Financial Technologies for Underbanked Consumers Attract $5.2 Billion Investment

November 7, 2013 – U.S. investment activity in financial technology companies serving underbanked consumers totaled more than $5.2 billion between July 2012 and June 2013, according to a report by the Center for Financial Services Innovation (CFSI) and Core Innovation Capital.

The study, supported by Morgan Stanley, looks at 71 equity investments, 11 acquisitions, and 3 IPOs involving more than 125 investors over the past year. It reveals substantial investor interest in the market. A growing number of entrepreneurs are seizing on the opportunity both to improve the financial services experience for the poor and to expand the mobile pay business model.

Specialty credit made up 42% of all transactions and 20% of known capital allocation during the period under study, while payments comprised 33% of all transactions and 79% of known capital allocation. The top specialty credit subsectors driving activity were small dollar credit, small business lending, and private student lending. In payments, investments in prepaid card systems, payments networks, and remittance, led the way.

In the United States, the FDIC estimates some 10 million households are unbanked, and another 24 million are underbanked. This is a challenge to growth here at home because access to banking services is key to economic empowerment. Banking services can boost job creation, raise income, reduce vulnerability to theft, and increase investments in human capital.

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