The Financial Services Opportunity in Emerging Markets — Why We Invested in Branch International
April 10, 2019
Every individual or small business owner should have access to financial services, no matter their geography. It’s a simple problem statement with much greater consequence — without capital, true potential and progress cannot be realized.
In emerging markets like Sub-Saharan Africa, Latin America, and Southeast Asia, what should be a basic need is instead unattainable, hindering those who look to escape poverty and join a growing global middle class.
While the gap in access to financial services is shrinking, some 1.7 billion people around the world today are either un-banked or under-banked according to BCG research. That’s roughly 35% of the adult population.
We at B Capital strive to invest in truly transformative technologies that have the potential to overcome global challenges. With offices in San Francisco, Los Angeles, New York, and Singapore, we search for companies around the world that align with this vision — and we’re firm believers in the idea that financial services should be ubiquitous.
Today — and in partnership with Foundation Capital, Visa, Andreessen Horowitz, and Trinity Ventures, among others — we’re proud to announce our investment in Matt Flannery, Daniel Jung, and the entire team at Branch International who are looking to solve this problem of access to financial services and deliver a modern financial institution to the mobile generation.
Scoping the Access Gap
Branch is live today in five markets across three continents — Kenya, Tanzania, Nigeria, Mexico, and (most recently) India. These geographies alone represent a growing population of nearly two billion people — or 40% of the total population in developing economies — and 500+ million smartphones.
Seeing these unimaginably large numbers begs the question — why aren’t incumbents aggressively looking for ways to reach this population? The fact is, traditional financial institutions are ill-equipped to properly serve these rapidly evolving markets. In addition to being historically conservative in their practices, big banks utilize outdated technology to make decisions and ultimately deliver services to their customers, resulting in a poor experience.
Data Science as a Key Enabler
In the last decade, improvements in data science have created a machine learning revolution that has positively impacted every single sector. At Branch, Matt and his team have built a culture around data science enabling the company to develop and constantly refine their credit underwriting algorithms with dozens of automated heuristics. The company’s enhanced fraud protection and risk management capabilities enabled by rich data empowers the team to optimize the loan portfolio, limit risk exposure, and protect against any potential fraud — thus providing Branch the ability to serve previously unreachable populations.
But it doesn’t end there. When applied to financial services, data science has near limitless applications. Although Branch today is using machine learning to improve their own credit box, the long-term implication of continuous improvement is a better and more personalized user experience.
By combining a simple mobile application with advanced data analytics and underwriting capabilities, Branch has already crossed the chasm and is offering loans to individuals and small business owners alike. But loans are just the beginning. While the metrics today are astonishing — 3+ million customers served, 15+ million loans issued, and $350+ million in total disbursements — Branch has barely scratched the surface with a massive untapped opportunity in lending, high-yield savings, and other adjacent financial products that will unlock prosperity and streamline commerce.
Branch international, led by a management team who have deep domain expertise and extensive experience in emerging markets, is on an incredible trajectory. We at B Capital — along with our partners at the Boston Consulting Group with offices in 90+ cities across 50 countries — are excited to support Matt, Daniel, and the rest of the team in their next phase of growth as they look to bring financial services to the masses.
For more coverage of today’s announcement, see Sarah Hansen’s piece in Forbes.