Fintech for Good.
How a new fintech startup in Mexico is knocking-down socioeconomic barriers.
Fintech (financial technology) startups are disrupting traditional financial services all over the world. From N26 (mobile banking) to Transferwise (bank wires), from Stripe (payments) to Robin Hood (stock trading), fintech companies are raising large piles of venture capital and completely changing the way that financial transactions are conducted.
But what I’m really excited about is that fintech is also creating opportunity in poorer communities and knocking-down socioeconomic barriers. Traditional banks have never cared much about people in the bottom third of the economy — they just can’t make money serving those people. But fintech companies — because of the lower costs of a pure-digital transaction — actually can serve populations in lower economic classes. This is creating a rising economic tide in many countries today, as underserved communities suddenly have access to banking, insurance, financing, and more.
Last month I met the founders of MIDAS, a new startup in Mexico City that is a great example of this. Loyalty rewards programs (earning points for purchases) are extremely popular with consumers everywhere. But in Mexico (as in many other countries), a large percentage of the population works in the cash-based “informal economy” (unregistered vendors, artisans, domestic workers, construction workers, etc). And since they shop with cash, they don’t have the benefit of participating in any rewards programs (which are typically associated with credit cards).
So MIDAS has created a new mobile app that solves this problem. A consumer walks into a shop, makes a purchase with cash, and scans a QR code at the counter. Now that consumer is earning points with every purchase, and even getting cash back rewards.
The shopkeepers and brands have an incentive to participate in the MIDAS platform because of the insights they gain from consumer data (the same dynamic that powers traditional rewards programs). Plus brands can use the platform for promotions (“Use MIDAS for your next purchase of Brand X and get an extra discount!”).
What I love about this particular fintech startup is that they are taking a well-known, well-understood model (loyalty rewards programs) and using a pure mobile/digital platform to deploy it into a large untapped market (53% of the Mexican economy is considered informal, and 91% of all retail purchases are made in cash). Shopkeepers win by getting consumer loyalty and data insights, brands win by being able to promote products to a large new market, and consumers win by being able to earn points and get cash-back, even if they don’t have credit cards. Great stuff.
