Find Fintech opportunities where others don’t
The United States is a nation of immigrants. What was true over 200 years ago remains the case to this day.
According to the Migration Policy Institute, nearly 45 million immigrants lived in the United States in 2019. According to the Pew Research Center, that number is by far the highest in the world, accounting for nearly ⅕ of the world’s migrants. Notably, although some media may have you believe otherwise, the vast majority (nearly 77%) are classified as legal immigrants.
Waves of immigrants from different countries defined centuries of cultural and industrial progress. Over the past quarter of a century, immigrants from Latin America have dominated these migratory flows to the United States. However, despite the fact that immigrants continue to represent a large portion of the population, they remain woefully under-represented in the types of financial products and services offered and developed.
Latinos accounted for more than half of the United States’ population growth between 2010 and 2019 and are among the youngest racial or ethnic groups in the country. Although this group has enormous purchasing power, they continue to face barriers to financial inclusion. Almost half of Latino households are unbanked or underbanked. This means that they tend to turn to alternative financial services, which are often associated with bad interest rates. They also tend to be overlooked and underserved by the big banks, which makes the problem worse.
For Amir Hemmat, this situation represented an opportunity.
“Companies have done a bad job of creating access to this consumer, which is the start of the waterfall that you don’t see investment in this consumer market for,” he explained.
Aware of this untapped potential, Hemmat decided to launch a startup dedicated to reaching this community. Hemmat himself is the son of immigrants and observed firsthand the obstacles his parents faced in navigating the American financial system. He used this personal experience to create Welcome Technologies (Welcome Tech for short), a digital platform focused on improving access to banking services for immigrant communities. After raising $ 35 million, the company recently announced that it will offer a monthly subscription service that provides users with access to a variety of insurance resources at a discount.
“As a company, we are thinking about whether to build a better system for immigrants. It is our north star. We believe the starting point is a digital wallet that helps influence transactional decisions more effectively, ”he shared in a recent interview.
If this consumer base has such potential, why haven’t the big financial institutions been able to meet their needs?
“It’s not rocket science – if you treat a consumer badly, they won’t deal with you in the long run,” Hemmat explained. “Companies have launched services and built teams and time and time again they’ve hit the acquisition cap and either lost money or … buried that consumer in multiple layers of debt. “
Hemmat thinks Welcome Tech will be different. “We focused our energy on building our trust with this consumer and leveraging the data. Among the categories of need, financial services represent by far the greatest opportunity to have an impact.
Welcome Tech is not the only startup to identify opportunities in this consumer segment. Crediverso, a personal finance platform aiming to be the “Credit Karma” of the Latino community in the United States, recently closed a $ 3.1 million funding round. The fact that the cycle has included venture capitalists such as Bessemer and Clocktower is a testament to the belief that investors are starting to cultivate in this demographic.
“What’s always amazing is that we focus on the largest underbanked population in the United States and the fastest growing population in the country and, unfortunately, it’s a very lonely space,” Hemmat observed.
As long as companies like Welcome Tech and Crediverso continue to emerge from the woods, this space may not be lonely for very long.