Infrastructure Fintechs: Enabling financial services for the underserved

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Infrastructure fintechs - companies that provide processes and tools that enable multiple types of financial services – are an indispensable component of the inclusive fintech ecosystem. Although these fintechs constituted 22 percent of eligible applicants of the 2019 Inclusive Fintech 50, together they accounted for only 15 percent of total funding raised by all applicants. Though there are several factors that impact a startup’s success in fundraising, one reason for this discrepancy could be that these companies are less visible to investors than their consumer-facing counterparts. Yet, it is often their innovations that make it possible for business-to-consumer (B2C) fintechs to develop products and services tailored to the financially underserved.

Thirteen infrastructure fintechs were selected as winners in the 2019 Inclusive Fintech 50, showing that despite fundraising challenges, these startups have developed valuable products. Over recent years, winners in the category have been operating largely behind the scenes, steadily digitizing the likes of cooperatives, microfinance institutions, rotating savings and credit associations and small financial institutions. In Nigeria, for example, Riby automates cooperatives, associations and trade groups’ financial activities – which could include cooperative member management, loan requests, loan originations and savings and contributions tracking. Similarly, Musoni has tailored and tweaked a core banking platform since its founding in 2013 for microfinance institutions, fully stacked with loan officer tablets, mobile money integration, and SMS functionality. And MaTontine, in Senegal, automates and digitizes tontines - a unique savings group model - and then utilizes the behavioral data to offer services like microinsurance and microcredit. One winner, awamo, offers a comprehensive solution for microfinance institutions to digitize their entire systems, with a particular focus on biometric authentication that contributes to better visibility into borrowers’ identities – a critical feature for institutions expanding into remote regions.

Meanwhile, through its proprietary blockchain, hiveonline captures reputational, transactional, and savings data that allows the women of village savings and loans associations in Niger to build a credit history, access markets, grow their businesses, and increase community wealth. And Kwara, propelled by its partnership with Kenya’s leading credit reference bureau, has on-boarded 1,400 cooperatives to its digital platform. Similarly, Teknospire makes it possible for small- and mid-sized financial institutions to digitize with limited capital expenditure and, as a result, more efficiently service last-mile clients.

Other winners in the Infrastructure category are also facilitating last-mile reach through high-touch disbursement channels. BASIX Sub-K in India transforms the mobile devices of rural and peri-urban agents into an extension of the operating system of banks, brokerages, government systems, and insurers to service end-customers. Likewise, E-Settlement, Nigeria’s first-to-market mPOS solution, has graduated it agents from processing payment requests to a wider basket of transactions, like card issuance and loan applications.

In addition to leveraging retailers as intermediaries to increase penetration, infrastructure fintechs are targeting micro, small & medium enterprises (MSMEs) more generally. Access to capital remains a constraint to MSME growth and infrastructure fintechs are working to address that. OZÉ, for instance, helps businesses in Ghana attract the capital needed to scale through its analytics platform that makes transaction data visible to partnering financial institutions. Numida in Uganda, meanwhile, offers a suite of business management tools through which MSMEs can manage cash flow, inventory, and staffing. This data is then used to populate credit scoring models that price the risk of unsecured working capital loans, which are delivered within 24 hours via mobile money.

Infrastructure fintechs are also providing solutions for digital identification. Everest built a decentralized platform that combines a biometric identity system with a scalable payment solution and a multi-currency wallet. The company counts governments, donors, NGOs, banks, microfinance institutions and others as customers. Distilled Identity utilizes advances in biometrics and artificial intelligence to improve how institutional clients handle credit, fraud and risk for un- and under-served segments (its identity profiles have match rates of 99.9 percent).

Infrastructure might not command as much attention as consumer-facing segments but, as the winners of Inclusive Fintech 50 make clear, the innovation in the space is enabling a multitude of financial products and services that better address the needs of underserved people and businesses.

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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.

Nikhil Gehani