Fintech for Inclusion: Why Accion is betting big on startups
We’re living in a period of spectacular innovation in financial services, with fintech changing every aspect of how people build savings, borrow money, get insurance, and more. And that is why I am so excited that Accion Venture Lab — our seed-stage investing initiative in inclusive fintech — is quadrupling its capital pool to support more early-stage innovators.
Today’s technological advancements can have a profound, positive effect on how we meet the financial needs of the 3 billion people who are still left out of the global financial system. New technologies can extend high-quality, affordable financial services to the billions of people who, today, lack a safe place to save, can’t get the insurance to protect their family from a crisis, or can’t get the credit they need to build a home or a business. With innovative technologies, there’s no longer any such thing as an insurmountable distance. We can now process, track, and learn from even the smallest transactions. Data and data analytics, when used responsibly, make it possible to better understand and serve customers, based on their behaviors, habits, and priorities.
The recent surge in innovation has the potential to catalyze a financially inclusive world. If we can harness these new and improved technologies, then we can find new ways to help people manage their daily lives, navigate unseen challenges, and capitalize on new opportunities. The following trends are just a sample of the many new innovations that are changing financial services and that can help more people thrive:
1. There’s more data today than ever before, and our ability to organize, interpret, and understand it is increasing exponentially: That’s valuable for every conceivable financial product and service, but it’s particularly important for providing individuals with credit and micro, small, and medium enterprises (MSMEs) with working capital and financing.
2. Mobile money, remittances, and other electronic payments are more common today than ever: They help ensure that money reaches its intended recipients quickly, safely, and inexpensively. E-payments can also create detailed transaction histories for individual consumers as well as for MSMEs that can be used as proxy credit scores.
3. Insurtech can help protect the world’s most vulnerable people: The world’s poor are the least likely to have insurance. But insurtech reduces the costs of designing, administering, and delivering insurance for the world’s underserved.
4. Agritech helps smallholder farmers thrive: Most of the world’s poor working adults make their living in agriculture, so we can catalyze social and economic progress by providing them with the financial tools they need. Agritech does just that by protecting against crop loss and giving farmers the fertilizer, seeds, and financing needed to grow larger crops.
5. Consumers are more empowered to understand and improve their financial lives: Before fintech, wealth management was a luxury reserved for only a few. Today, we can analyze consumer behavior to provide automated, personalized wealth management insights and advice that help users improve their financial lives. We can also use technology to expand the most effective ways to promote savings and financial health. Likewise, these technologies are building personal financial management tools that are changing clients’ expectations. You can construct your Facebook profile — why not your credit profile? Customers won’t accept a black box that takes in data and constructs their financial lives; instead, they’ll value the services that help them evaluate and improve their credit scores themselves.
We’ve seen incredible creativity from entrepreneurs working around the world to harness these trends and develop better, faster, cheaper, and safer financial services for those who have been left out: since we launched Accion Venture Lab in 2012, we have invested in more than 40 early-stage startups operating in 30 markets. Venture Lab’s portfolio companies have provided us with the means to harness emerging fintech trends in a sustainable, scalable way, and to develop new tools that help us pursue our mission.
That’s why we worked to quadruple Venture Lab’s initial capital pool, adding $33 million in new capital with the launch of a new $23 million fund and an additional, separate $10 million investment from Accion. The oversubscribed fund signals investors’ belief that these startups have significant potential to reach underserved families and businesses; it will allow Venture Lab to keep pace with evolving fintech trends through new investments and more follow-ons that can help scale its portfolio companies’ impact.
We’re onto something big here. Technology can disrupt the status quo, and thoughtful innovation can help us create a better world. Venture Lab is just one component of how we’re developing an inclusive fintech ecosystem to better meet the needs of the world’s 3 billion financially underserved. Other elements of this strategy include our partnership with Quona Capital, a venture firm focused on later-stage inclusive fintechs. Quona and Accion work closely together to support inclusive fintechs at the growth stage. That strategy also includes our work with industry initiatives like the Inclusive Fintech 50 to create greater visibility for early-stage fintechs addressing financial inclusion.
By combining these efforts, we can continue harnessing the most groundbreaking and inclusive fintech to support entrepreneurs, improve farmers’ resilience, help parents pay for their children’s education, and build a world with more opportunities for everyone.
