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Sunday, October 2, 2022

How Welcome Tech is driving financial inclusion for immigrants in the US

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Historically, many immigrants in the US Hispanic/Latino community have been unbanked/underbanked and, by extension, lacking the necessary credit scores to access standard financial services. This has left them open to the clutches of predatory financial services providers.

Amir Hemmat, co-founder and CEO of Welcome Tech

Amir Hemmat, co-founder and CEO of Welcome Tech, a Los Angeles-based financial technology solutions provider focused on the Hispanic community, explains what his company is doing to tackle this.

Research from Claritas shows the Hispanic market represents the most sizable minority cohort in the US, with a population of approximately 62.8 million and an estimated purchasing power of $2 trillion. And it continues to grow – figures show that between 2010 and 2019, the community’s share of the total US population rose from 16% to 18%, accounting for 52% of all US population growth, according to Hemmat.

Crucially, less than half of Hispanic households are ‘fully banked’, meaning they can’t open an account, which then negatively impacts their ability to secure other products or services.

It shouldn’t come as any surprise, therefore, that an estimated $50 billion is spent annually on predatory financial services in the US – a development Hemmat describes as a “crisis” for the community. But it’s a crisis that can be readily solved, he argues, by employing machine learning technology to offer relevant financial education and tailor-made services.

As he explains: “Many industries and companies are largely focused on extracting value from their consumer segment. We want to be the company that focuses on creating value for them.”

Building relevant services on unique insights

He adds: “We have the largest collection of proprietary data in the country, reflecting the needs of the immigrant community. We’ve built highly relevant services based on these unique insights and are able to leverage machine learning to personalise and customise service offerings as well as user experiences.”

And with over nine million immigrants a year interacting on the company’s platform (65 million messages, seven million phone calls), according to Hemmat, it’s a deep customer pool.

Underpinning Welcome Tech’s business proposition are the three pillars of finance (a digital banking solution for the community); healthcare (offering a medical discount plan providing members with unlimited telemedicine consultations with bilingual doctors whenever they need them); and education (an extensive and constantly updated library of digital content and educational products, both in English and Spanish).

A rewards scheme, offering consumers an opportunity to earn income through ongoing financial rewards for their participation and completion of the education curriculum, is also available.

Growth and competition

With more than three million users today, Welcome Tech is showing strong growth, but it isn’t without competitors – case in point being personal finance platform (also aimed at the Hispanic community) Crediverso. The firm was founded in 2019 and completed a $3.1 million seed round last year. It has already signed-up more than a dozen providers to date, including US Bank, Remitly and Western Union.

Hemmat is comfortable enough though, arguing the fintech landscape is a challenging one and includes many new players. He adds: “We continue to welcome new companies who’ve set out to make a positive impact like us. We are hopeful that more companies will create fair access and opportunity to marginalised communities and we, as well as society, will ultimately benefit from it.”

In the meantime, Welcome Tech continued to grow through the Covid-19 pandemic last year, posting record-breaking numbers via its user platform, SABEResPODER, which saw 60% year-on-year growth in users.  Its digital wallet, PODERcard, meanwhile witnessed 2,200% growth. “We expect this year to trend similarly and set new records,” says Hemmat.

Clearly the market is a growing one, yet it’s one that mainstream banks have been slow to embrace – not least because they’ve built massive retail infrastructures that are both costly and make it more difficult for them to customise anything for anyone, except their perceived premium customers, according to Hemmat.

He adds: “Big banks have failed to innovate and none of the significant neobanks have truly prioritised this community. Our data shows that the community we serve is totally unfamiliar with the brands trending in the general market.”

Take the remittances space, for example. This market is invariably serviced by traditional remittance companies and fintechs – mainstream banks having chosen to pass due to the perception that this type of business won’t make them money.

“It’s a total lost opportunity as remittances are one of the most important transactions for the immigrant community,” argues Hemmat.  Indeed, according to Migration Data Portal, in 2020, the top three source countries for remittance outflows in current USD were the US (68bn), UAE (43bn) and Saudi Arabia (35bn).

To engage or not to engage?

Which begs the obvious question, how can the major banks more effectively connect/engage with the Hispanic community in order to address their financial services needs?

For Hemmat, the answer is clear – major banks need to be able to customise and personalise for consumer segments. “Right now, they lack in-language service experiences, and their underwriting models lack data specific to minority demographics,” he says.

“Providing financial literacy services in the communities they serve at no cost is important, too,” Hemmat adds.

Moreover, products offered by banks need to take into account the unique financial services needs of the unbanked, such as getting immediate access to funds upon a cheque deposit, remittances and low-cost overdraft financing. “Banks today make billions in overdraft revenues and haven’t taken the time to build a low-cost loan overdraft line to avoid charging high fees,” says Hemmat.

In other words, the lethargy of major banks needs to be replaced with more creativity.





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