One lesson many fintech startups learn the hard way is that building technology for technology’s sake is rarely a good idea. Especially when developing products and services for customers who don’t have a lot of experience with financial institutions, or who likely don’t have phones and computers that can handle all the bells and whistles of a complex app, fintechs should look for the places where including an element of human interaction would enhance their tech-driven products.
In our recent paper, “The Tech Touch Balance: How the Best Fintech Startups Integrate Digital and Human Interaction to Accelerate Financial Inclusion,” we showcase several fintech startups in the Accion Venture Lab portfolio that are finding an optimal balance between high tech and a human touch, making their offerings accessible, affordable, and attractive to their target customers. Two are located in Latin America: ESCALA, and Tienda Pago.
Based in Colombia, ESCALA helps low- and middle-income families save for their children’s college educations. Paying for higher education in Colombia is very challenging: half of the students who begin college don’t finish, and 70 percent of them drop out for financial reasons. ESCALA partners with employers to offer long-term education savings plans as job benefits for workers.
To drive adoption and retention, ESCALA balances both technology and human touch to engage with customers. ESCALA accounts are automated; the workers’ contributions are electronically deducted from their wages, making participation easy. The customers also receive regular updates on their account status via email, SMS, or WhatsApp, and can track the growth of their savings and learn about tuition discounts and other benefits they can access using an online dashboard. Many employers also offer matching funds, which the workers also receive as direct deposits. However, all this automation comes with a good deal of human interaction on the front end. ESCALA representatives hold on-site presentations at the workplaces, giving potential customers — who typically don’t already have savings accounts — plenty of opportunity to understand the product. ESCALA also benefits from its partnerships with employers, building on the familiarity and trust employees already have. ESCALA agents then meet one-on-one to enroll customers so that each savings plan can be targeted to the individual’s income, family size, and goals.
Tienda Pago, which currently operates in Peru and Mexico, is also using technology and existing partnerships to provide financial services to underserved clients. In this case, the clients are owners of small neighborhood “mom and pop”-style stores, the partners are distributors of well-known consumer goods often stocked in those stores, such as Coca-Cola, Nestle, and Anheuser-Busch InBev, and the product offered is working capital loans to help the shops finance the up-front purchase of the goods.
The shops Tienda Pago targets are themselves very high-touch businesses, given that they sell tangible goods to local customers, and usually in cash transactions. Tienda Pago, therefore, works through the goods distributors, who introduce the concept to the shop owners. Tienda Pago sales agents then follow up with interested shopkeepers, providing one-on-one guidance through onboarding. Tech then takes the lead in the loan approval process, as Tienda Pago’s algorithm analyzes data collected by the sales agent to produce a credit score and loan amount. Technology plays a role going forward in managing the loan payouts and the payments for consumer goods deliveries, but so does human interaction, as the distributors continue to make deliveries in person and the Tienda Pago staff is only a call or text away if needed.
For more examples of how fintech startups balance tech and touch as they develop their offerings, and general advice on these issues, read the full paper here.