Investors are backing fintech ventures to crack a huge market: the global poor
BFA’s fintech accelerator, Catalyst Fund, has new lessons to share about how #inclusivefintech companies are broadening and deepening #financialinclusion in emerging markets. We have been working with 20 global startups and accelerating their ability to offer more affordable, better-designed and time-saving products and services. Directed at the financial inclusion community, donors, and investors, we invite you to our webinar to learn about how our companies are doing business differently - changing the paradigm for serving low-income customers and succeeding in emerging markets.
Join us for a webinar as we discuss more on November 14, 2018 at 9 AM EST.
Alternative credit scores — using data, in part, from customers’ smartphones — will be migrating from emerging economies to the U.S.
Catalyst Fund, Cathay Innovation, 500 Startups, and Orange SV invite you to a special gathering for pioneering investors in emerging market fintech. Come meet leading investors and high impact entrepreneurs building fintech solutions in the world’s fastest growing markets.
6:30- 7:00 PM- Panel discussion on "The Next Frontier of Fintech Investing - The Emerging Market Opportunity”, moderated by David del Ser.
Alex Lazarow: Alex is a Director with Cathay Innovation, a global venture capital firm based in San Francisco. Cathay Innovation was founded around the conviction that empowering digital entrepreneurs with a global platform can help them accomplish their vision. He is also a Kauffman Fellow, earned an MBA from Harvard Business School and is a Chartered Financial Analyst (CFA) charterholder. He has a bachelor of commerce in international business and finance from the University of Manitoba. He is a Term Member with the Council on Foreign Relations.
Sheel Mohnot: Sheel is a Managing Partner at 500 FinTech. His own startup experience includes 2 successful FinTech exits – a payments company and a high-stakes auction company. He formerly worked as a financial services consultant at BCG and started his FinTech career at the non-profit p2p lender Kiva. Sheel holds an MBA from the University of Michigan and a BS from Carnegie Mellon.
Moses Choi- Moses Choi is a seasoned investor and financial services professional and has executed over $15Bn in capital markets and principal investment transactions. He currently leads strategy, product innovation, and deal sourcing in support of Orange’s financial services and mobile money business units. Prior to joining Orange, Moses was Vice President at Morgan Stanley, where he focused on cross-asset origination and represented the firm on the ICMA’s Green Bond Principles Executive Committee. He is a contributor to the World Economic Forum and holds a master’s degree from the Fletcher School at Tufts University and a BS and BA from Cornell University
7:00- 7:15 PM- Catalyst Fund CEOs will share what they're building to expand the inclusion and financial health of low income customers in emerging markets.
7:15- 8:30 PM- Stay for cocktails and some fun networking with investors, industry experts and entrepreneurs.
If you’re an investor or a donor and are interested in attending, then reach out to email@example.com
Join us for another Inclusive Fintech Happy Hour hosted by BFA's Catalyst Fund, Accion Venture Lab and Quona Capital. After the success of last year's event, we bring together again the ecosystem actors in inclusive fintech and financial inclusion - innovators, funders, and influencers - for a night of creative exchanges during SOCAP 2018 at The Dorian, San Francisco from 6 PM- 8 PM.
Network and share a few drinks with investors, entrepreneurs, industry partners, and like-minded peers, advancing impact through financial products and services for emerging markets around the world. Don't miss out, RSVP today.
Catalyst Fund seeks to uncover how inclusive fntech companies are creating new and superior value propositions, and to determine whether they are driving financial inclusion deeper and further. We work with early-stage fintech companies that span the globe and push the boundaries of innovation in sectors as diverse as lending, agriculture and insurance. Run by BFA, Catalyst Fund provides fintech innovators with grant funding and tailored technical assistance to complement their skill sets. In turn, the startups help us learn about how to advance financial inclusion among low-income populations in the markets where they operate.
We are examining how deep can Inclusive Fintechs get into their markets? Explore our proven strategies for reaching low-income customers: will they continue to be owners of these enhanced value propositions? And can they continue to maintain and improve offerings as they scale?
Read and download the brief here.
"The world's refugee camps are often home to displaced entrepreneurs who set up small enterprises, driving the business case for financial services. But getting providers to take notice is a tough call, exacerbated by problems of access and identity, James King reports."
Through its investments and global partnerships, the Omidyar Network is tackling one of the biggest obstacles around refugee IDs – that of interoperability. In essence, this is the difficulty facing a refugee or migrant when every service provider or agency they encounter requires a different form of identification. Developing a foundational and interoperable form of ID would enable refugees to access a far wider suite of services and opportunities. But to achieve this, regional and global co-operation from various stakeholders is needed.
“We want governance structures that allow the interoperability and portability of digital IDs across multiple markets,” says Ms Anderson. “There are a variety of stakeholders working to address somewhat different aspects of a similar problem but often in silos. Identity is an issue that needs to be solved at scale. For this to happen, actors must work in a more collaborative and consensus-building way,” she adds.
Reaching this endpoint will take time and will demand an effective intersection between technology and regulation. In the meantime, other private sector actors are looking at the steps that can be taken on the ground. Increasingly, issues of refugee financing are attracting the attention of fintechs and start-ups who have been sold on the business case. Leaf Global Fintech, a Nashville-based business, is a case in point.
Co-founded by Nat Robinson and Tori Samples, both of whom had prior experience working with refugees in Africa and the US, Leaf aims to address the refugee challenge virtually. The company, which is focusing on Rwanda and the Democratic Republic of the Congo, partners with local banks and mobile money operators to ensure the safe passage of funds for a refugee crossing the border between two jurisdictions. It achieves this by using blockchain technology.
Ms Samples says: “There’s a lot of hype around blockchain. We are using it to facilitate cross-border transfers rather than storing any value on it.” For example, a user in the Democratic Republic of the Congo can open an account with Leaf via SMS, cross the border to Rwanda and receive their savings through a partner institution. In doing so, the company is addressing one of the key impediments facing mobile money networks in the region.
“Mobile phone penetration across east Africa is high. Mobile money accounts are growing much faster than bank accounts. That’s also an avenue that we are looking to tap into. But the issue with mobile money is that it doesn’t cross borders. The issue with that is that it’s offered through national telcos,” says Mr Robinson.
Continue reading here.
(Leaf is a #CF20 company and is an integrated financial services provider whose mobile platform enables the conversion of physical to digital fiat currency through blockchain technology. Refugees deposit cash at a mobile money agent in their home country and then send that money into a Leaf account. The company stores the transaction on the blockchain and works in partnership with regional banks to safeguard currency.)
Meet the Five Startups Shaping the Future of Inclusive Fintech in Emerging Markets
Through Innovations in e-Commerce, Blockchain, Mobile Money Integrations, and Agrifintech
At Catalyst Fund, we have been working with a wide range of startup companies to bring much-needed essential financial products and services to improve the lives of people on low incomes. We are proud to announce the five latest “inclusive fintech” companies to join Catalyst Fund: BancoMare, Hover, Leaf, payAgri, and Sokowatch. These startups are tackling enormous challenges to bring more accessible, affordable, and appropriate financial services to the 1.7 billion underbanked customers in Africa, India, Brazil, and Southeast Asia.
There has been progress in financial inclusion over the past 5 years, with 515 million people gaining access to a bank or mobile money account, bringing the percent of adults globally with bank to 69 percent. However, too few people on low incomes actually use financial services, and we are yet to see the variety of products that can truly improve the financial health of these customers. We invested in these startups because their solutions can accelerate financial inclusion by: 1) overcoming infrastructure barriers currently limiting mobile money innovation; 2) facilitating partnerships among ecosystem players such as digitizing data for financial service provision; and 3) bringing tailored products to the most vulnerable people through advanced technology.
Read more about these companies here.
Inclusive Fintech Companies Are Creating and Scaling Solutions to the Widespread Unmet Need for the Full Range of Financial Services In Emerging Markets
New York, July 31, 2018 — Catalyst Fund has added another 5 “inclusive fintech” companies to its early-stage accelerator, now totaling 20 companies that leverage innovative technologies, in order to deploy financial service solutions in emerging markets where there is enormous pent-up demand. Mobile technology, machine learning, AI, and blockchain are making it possible and profitable to build the full range of financial services for previously underserved populations in places like Africa, India, and Southeast Asia. Catalyst Fund’s highly successful model de-risks companies and gets them investment ready — the 11 companies that sought follow-on funding after completing the program secured an average of $1.3 million each.
“Bank accounts and payment transfers are receiving a lot of attention and are growing in the number of subscribers, but they aren’t being used with the frequency that you’d expect,” said David del Ser, a Director at BFA. “We’re accelerating inclusive fintech companies whose solutions will achieve greater usage and help address the complete financial lives of these populations — there is great need and demand for these kinds of products and services in emerging markets.”
Inclusive Fintech refers to a wider range of modern financial services, beyond bank accounts and digital transfers, that are tailored to the unmet needs of emerging market customers to ensure adoption and to enable users to move up the financial ladder.
Catalyst Fund, a partnership between BFA, the Bill & Melinda Gates Foundation, JPMorgan Chase & Co., and Rockefeller Philanthropy Advisors, encompasses both B2B and B2C companies that either directly provide inclusive fintech solutions and services, or build the rails for needed technological and financial infrastructure. The five latest portfolio additions are:
● Hover’s proprietary and patent-pending technology enables mobile developers to turn an existing communications protocol, USSD, into an invisible transport layer, allowing the facilitation of in-app mobile payments so that users who can’t access or afford data plans can still connect to transact.
Innovation: In-App Mobile Payments Classification: Rails/Infrastructure
● PayAgri is an agri-fintech startup that brings together key players in the Indian agriculture value chain to facilitate trade and funding flows to low-income farmers who struggle to access funding and establish credit history.
Innovation: Digitizing agricultural ecosystem Classification: Rails/Infrastructure
● Banco Mare is a digital bank, serving consumers in one of Rio de Janeiro’s largest favelas, who are excluded from the formal financial system. The mobile app allows users to pay their bills, make peer-to-peer transfers and pay at local merchants, using their own blockchain-based digital currency “Palafita.”
Innovation: Blockchain Classification: Product/Service
● Leaf was founded with the mission of helping refugees transfer their assets across borders safely using blockchain technology.
Innovation: Blockchain Classification: Product/Service
● Sokowatch is an e-commerce platform for African informal retailers that offers on-demand and free delivery of store products and credit lines to address common stockouts, lack of access to working capital and business management tools.
Innovation: Digitizing the informal retailer Classification: Product/Service
“Consider that just a few years ago there were 2.5 billion unbanked globally and even today, 3.8 billion people still do not have access to insurance — we haven’t begun to scratch the surface of the need for financial services among this demographic,” said Maelis Carraro, Catalyst Fund Program Manager and Senior Associate, BFA. “But pre-seed capital is a challenge here just as anywhere else, that’s why our model is set up in a way that de-risks the investment so that we can get these companies to market where they can have the greatest impact.”
The accounts of one-fifth of banked individuals worldwide are inactive. In India 80 percent of the population has a bank account but 48 percent of those accounts haven’t had a transaction in the past year. Another 190 million Indians remain unbanked.
“We are proud to invest in solutions that have the potential to transform the financial lives of people across the world and in technology that is reinventing the global financial services landscape,” said Janis Bowdler, President, JPMorgan Chase Foundation (NYSE: JPM). “We look forward to seeing the impact that the 20 Catalyst Fund companies will make on consumers’ lives.”
Participating Catalyst Fund cohort companies must first be nominated by a sponsoring investor in order to be considered, and a pre-selected group of investors can make follow-on investments once the companies have been de-risked by completing the program. The program draws on BFA’s business intel from 12 years of using finance to create solutions for low-income people in emerging markets. Companies receive flexible grant capital, tailored technical assistance, mentoring by potential investors and access to networks of follow-on investors. A fifth cohort is planned for later in 2018.
BFA is a global consulting firm specializing in using finance to create solutions for low-income people. Our approach is to seek out, create and implement financial solutions to help people manage challenges and seize opportunities. We partner with cutting-edge organizations that touch the lives of low-income consumers such as financial institutions, fintech companies and information providers. In creating solutions, we integrate our deep expertise in customer insights, business strategy, new technology, and growth-enabling policy and regulation. Founded in 2006, BFA’s clients include financial institutions, technology companies, donors, investors and policymakers. BFA has offices in Nairobi, Delhi, Boston, Medellín and New York. For more information, please visit: www.bfaglobal.com.
About Catalyst Fund
Catalyst Fund is a philanthropic grant fund at the forefront of Inclusive Fintech, an initiative supported by the Bill & Melinda Gates Foundation and JPMorgan Chase & Co. Since 2016, as a project managed by BFA and fiscally sponsored by Rockefeller Philanthropy Advisors, Catalyst Fund has been accelerating startups developing financial services for the needs of the low-income demographic. We also seek to build up industry knowledge and customized tools from our direct work supporting and accelerating that early-stage startups building digital financial services for the next billion.
What can startups and companies do to build trust, loyalty, and engagement with customers? Catalyst Fund identified five strategies that enable companies and startups to innovate like a fintech.
Five ways to innovate like a fintech
- Keep the design simple and adapted to your customer base.
- Prove your abilities to users.
- Give users a sense of control in managing their actions.
- Be transparent about what you do and why.
- Commit to doing what is right for the customer.
Learn more about designing inclusive products here.
Co-written by Elizabeth Davidson
Early identification of key risks can help fintech startups invest in the business support they need early on before a risk takes down the business. These risks can scare off investors, who want to ensure that entrepreneurs understand the key challenges they face. Instead of waiting for entrepreneurs to identify key risks, early stage investors can work with startups to tackle these risks before or in conjunction with their investment.
Catalyst Fund has taken just this approach. By working with our entrepreneurs to identify risks, we can tailor technical assistance to solve these risks so that investors are more confident in the future success of the business.
Taking an honest look at their own key risks can be difficult for entrepreneurs, who may be too deep in the weeds to step back and look at the bigger picture. This is why the Catalyst Fund developed a risk diagnostic to help startup leaders get a better grasp on their challenges, and understand those within or outside of their control. The tool offers a checklist of possible mitigation strategies for the entrepreneur. Read more here.
Remember the hockey-stick growth chart? This is what an entrepreneur signs up for and what investors want to see.
But let’s face it, hockey-sticks are not part of the reality in Africa… not yet. So why are software-as-a-service startups not taking off? Three reasons:
- 1. Businesses are competing for the investor dollar, not for superior tech
- 2. Economies of scale can only work at scale
- 3. Scaling across the continent is harder than it sounds
Read more here.
Some social enterprises may be able to endure the long time horizons, but for many early-stage ventures, investing in a partnership with a larger, better-resourced player, with extensive due diligence and decision-making processes, may be a deal-breaker. These delays can be a death knell for early ventures that do not have the time or capital.
At the same time, not all partnerships are valuable. Startups need to carefully understand the potential of a collaboration by analyzing mutual benefits and determining which processes and priorities will dominate the relationship. Our partner, Accion Venture Lab, offers additional strategies for “Enterprise Sales for Fintech Products and Services.”
A quick guide for social enterprises to land successful partnerships, read more.
User research (UX) never ends and can be executed cost effectively. It needs to happen at every stage of the design workflow to create a UX Design that meets your customers’ needs.
Launching a startup is not easy, especially when you don’t always have the right resources and tools to help you succeed. The Catalyst Fund Toolkit offers you tools across three main areas: customer trust creation, risk management and product/market fit. These tools are tailored to the needs of startups that serve low-income customers in emerging markets, through our experience working with early-stage fintech companies around the world.
As the manager of Catalyst Fund, BFA, is pleased to host this special webinar series covering each of these toolkits in the coming weeks:
Webinar: Design for Trust
Trust is an essential factor in financial transactions, but what is trust made up of? Fintech companies providing digital financial services often find it difficult to build trust with their customers because of a lack of physical contact. However, managing the principles of competency, appearance, control, transparency, & commitment can be great drivers for building trust with customers.
DATE & TIME:
February 14, 2018
10-11 AM EST
Webinar: De-Risk your Fintech Startup
Running an innovative startup is not without its set of risks and challenges. But understanding these risks, monitoring and managing them with mitigation strategies can help lower a company's risk profile. The second webinar of the series provides a framework for de-risking internal and external factors, while helping founders and CEOs see the overall picture of their firm's health and how to take action on their high priority risks.
The panelists for this webinar include Maelis Carraro from BFA and Jonathan Duarte, CEO of Escala Educacion.
ESCALA is a Catalyst company and works as a higher-education savings program for lower and middle-income families in Colombia. Jonathan is passionate about growing the entrepreneurial ecosystem in Colombia and is an Industrial Engineer from Georgia Institute of Technology (USA) and an MBA from Harvard Business School.
Maelis manages Catalyst Fund at BFA and has previously worked directly on microfinance product development for Grameen Bank in Bangladesh, on development and climate change policy issues for the Organization for Economic Development and Cooperation (OECD), and impact investing for Global Partnerships, a not-for-profit impact investing fund dedicated to alleviating poverty in Latin America.
DATE & TIME:
March 15, 2018
10-11 AM EST
Webinar: Get to Product/Market Fit
One of the biggest questions early-stage companies have to answer is whether their product is right for their targeted market. Product-Market Fit can be thought of as the measure of how well your product satisfies the market. The Product/ Market toolkit covers the startup journey from the moment a startup identifies a pain-point, a passion or a hunch, and go all the way up to the final stage of optimization and scale up. Scaling up would not be possible for startups without a perfect combination of visibility, desirability, and feasibility of the product, in the market they are serving.
DATE & TIME:
TBD. You can pre-register below and we will contact you when date is finalized.
More than 2 million domestic workers in Mexico are virtually invisible to the financial system. They perform work as housekeepers, cleaners, cooks, carers, drivers, gardeners and doormen, among other professions. Nearly all are informally employed, which means they get paid in cash, make no contributions to a social security or pension fund, and are uninsured.
Yet many domestic workers have a relatively stable source of income (when work is available) and they are financially active. More than 75 percent of them earn up to only 58,000 pesos a year (about US$3,100).
In this environment, Comunidad4UNO (4UNO), an early-stage Mexican fintech startup and Catalyst Fund company, is tackling the dual challenges of financial exclusion and affordable insurance access among this market segment. The company is providing domestic workers with tailored and market-based financial products through their employers via an online marketplace, helping reduce their vulnerability to accidents, health issues and the financial challenges they can cause- read more.
Lola, a single mother of three, earns a living cleaning houses in Mexico City. She gets paid in cash every week, and asks for an advance from her employers when she really needs it, like when her mother passed away in her village and she had to cover transportation and funeral costs or when she was mugged on a public bus. Lola stores small sums of money at home to pay for food, rent, electricity, water and gas.
As is the case with many domestic employees, her job is informal and unsecured. Sometimes, she has to miss work when her kids get sick and, depending on the employer, she may or may not get paid for those missed days. She is unfamiliar with her labor rights and her employers, who are primarily concerned with employee retention, are generally oblivious to their legal obligations.
Although Lola uses several financial instruments to make ends meet, pay her bills and provide for herself and her children, her transactions generate no records in the financial system, thus making her invisible to banks and other financial institutions- read more.
Customer-centric design, agile product management, and innovative technologies are helping fintech ventures create better and more targeted value propositions for their customers, especially in emerging markets. How can early-stage ventures harness this powerful combination to win over their customers and ensure their businesses thrive? Working closely with inclusive fintech startups at Catalyst Fund, a philanthropic fund aiming to accelerate fintech innovation in emerging economies, supported by Gates Foundation and JP Morgan Chase & Co., they have distilled practical insights on how to support companies as they grow. They have built tools that enable startups to build trust with their customers, assess risks and develop mitigation plans, achieve product-market fit and apply machine learning strategies. Maelis Carraro, program manager of Catalyst Fund, will give ANDE members an overview of these tools and show how other enterprises could utilize these frameworks for their own business needs and aspirations. Learn more about our toolkits.
Maelis Carraro | Senior Associate | BFA
Maelis is a Senior Associate at BFA. She is the Program Manager of Catalyst Fund, an innovative fund supporting early-stage inclusive fintech startups in emerging markets with grant seed capital, mentorship, and tailored business advisory services. Maelis joined BFA from the International Finance Corporation (World Bank Group), where she advised financial institutions in emerging markets on business strategy, digital product development, and customer acquisition strategies to serve underserved and low-income customers. Maelis previously also worked on impact investing to support small and medium enterprises in Africa and Latin America for Global Partnerships and on microfinance product research for Grameen Bank and the OECD. Maelis also co-founded RemitMas – a digital remittances service for Latino immigrants in the US, which sparked her passion for entrepreneurship and fintech. Maelis holds an MBA from Columbia Business School and a Master in International Affairs from Columbia School of International and Public Affairs. She received her BA Cum Laude from University College London, where she majored in Political Science and Economics.
Jane del Ser | Senior Associate | BFA
Jane is a Senior Associate with the Insights & Influence team at BFA. Her areas of expertise include product management and marketing and strategic marketing communications. She brings over ten years experience working with startups, social enterprises and nonprofits leading Strategy, MarCom and Product in hi-tech, mobileand social innovation. Jane most recently served as Managing Director at Center4, an initiative in NYC to increase uptake of technology by health and human service nonprofits to transform how services are deliveredand improve outcomes for people served.
Since we launched the Catalyst Fund in 2015, we have helped 15 fintech entrepreneurs deploy novel approaches to bring products and services to their customers. We have distilled the successful patterns and behaviors we have observed into toolkits and posts for those considering fintech methods for their businesses, whether they be startups or established players.
At a high level, successful fintech startups adopt principles of Design, Risk Management and Product Management, and also put modern technologies like smartphones, artificial intelligence and cloud computing at the core of their value propositions. At successful fintech startups Designers, Product Managers, CEOs and Engineers reinforce each other in multidisciplinary teams to explore the overlap between what customers find desirable, what engineers can build, and what the business requires to grow - continue reading.