The Future of Finance Starts with Trust
My mom, a doctor, came to the United States from India when she was in her thirties. Like many doctors in our New York City neighborhood, she often let patients come to see her whether they could pay right away or not. I remember people would walk up to her in the street and pay her on the spot for past appointments. She gave them credit because she trusted them.
Later, when I was traveling in South Asia and Africa, studying the way small business owners used money and made financial decisions, I saw how trust was abundant in these communities, too. What wasn’t abundant was opportunity. On the margins of the global economy, these individuals were left out of the financial systems that could help them grow their businesses, advance their lives, save for the future, and support their families. When they described what they needed most, they sometimes named specific kinds of financial services, but more often than not, they simply wanted more choice and control. They wanted to be active participants in determining their financial lives.
Rethinking the Credit Score
In the United States, where approximately 80% of Americans have access to credit and other services offered by banks, the majority of us take financial access, choice, and control for granted. Thanks to credit bureaus like FICO and Equifax, we have credit scores to prove we’re trustworthy to mortgage brokers, insurance agents, utility companies, car dealerships, and even employers. Our scores help us do everything from purchasing a latte to financing a home. They help us build our futures and chase our dreams.
But in many growing economies around the world, financial access — including credit and all that comes with it — is far more limited. A McKinsey report estimates $2.1 trillion in unmet need for credit in emerging markets; the IFC reports that 200 million small businesses globally are unable to access the credit they need. The impact of this gap on our global economy is self-evident. The impact on individual lives is largely immeasurable.
And the fundamental challenge is trust.
When we started Tala, we knew there wasn’t traditional financial data on these underserved customers — the kind of data banks might use, for example, to make a lending decision. So we set out to find new data, and to create a score that better represented the way most people live their lives. We wanted to use the same kinds of personalized, daily life data — geographic flows, social networks, communication patterns, payment habits — that fostered the hyper local, trust-based economies I saw working in my youth and around the world. And we wanted to use our data to make financial services feel more like a relationship between two humans rather than a transaction with an indifferent system.
We believed then, as we do now, that our approach would give people the power to build whatever kinds of financial lives they want.
The Future of Finance
Today, over one million loans later, we know we have a model that works. We can score any customer using just the data on their smartphone, even if they have no credit history. We’ve given our customers access to credit, but we’ve also provided flexibility and choice within the credit product itself, so that they can better plan their lives. Our repayment rates average 92 percent, with more than 90 percent of our customers staying on our platform and growing their credit limits with us over time. Most of our customers (66%) use their loans for business purposes, but many others use credit for education, medical expenses, emergency travel, or other personal needs.
Ultimately, we want to change the way credit scoring and financial services work across the globe. We see a world where underserved people everywhere have financial access, choice, and control. People need access to financial systems, including credit and all the opportunity credit brings. Within those systems, they need choices, so they can do what they want to do, what they need to do, and what they should do with their money. Finally, we want more people everywhere to be in control of their finances, as active participants in their own financial lives — whether they are budgeting, saving, investing, or learning.
None of this will happen without trust. Our credit scores, or what we like to call financial identities, help our customers become visible and trusted— thereby putting power in their hands. In Kenya, for example, by reporting to the credit reference bureau there, we’re helping customers build credit histories for the first time in their lives; they can now choose to enter the formal system. We’re seeing every day what the power of trust can do for a single person’s life. Just imagine what it can do for billions more.
What’s Next for Tala
Today we’re excited to announce that we’ve raised over $30M in our Series B financing, led by IVP. We’re thrilled to welcome IVP and Ribbit Capital to the Tala family and for the continued support of Lowercase Capital, Data Collective, Collaborative Fund and Female Founders Fund. Our funding will help us continue providing fair and flexible credit to our customers while also helping us expand our reach to new markets and add more value to our platform.
If we get this right, and I know we will, the future of finance will be less transactional and more human, built on trust and a belief in people. Thank you for being part of our journey. I believe we’re just getting started.
P.S. We’re hiring! We are data scientists, engineers, customer experience designers, marketers, and finance geeks all passionate about extending financial freedom to the billions of underserved people across the globe. We believe in people from every type of background — around the world, and within our company. Come join our global team.