How leading fintech startups in payments and remittances differentiate themselves
Digital payments have long been considered the first rung of a financial inclusion ladder, so to speak, that would help the underserved step into formal financial services. And with advancements in technology, interoperability, and mobile phone adoption, payments continues to be a popular product category for fintechs. In fact, over 100 payment and remittance fintechs submitted eligible applications to Inclusive Fintech 50.
Though the benefits of payments and remittances services is clear, what is most striking is the performance of some of these fintechs: Although this category accounted for 26 percent of eligible applicants, only 16 percent of winners offer payments or remittances services. Our analysis of data from applicants shows that some of these fintechs struggle to differentiate themselves. For one, many payments providers provided little detail on their target customer, perhaps assuming that most users have similar needs and expectations. Additionally, scores related to ‘innovation’ tended to lag behind other types of fintechs as the payments and remittances products were mostly improvements on common offerings like digital wallets. Though the category might be showing signs of over-saturation, the eight payments & remittances providers that earned a spot on the Inclusive Fintech 50 show that these services still have an important role to play in financial inclusion.
The winners were able to both convey strong traction and distinguish themselves not only on the basis of innovation, but innovation with an intentional, practical use for the financially excluded. For four of the eight fintechs, that involved upending the fractured, expensive remittance industry. Thunes, a cross-border payments network, is confronting the problem at its infrastructural source. By connecting various payment systems, the firm is enabling merchants, mobile wallet operators, money transfer operators and banks to move funds in and out of countries in real-time without committing to substantial capital and operational expenditures. Hello Paisa, meanwhile, is focused on the retail market in South Africa through a simple but thoughtfully designed, self-service digital money transfer portal that is supported in a number of languages to better reflect its user base. Its cash-in, cash-out network, too, has been adapted to accommodate the diversity of its users.
Other winners hinge on a flagship payment product that, over time, evolves into a more comprehensive, multi-pronged platform that also integrates remittances. Peppermint leveraged its burgeoning Filipino mobile-banking and payments technology platform to land its first international remittance corridor, between Australia and the Philippines. The non-bank agent networks that use Peppermint’s bill payments and e-load platform, are able to provide the unbanked with access to basic financial services. MyCash Online designed an e-marketplace that allows workers in Australia, Malaysia and Singapore to top-up mobile accounts, settle bills and purchase tickets without a bank account or credit / debit card; remittance functionality has been introduced and layered onto the platform as MyCash Online receives country-specific regulatory approval.
For most payment providers, the ability to branch out beyond a wallet hinges on a well-oiled, well-trained agent network. Without agents, there is no intermediary to facilitate offline-to-online money conversion – and vice versa – a feature without which would preclude the unbanked. It is no coincidence, then, that as Peppermint dove more deeply into the remittance sector it simultaneously increased its investment in agents. The emergence of fintechs that specialize in the last-mile will likely increase as payment providers seek to expand the portfolio of payment offerings available to previously unreachable segments. One Inclusive Fintech 50 winner, Celcoin, is at the forefront of this trend. Through its back-end solution architecture, merchants’ smartphones are transformed into multi-service payment terminals, which can then execute bill payments, online purchases and recharges on customers’ behalf.
Prepaid cards are another popular strategy employed to democratize digital payment instruments. Dinarak, an e-wallet payments service provider plugged into the national switch in Jordan, distributes optional prepaid cards to expand access to e-commerce, point-of-sale purchases and ATMs. Dopay, in its quest to create a unified solution to digitizing payroll in Egypt, services clients’ unbanked employees through a Dopay account. The digital account retains its real-life liquidity through an accompanying debit card.
Surprisingly, blockchain-based payments fintechs were mostly unable to claw their way into the Inclusive Fintech 50. The exception to this is AID:Tech, which manages the transfer of digital assets such as international aid, welfare, remittance and health entitlements while generating a permanent and traceable transaction record through blockchain technologies. This may suggest that the application of blockchain has not yet caught up to the hype, and that few fintechs can demonstrate traction. But what we’ve learned is that early-stage payments and remittances fintechs are changing the financial services landscape.
Inclusive Fintech 50 is funded by MetLife Foundation and Visa Inc. with support from Accion and IFC. Click here to see the full list of winners across categories.