Rob Stevens was the Portfolio and Investment Associate with Accion Venture Lab, Accion&#8217;s seed-stage impact investment initiative in fintech for the underserved. He led Venture Lab’s investments across Southeast Asia, Africa, the Middle East, and the U.S. He also worked with portfolio companies on portfolio engagement projects ranging from customer research to product strategy. Rob holds a B.S. in mathematics from Davidson College.

Former Portfolio and Invesment Associate

Rob Stevens

We’re looking for fintech startups that can help Americans build financial health

Article

Do you have at least $400 to cover an emergency expense? <a class="markup--anchor markup--p-anchor" href="https://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf" target="_blank" rel="nofollow noopener noreferrer">Nearly half of Americans</a> don’t — and they’d have to resort to selling possessions or borrowing money to pay the bill. 8 in 10 Americans are <a class="markup--anchor markup--p-anchor" href="http://www.pewtrusts.org/~/media/assets/2015/02/fsm-poll-results-issue-brief_artfinal_v3.pdf" target="_blank" rel="nofollow noopener noreferrer">worried about their lack of savings</a>. <a class="markup--anchor markup--p-anchor" href="http://www.usfinancialdiaries.org/paper-1" target="_blank" rel="nofollow noopener noreferrer">Income volatility has been increasing</a> since the early 1990s, and the poorest Americans have suffered the most in this shift. Living paycheck-to-uncertain-paycheck, 4 in 10 Americans have <a class="markup--anchor markup--p-anchor" href="https://s3.amazonaws.com/cfsi-innovation-files/wp-content/uploads/2017/01/24183123/Understanding-and-Improving-Consumer-Financial-Health-in-America.pdf" target="_blank" rel="nofollow noopener noreferrer">trouble making bill payments</a> on a monthly basis. And for those who’ve taken out a loan or used credit cards to manage expenses, more than a third have <a class="markup--anchor markup--p-anchor" href="https://www.urban.org/research/publication/delinquent-debt-america" target="_blank" rel="nofollow noopener noreferrer">debt in collections</a>.
At Venture Lab, we look at the problems people around the world face financially, and we invest in fintech startups that can create solutions that help the people who need it most. In the U.S., we focus first and foremost on how fintech can serve the <a class="markup--anchor markup--p-anchor" href="https://s3.amazonaws.com/cfsi-innovation-files/wp-content/uploads/2017/01/24183123/Understanding-and-Improving-Consumer-Financial-Health-in-America.pdf" target="_blank" rel="nofollow noopener noreferrer">138 million Americans</a> who struggle with financial health.
We see four core problems to solve in the U.S. — and a few startups that are taking them on:
1) How can Americans’ earnings match their needs?
Consumers in the U.S. have always dealt with inconsistent cash flows and paycheck cycles, but there’s potential for fintech to make the inflows of money smoother and easier to access when needed.
One of our favorites in the space is <a class="markup--anchor markup--p-anchor" href="https://even.com/" target="_blank" rel="nofollow noopener noreferrer">Even</a>, which reduces daily wage earners’ income volatility and provides access to stable, predictable cash flows through cash advances. Benefits management is another area where fintechs could potentially disrupt a stagnant industry, with startups like <a class="markup--anchor markup--p-anchor" href="https://www.joinpropel.com/" target="_blank" rel="nofollow noopener noreferrer">Propel</a> aiming to digitize the electronic benefits transfer process.
The potential here is massive, as daily wage earners and recipients of aid are often among the most financially vulnerable citizens. We’re excited to see more innovation in this space, especially focusing on providing more flexible access to funding when customers need it.
2) How can Americans best manage their costs?
It can be difficult for consumers to balance short-term needs with long-term priorities, especially with complicated interest rates and asynchronous billing cycles.
We believe fintechs can take the wealth of data that customers have and use technology to simplify the process. One company that has done this well is <a class="markup--anchor markup--p-anchor" href="http://earnup.com/" target="_blank" rel="nofollow noopener noreferrer">EarnUp</a>, which prioritizes and pays customers’ obligations for them. By getting a holistic view of the customer’s payments, EarnUp can take the hard work out of understanding monthly expenses.
Startups can also provide support by reducing the expenses that many consumers face just for having low balances. <a class="markup--anchor markup--p-anchor" href="https://www.dave.com/" target="_blank" rel="nofollow noopener noreferrer">Dave</a>, for example, helps customers budget monthly and then provides a cash advance to prevent overdraft fees. Given the difficulties of managing variable cash flows and expenses, there are many ways to use tech to solve this problem for consumers.
3) How can Americans build short-term resilience?
Far too many consumers aren’t prepared for an unexpected expense or loss of income, and there’s room for more services to make these shocks less stressful for customers. Many possible solutions could do the trick: income or job loss insurance, automated savings, or fair short-term credit.
Within savings, we love the work that <a class="markup--anchor markup--p-anchor" href="https://digit.co/" target="_blank" rel="nofollow noopener noreferrer">Digit</a> is doing, leveraging automation and machine learning to help people save flexible amounts each month. <a class="markup--anchor markup--p-anchor" href="https://safetynet.com/" target="_blank" rel="nofollow noopener noreferrer">SafetyNet</a> approaches the problem from a different angle, providing insurance to consumers to cover them if they lose their job. In uncertain times, helping people stay resilient is a large market, and we believe there’s room for multiple winners to leverage tech in this space.
4) How can Americans build lasting health and wealth?
Our portfolio includes several players that build resilience in the face of damaged credit and burdensome debt, like <a class="markup--anchor markup--p-anchor" href="https://www.selflender.com/" target="_blank" rel="nofollow noopener noreferrer">self lender</a> and <a class="markup--anchor markup--p-anchor" href="https://www.lendstreet.com/" target="_blank" rel="nofollow noopener noreferrer">Lendstreet</a>. These companies help customers recover from bad credit scores and build up their credit profiles over time.
Building financial health often includes acquiring assets — such as a home — that can provide more security. But the U.S. is going through an affordable housing crisis, as highlighted in Matthew Desmond’s Evicted. Fortunately, startups like <a class="markup--anchor markup--p-anchor" href="https://www.hurryhome.io/" target="_blank" rel="nofollow noopener noreferrer">Hurry Home</a> have begun to tackle this problem.
Building home ownership, through rent-to-own agreements or new sources of financing, would allow customers to have lasting assets that could protect them from financial hardship. We’re also excited about startups that are helping build security through long-term savings. While long-term savings and home ownership are typically reserved for high-income customers, we’re interested in startups that are focused on the underserved.
At Venture Lab, we’re excited to see fintech used as a force for social good and startups that are solving today’s most pressing financial problems — not just in the U.S. but around the world. We’re seeing financial health become a priority in markets globally, and these U.S. startups are often at the forefront of innovation on the topic. We look forward to seeing what’s ahead for these innovators as they build solutions that can <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/can-impact-investing-rekindle-american-dream" target="_blank" rel="noopener noreferrer">make the American dream accessible</a> to everyone.
Do you have a startup that’s helping Americans build financial health? We’d love to hear about it. <a class="markup--anchor markup--p-anchor" href="mailto:Accionventurelab@accion.org" target="_blank" rel="noopener noreferrer">Contact us</a>.
Amee Parbhoo, Aakash Shah, Reilly Kiernan, and Vikas Raj contributed to this article.

How can we solve Americans’ financial health crisis?

Amee Parbhoo

Despite the fact that they are wealthy and modern, cities like Dubai in the Gulf Cooperation Council (GCC) actually face a big financial inclusion challenge. There are 8 million foreign-born migrant workers in the United Arab Emirates (UAE) alone, making up some 88% of that country’s total population. These workers come primarily from India, Pakistan, Bangladesh, and the Philippines, and are mostly in low-paying jobs such as construction or domestic labor. Across the Gulf region, migrants have faced tough working conditions and have been historically ignored by financial institutions. They lack access to basic financial services, including bank accounts and fast, convenient remittance channels for sending money to their families back home.
This is where <a class="markup--anchor markup--p-anchor" href="http://nowmoney.me/" target="_blank" rel="noopener noreferrer">NOW Money</a>, <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/uae-based-fintech-start-up-secures-700k-investment-to-advance-financial-services-access-for-underserved-migrant-workers/" target="_blank" rel="noopener noreferrer">Accion Venture Lab’s newest portfolio company</a>, comes in. NOW Money was founded in 2015 by Katharine Budd and Ian Dillon, who were inspired by the digital-only <a class="markup--anchor markup--p-anchor" href="http://www.businessinsider.com/the-digital-only-challenger-banks-explaine-2017-5" target="_blank" rel="noopener noreferrer">“challenger banks”</a> that had begun to emerge across the US and Europe. While the UAE has over 50 banks in operation, none of them are able to reach the country’s massive and underserved low-income migrant population effectively. NOW Money provides a suite of products to its customers: current accounts for depositing and withdrawing wages; debit cards for use at ATMs and for merchant transactions; and a marketplace of online remittance platforms for cheaper and more convenient money transfer services. By reducing the cost of customer acquisition and reaching a relatively untapped market, NOW is able to offer these services (and eventually others) and cost-effectively serve customers that would otherwise be considered unprofitable by traditional banks.
NOW partners and integrates with large employers to pay workers’ salaries directly into NOW Money accounts. The value proposition is strong for both end customers and employers. For customers, NOW offers a suite of products otherwise unavailable in the market. In particular, during our due diligence we saw customers incredibly excited about the digital interface for access to remittances. In the UAE today, some 95% of remittances are cash-based transactions. The workers we spoke with remit 60% or more of their wages to family members in their home countries, and typically have to take time off work, wait in long lines at remittance houses, and pay high fees in order to make these regular transactions.
For employers, NOW provides a less expensive solution for payroll. In addition, the employers we spoke with were motivated to give their employees the benefits NOW offers for both moral and economic reasons. Some employers see a spike in absenteeism the day after pay is disbursed, as employees go to remittance houses. Lastly, many employers, especially in more skilled and technical professions, value NOW as a way to increase employee retention.
Venture Lab is excited to be supporting the NOW Money team as they grow and scale. We invested in the company — our first in the GCC and one of the first early-stage VC deals in the region — for a number of reasons:

<ul class="postList">
 	<li class="graf graf--li">Clear social impact: The migrant population in the GCC is historically underserved by basic financial services. The wages these workers earn are low ($200–300 per month, depending on occupation). Due to banking standards in the UAE, it is very difficult and costly for a customer to open an account if they earn less than $1,300 per month, thereby excluding a vast majority of the migrant worker population.</li>
 	<li class="graf graf--li">Large market with unmet need: The UAE is the third largest market in the world for remittances, trailing only the US and Saudi Arabia. Across the GCC (UAE, Saudi Arabia, Bahrain, Kuwait, Qatar, and Oman), the total addressable market is some 25 million low-income migrant workers believed to be remitting about $50 billion annually. The remittance corridors used are some of the most active in the world, and NOW fills a crucial gap by providing customers ease of access and lower costs.</li>
 	<li class="graf graf--li">Innovative “neobank” model: Accion Venture Lab looks to support fintech companies that have innovative approaches to increasing access to and quality of financial services for underserved markets. We have been actively watching the digital-only neobank/challenger bank models around the world and are excited about NOW Money, our very first neobank investment. We’re thrilled to be part of NOW as it expands and aims to become the financial service platform of choice for migrant workers. As NOW truly owns the customer relationship, it will be able to provide incremental value to customers’ financial lives with each further partnership, beyond simply account access and low-cost remittance tools.</li>
 	<li class="graf graf--li">Opportunity to learn from new customers, market, and product: NOW Money would be a first for Venture Lab in a number of ways. Venture Lab has never invested in the Gulf region, and NOW Money could serve as a way to learn about this fast-growing region and its market dynamics. In addition, Venture Lab has investments reaching many kinds of underserved customers, but we have limited experience serving migrant workers, which is a huge market with demonstrated, specific, and relevant financial needs. NOW Money would help us better understand this vast and growing population of underserved customers.</li>
</ul>
As is the case for all of our seed investments, NOW Money is early in its journey, but as investors in the company and proponents of financial inclusion for underserved populations, we are excited about their progress so far and the company’s plans going forward.
<a class="markup--user markup--p-user" href="https://medium.com/u/c50787175cb7" target="_blank" rel="noopener noreferrer">Rob Stevens</a> contributed to this article.

Rob Stevens

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