FinTech Newsletter: April 2019

From the a16z FinTech Team

“Traditional banking services have fallen flat for an enormous segment of the population — whether because they’re ‘unbanked,’ or because the state of those services makes it even more expensive to be poor. In my video below I talk about why so many low-income populations — both in the U.S. and around the world — are left behind, and what the opportunity for startups to change this in the future will be.” –Angela Strange, a16z General Partner

Top Startup News

Mexican president Andrés Manuel López Obrador wants to boost financial inclusion. In Mexico, 60% of the population is unbanked, meaning they do not have access to bank accounts and other such institutional financial services. In an effort to increase financial inclusion in the country, López Obrador has called on banks to reduce the commissions they charge customers so that more citizens can enter the banking system. López Obrador stated that, if needed, he would even add more bank licenses to increase competition. Since bank account penetration is low but smartphone penetration in Mexico is relatively high, this creates a perfect opportunity both for incumbent banks to offer digital accounts and for app-based neobanks. Expect to see more new entrants in this space. Link

Chinese tech giant Tencent takes a stake in Argentinian neobank Uala. This week, Tencent (the company behind the app WeChat, used by over 1B people in China) has announced an investment in Uala. The second largest economy in South America, Argentina, like Mexico, has a large under- or unbanked population. Uala brings Argentinians into the financial ecosystem through a prepaid card tied to an app that can be used to refill metro cards, make digital payments, and pay bills. The cash injection should help Uala speed up its product development and customer acquisition activities, but it will also allow Uala to learn from Tencent’s experiences with WeChat Pay, which is one of the most popular methods for Chinese consumers to make payments. This is Tencent’s second bet on the rise of mobile banking and financial inclusion in Latin America, after investing in Brazilian neobank Nubank last year. Link

Branch raises Series C from Visa for African microlending. Because most citizens in emerging markets don’t have a credit score, Branch, a microlending app operating in Kenya, Nigeria, Tanzania, Mexico, and India (and an a16z portfolio company), uses smartphone data to assess creditworthiness of its potential borrowers, essentially creating its own credit score. Branch recently raised a Series C led by Visa and Foundation Capital. This is an important signal regarding the increasing interest in emerging markets from established players in the US payments ecosystem, as well as indicative of synergies that can exist when FinTech startups and large incumbents form partnerships. Having Visa as a partner creates multiple user experience benefits; for one, borrowers will be able to collect funds from a global network of ATMs across the country rather than having to go to a convenience store or bank. And second, Branch will now also be able to offer better loan terms to merchants who accept Visa on mobile phones.  Link

IPO and Mastercard investment for Jumia, the Amazon of Africa. Meanwhile, Mastercard also been active in investing in Jumia, an online retailer that operates in 14 African countries. Jumia is tackling a massive market opportunity in Africa as only 1% of retail sales in the geographies Jumia operates in are done online. Jumia is in fact the first Africa-focused tech company to go public on a major global exchange: on April 12th Jumia IPO’d on the NYSE, raising close to $200M and closing with stock up 75% on its first day of trading. Mastercard has agreed to buy ~$56M of Jumia stock in a private placement alongside the IPO. The investment will come along with a partnership to help Jumia expand its operations throughout Africa, as Mastercard aims to capitalize on the trend of increasing ecommerce payments across the continent. Link 1 Link 2