Offering Mexican Consumers a Better Banking Experience
Why We Invested in Albo
By Jenny Johnston, Associate, Investments, Flourish
For many years, one of the toughest challenges in financial inclusion was how widespread the problem was. The world’s unbanked population lived in dozens of countries, with different markets and different regulatory regimes — it seemed that there would never be one common way to reach all of them.
Thankfully, that was not the case. The advent of mobile phones and high adoption of mobile money and digital banking has helped to bring more than a billion people into the formal financial system — and in record seven years. Today, half of the world’s 1.7 billion unbanked adults, live in just seven countries — Bangladesh, China, India, Indonesia, Nigeria, Pakistan, and Mexico — making it easier to focus on localized solutions.
We call these frontier markets, and in many of them, a constellation of factors is aligning to rapidly expand access through digital banking. These trends include a large unbanked, and yet digitally savvy, population; widespread mobile money platforms; and the entrepreneurial and regulatory environment to scale new financial solutions.
In Mexico, these trends are coming together in an exciting way. With a population of approximately 130 million people, fewer than half of Mexican adults have a bank account. Because of inefficient transport, the average time to get to a bank is 42 minutes in rural areas and 22 minutes in cities. Bank usage is also low. Among Mexican consumers who currently do have an account, one in three are unhappy with their bank due to excessive fees, confusing communication, standardized products that don’t really fit their needs, deficient customer service, outdated branch models, and a long wait for support.
In frontier markets like Mexico, Omidyar Network has made strategic investments in the most promising digital-first neobanks to leapfrog this traditional and stagnant banking model to reach many new, previously underserved, customers with better, personalized services — and at far lower costs. In Pakistan, we invested in Tez, and in Brazil, a middle market, we invested in Neon.
Neobanks have the potential to scale among customer segments that traditional banks have not been able to serve profitably. Neobanks combine the low-cost structure of a branchless business model; digital distribution; and micro-targeting enabled by data science that lowers acquisition costs. They also deliver a digital banking experience with innovative products and services that are more relevant to the financial lives of people making low, irregular incomes.
In Mexico, we have invested in one of the first digital banks built on this model, Albo. Launched in 2016, Albo has become a financial ally to its users. Its vision is to become a holistic banking platform that provides the best of FinTech solutions via digital channels and partnerships that extend its product offerings as well as its brick-and-mortar presence without building branches.
These partners include retailers like Oxxo, Mexico’s largest convenience store brand. Through Albo’s retail partnerships, customers have access to cash-in/cash-out services at 15,000 Oxxo stores, 1,500 Farmacias del Ahorro, and 1,100 Farmacias Benavides branches nationwide. Albo’s app also offers digital bill pay as well as bank and P2P transfers.
Albo offers every Mexican the opportunity to join a bank, with nofees, flexible products, and an International Mastercard. Leveraging its comprehensive backend technology, Albo offers premium financial services at very different economics compared to Mexico’s traditional banks.
Our investment in Albo is based on their leadership team, their technology, and their model, as well as in Mexico’s vibrant entrepreneurial ecosystem. With this Series A financing, Albo will invest in fulfilling the technical requirements to become a regulated financial institution and further expand its services.
Originally published at medium.com on January 23, 2019.