Meet the new warm fuzzy payday lenders: a better approach for a controversial industry.

• Author: Beato, Greg

For more than two decades, America's bank deserts have been afflicted by convenient access to payday loans. As alluring as giant bottles of soda pop, this consumer-friendly form of credit may look refreshing, its critics contend, but it leaves a bitter aftertaste of misery and exploitation. And sometimes these critics have a point.

Take the alleged actions of two Kansas City firms. According to separate complaints filed by the Consumer Financial Protection Bureau and the Federal Trade Commission in September, both companies were pursuing a similar scheme--depositing money into the bank accounts of thousands of people who had provided personal information to payday loan comparison websites but hadn't actually solicited loans from the firms in question.

After making the initial deposits, the companies extracted hefty interest fees on a regular basis. In short order, some victims found they had paid hundreds of dollars to service loans they didn't even know about. Talk about predatory.

Yet despite such egregious tactics--and despite persistent calls for stricter regulation of the industry-consumer demand for shortterm, high-interest, uncollateralized credit remains strong. Every year, approximately 12 million people take out payday loans, and many find significant value in the ability to do so. In a 2013 poll conducted by the Pew Charitable Trusts, 48 percent of respondents said that payday loans "mostly help" borrowers like themselves, 56 percent said the loans had "relieved stress and anxiety" in their lives, and 62 percent said they would use the service again if they found themselves in a financial bind. Imagine how much Congress would pay for approval ratings that high!

Of course, outperforming Capitol Hill is hardly a reason to brag. (In June 2014, Gallup found that just 15 percent of Americans think Congress is doing a good job.) And although the Pew poll respondents had good things to say about payday loans, they expressed some dissatisfaction with the industry, too. But while legislators and bureaucrats have interpreted that ambivalence as a mandate for more regulatory intervention, it could also be viewed as a cry for more entrepreneurial innovation. Millions of people use and value payday loans --they just want better ones.

Entrepreneurial reform is happening across all sectors of the financial services industry as tech-driven startups work to meet consumer demand for lower fees, better rates of return, clearer policies, and more...