Fintech for tomorrow
Empowering millennials at the base of the pyramid
That sunny morning, the bus was surprisingly empty. Kary, 19, was heading to her law class and she could feel the wind in her hair. She was listening to an Ed Sheeran playlist on her weex mobile. ‘Life is too short to listen to sad music’, she thought. To connect with friends and the world, she uses an iPhone 5S that she inherited from her godfather on her 18th birthday. She spends $5 dollars a month on weex mobile credit to gain access to her digital world. Last month, a friend invited her to download a new wallet. After gaining her mother’s blessing, she joined and immediately made her first purchase on the payment platform: a Spotify premium account. Kary felt empowered and full of potential knowing that these instant services were now at her fingertips. Maybe, she’ll apply for a credit card next and be the first in the family to have that privilege. She would take her family to a nearby Cinepolis, watch a Marvel movie with popcorn and a large cherry ICE.
Much has been written about solving problems for people like Kary. In his influential book — The Fortune at the Bottom of the Pyramid — Professor C. K. Prahalad argued in the early 2000s that bringing products and services to that population could yield attractive financial returns. I still teach his framework to my Stanford students. New technologies such as AI and Blockchain coupled with expanding mobile infrastructures have made the opportunity to reach the poorest 4 billion in the world more relevant than ever. Yet most governments, large companies and startups fail. Execution is hard. Very few can make the leap from good intentions to meaningful impact.
One of our portfolio companies is about to become one of these rare startups that marry impact, scalability and eventually, profits. Indeed, weex might have cracked the code of scale in mobile and financial services at the base of the pyramid by building a unique product. Its success will depend on a blend of ambition, passion and smart application of deep tech.
Solve big problems…
Mexico is a puzzling blend of world-class multinationals and sprawling informal economies. Michelin star restaurants and ubiquitous street taco stands. A country where Uber, Spotify and Amazon have significant local operations yet only 30% of young people have a bank account to pay for their services and access to formal credit is lower than 10%.
In turn, most of the 35 million young adults have a connected device in their pockets. When John Cooper and Ricardo Suárez started weex they focused first on changing the rules of the broken Telecom industry in Mexico that structurally overcharges its poorest clients. They built the most efficient mobile virtual network operator (MVNO) to benefit cash tight millennials, who can’t afford costly monthly plans, take control of their digital lives. weex mobile in the only telecom company that allows users hyper customization and control of how they can spend their credit to fit their unique digital lifestyle.
After 2 years of fine-tuning the weex mobile model, they realized millenials could not take complete control of their digital life without enabling effortless digital payments, easier access to credit and help managing their social money. Last summer, building a wallet to complement the mobile value proposition became a priority.
When my partner and I showed up at the weex offices in 2015 for our investment diligence, we realized our future bet was unlike any other. As we came out of the parking lot at Mexico’s buzzing downtown near the Zocalo, we discovered a XIX century building with a traditonal heladeria shop occupying the entire hallway. We went through the impromptu shop and climbed three stories of large stairs to discover weex’ tech oasis. Most startups prefer the hip Condesa or posh Polanco to set up their desks. ‘We want to be close to our customer base not to our friends.’ said John, in his confident Spanish hardly hiding his elegant British accent.
Ricardo and John like to spend time with weexers. It was true even before they chose the problem they would so passionately try to solve. Since they joined the Coca-Cola Founders program in 2014, they have centered their research on the user. They have the patience of an older brother, the empathy of a designer and the methods of an engineer. The approach that led them to a unique digital hub app helped them craft one of the most ambitious Fintech products in Latin America. They don’t call it design thinking nor use empathy maps, it’s just how they build.
Shortly after starting the development process, they realized that by leveraging their large mobile user footprint and data richness, they could overcome two of the biggest challenges for financial inclusion: distribution and education. Much like M-Pesa — African mobile money juggernaut — that targets captive mobile users and educates them on the benefits of financial services with agent networks, weex wallet has $0 acquisition costs and educates through daily digital interaction in the weex app.
“There are billions of dollars of social loans that are made every year but are not always easy to get back. We have developed a powerful social credit feature in our app that helps users make loans and track debts between friends and passes the socially awkward process of asking for money back to a friendly yet persuasive digital reminder system” — Ricardo Suárez
A few months after the first mock-ups, a beta version of the wallet was launched in November last year. Users would get a virtual prepaid MasterCard for online purchases in seconds and a physical card for offline purchases within days just by downloading the app and creating an account. They are able to subscribe to digital services right away. No paperwork and no lines. To make things easier, cash top-ups can be made through the already familiar network of corner shops and convenience stores, transfers between users are free and tracking debts or splitting bills are made simple just like other peer-to-peer payment services like Lydia and Venmo.
Kary used her wallet exclusive invites to refer her best friends Luis, Miguel and Laura. All joined. A big anime fan, Luis was able to buy his first subscription for Crunchyroll and order rare comics from Alibaba. Mike now receives his monthly allowance from his family in Zacatecas. He can get a Netflix account for his roomies and even pay the electricity bills from his phone. Laura sold tickets for the graduation party using the social features. She reached 70% of the goal and borrowed the rest on weex credit. With zero marketing costs, weex wallet is the fastest growing wallet in Mexico and is quickly building one of the largest active user bases. Kary, Luis, Miguel and Laura can now split the tacos and the Uber when they go out.
With this launch, weex is moving one step closer to accomplishing their vision of being the #1 services hub for millennials in Mexico and beyond. They plan to create revenue sharing partnerships with other Mobile Operators throughout the region to offer weex wallet to other mobile customer bases. This innovative business model opens up huge opportunities for the burgeoning e-commerce sector and digital platforms in Latin America. John and Ricardo plan to bridge the gap between the formal and informal personal finances and erase the lines between prepaid and postpaid and between debit and credit.
Ultimately, they will empower Kary and her generation to do more with money and shape the future. If one man can destroy everything, why can’t one girl change it? ― Malala Yousafzai