More than half of the developing world’s population own or have access to a smartphone, according to the Pew Research Center. At the same time, a high percentage of these residents of these low- and moderate-income countries don’t have easy access to financial products.
Among the fintech companies seeking to leverage mobile phone technology to reduce the ranks of the unbanked and underbanked is Yabx Technologies. Yabx, headquartered in The Hague, Netherlands, was a finalist in the 2022 BAI Global Innovation Awards on the strength of a lending solution that relies on the collection and analysis of alternative data – including telecom data – to broaden financial inclusion in Africa, Asia and Latin America.
BAI recently connected with Abhinav Gokari, who leads Yabx’s business operations in Latin America, for a wide-ranging discussion that included the finer points of the company’s digital finance product, what they’ve been learning as they widen their reach, and when we might expect to see them expanding into the U.S. to serve the large underbanked population here.
This interview has been edited for length and clarity.
BAI: What data do you use to determine creditworthiness and how do you source that data?
Abhinav Gokari, Yabx: We primarily use mobile-wallet transaction data and telecom data to create machine-learning algorithms, which then determine creditworthiness of a customer. The key features typically gauged by that our scoring models are financing consistency, transaction patterns, loyalty to network, mobility, social centrality, communication entropy, professional attributes, communication entropy and digital affinity. We source data by establishing key partnerships with telecom providers, wallet networks, merchant aggregators, banks, ecommerce players and others.
What is the educational component of your mobile banking service?
There are both digital and physical avenues of credit education, considering most of our customer base is new to credit or traditionally underbanked. While we ensure that our digital credit products are simple to understand, there is sufficient digital support that is available. Additionally, our telecom partners provide on-ground merchants and sales personnel who are also involved in educating the customer about credit.
When you go into new markets with a new product, there’s always bound to be surprises — things that you didn’t expect. Tell us about something that fits into this category, and why it caught you by surprise.
One of the things that surprised us was understanding how the amount of credit completely changed the repayment behavior of the same customer. In the underserved segments that we operate in, we found that the same customer would repay the credit of a certain loan amount but might default on a different amount of loan. That means that simply labeling a customer good or bad is not the most optimal strategy. We built a strategy to calculate the right amount of credit for each customer at which their creditworthiness is good and the portfolio profitability is the highest.
There are concerns that mobile-based banking solutions can reinforce existing inequities regarding access to credit. How do you guard against that?
Creating credit products based on mobile have truly enabled delivering last-mile credit services to segments which probably never even have seen a bank branch. We ensure that there is no reinforcement of the traditional inequities by integrating our philosophy into our product design. Designing product journeys that are uncomplicated, designing credit terms that are clear to understand, building unrestrictive use cases, and trying to keep KYC requirements minimal are some of the ways that we work to ensure broad accessibility.
Do you have any plans to bring your mobile banking services to the U.S.? If so, how would doing so be different that serving the developing world?
Currently, our products in their current form are not suitable for a developed market like the United States. However, we do not rule out the U.S. as a potential market. We are rapidly expanding in middle-income countries in Latin America with certain product enhancements. We definitely see the U.S. as our next step of expansion and will be looking to customize our proposition accordingly. The U.S. has large customer segments who are traditionally underserved by banks and our focus would be to identify the key gaps in the way they would use credit and to bring in technology to bridge that gap.
Terry Badger, CFA, is the managing editor at BAI.
We explore the current state of mobile banking—including the quest to improve the day-to-day user experience and protect customers from fraud—in the BAI Executive Report, “Building on mobile banking’s success.”
