risk tolerance and cash flow needs while remaining within regulatory bounds. This could help grow reserves over time while balancing safety and accessibility, giving homeowners more value for their contributions.

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4. Lending ("Borrow")

Sometimes HOAs need to finance big projects—like repaving roads or adding community amenities. Traditional lenders see HOAs as risky borrowers. 

Commonground could use AI-powered risk assessment to offer more tailored lending products, factoring in historical payment behavior of the association and community-specific metrics, ensuring fairer access to credit.

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‍5. Insurance (“Protect”)

From property coverage to liability protection, insurance is crucial for HOAs. 

Commonground could partner with insurtechs to provide customizable policies using AI to find gaps or opportunities in existing coverage. Residents could access personalized insurance products as well, tied directly to their property or association.

More next week!

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