Enabling Entrepreneurial Solutions for the Under-Banked

By: Amy Millington, President of eBay Foundation, and Ross Baird, Executive Director of Village Capital

In early May, 14 teams from across the U.S. gathered in the San Francisco Bay Area for Village Capital-FinTech, an effort to build businesses that utilize technology to expand access to financial services to unbanked and under-banked Americans. The startup accelerator was launched by Village Capital, in partnership with eBay Foundation.

 

The Problem: Lack of Access to Financial Services Perpetuates Poverty in America

The teams are working to address an immense problem facing millions of Americans today. In 2012, the U.S. poverty rate was 15 percent, with 46.5 million people estimated as having income below the official poverty line. At the same time, more than one in four households are either unbanked or under-banked, conducting some or all of their financial transactions outside of the mainstream banking system.

In the words of Arjan Schutte, founder and managing partner of Core Innovation Capital and mentor to the program, "It's really expensive to be poor." For Americans who lack access to formal financial services, costs add up. Without savings or good credit, an unexpected expense can leave low-wealth individuals strapped for cash, often leading them to apply for cash advances or payday loans. These are costly options that typically carry extraordinarily high fees. The financially underserved paid a collective $89 billion in financial fees and interest in 2012.

 

The Opportunity: Entrepreneurial Solutions for the Unbanked and Under-banked

Where most people may see a systemic problem as unsolvable, social entrepreneurs see an opportunity to address a pressing need. The 14 enterprises in the cohort have a range of solutions that could transform the financial services industry, including:

 

Digital Payment Mechanisms

  • ePaymentGuard® offers affordable risk management and protection against credit card chargebacks for online payment processors.
  • HelloBit leverages digital currency and payment technology to reduce the friction and transaction costs in traditional money remittance.
  • Rezzcard is changing rental payment and collection for affordable housing through mobile electronic payment management.

 

Alternative Means of Access to Capital/Credit

  • AlumVest’s platform connects leading startups from US universities with equity crowdfunding.
  • Bashar&Fadia allows individuals to access affordable financing and repay based on future income, providing investors an opportunity to invest in personal potential.
  • eMoneyPool creates a path for individuals to access traditional mainstream lenders by leveraging alternative credit and payment histories.
  • LendStreet helps distressed debtors settle, restructure, and refinance their debt while enabling investors to buy the debt at a discount.
  • LendSquare is a platform to crowdfund small business loans, allowing individuals to directly support businesses they believe in.
  • MoneyWorks’ application provides an integrated solution to repay debt, establish and stick to a budget, and increase financial health.
  • MPower Financing is a peer-to-peer lending platform linking international and underserved college students with affordable student loans.

 

Asset Building Services/Currency Exchange

  • PeopleHedge protects individuals and small businesses from the volatility of foreign exchange rates.
  • Planwiseoffers online technology that provides financial tools to make better choices in prospective financial and investment decisions.
  • SavedPlus makes savings easier by enabling automatic savings contributions alongside consumer spending.
  • WiseBanyan makes it easy for anyone to get access to money management through customized, easy-to-use portfolio construction and automated rebalancing.

 

During the three-month accelerator program, the teams will build their business models, develop sales channels, get direct customer feedback to their services, and meet potential hires, customers, partners, mentors, and investors. The final session of the program will conclude with a Venture Forum on June 24, 2014, at the San Francisco Federal Reserve. At the end of the forum, two teams will each receive a $50,000 investment through a unique selection model: the entrepreneurs themselves will peer-select who receives investment based on the business case they present.

The cohort is supported by an ecosystem of experts from eBay, PayPal, Core Innovation Capital, the Center for Financial Services Innovation, Accion, and the Sorenson Global Impact Investing Center (SGII) at the University of Utah. David Schwarzbach, Vice-President and CFO, eBay North America, spent one morning advising the entrepreneurs and said, “I wish this program had existed back when I was starting several businesses.”

Village Capital: FinTech is the kickoff initiative of Solutions from Our Country’s Entrepreneurs (SOURCE), a national partnership between Village Capital, Investors’ Circle, and The Hitachi Foundation. The program connects entrepreneurs building market-based solutions with the investment capital, mentoring and support needed to grow their business.

If you’re interested in learning more about the program and cohort of participating teams, we invite you to attend one of our upcoming public events:

  • Venture Forum in San Francisco –San Francisco Federal Reserve Building (101 Market Street, SF): June 24th from 4:00pm to 6:00pm.
  • Happy Hour in San Francisco – Impact HUB San Francisco (901 Mission Street, SF): June 24th from 6:00pm to 7:00pm.

 

For more information about the events, or the program in general, please e-mail Dustin Shay at dustin.shay@vilcap.com.