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"The time when everybody and their dog could start a prepaid card company is coming to an end" and prepaid companies need to step up their use of technology to keep their customers, says Plastyc CEO Patrice Peyret.
March 16 -
NetSpend has learned the hard way that tapping into the vast market of underbanked consumers isn’t so easy. Its revenue failed to meet analysts’ estimates and it lost three distributors.
August 4 -
A new venture capital firm focused on funding technology companies catering to the growing underbanked population has made its first investment, in GoalSpring Financial Inc., a San Francisco startup marketing an online debt management program.
September 10
Core Innovation Capital is closing its $45 million private equity fund so that it can focus on investing in startup financial services companies.
The venture capital fund — the investment arm of the Center for Financial Services Innovation, a nonprofit organization that promotes the expansion of financial services —
"We decided we have ample capital to work with to demonstrate our thesis and execute our strategy," Arjan Schütte, a principal with Core Innovation Capital, told American Banker in an interview Wednesday.
"One of our mandates from the beginning, which is especially unusual for a nonprofit, is to make investments in companies that are really showing what we're talking about," Schütte says. "There's a way you can profitably serve the underbanked," who do not have or do not use a bank account.
Initial investments are expected to range from $1 million to $3 million and rise to the $5 million to $10 million range as each startup grows, Schütte says.
"We're reserving a lot of capital to follow on. Our strategy is really to grow with these companies and to keep up with their capital needs," he says.
The fund will be able to support the companies it invests in beyond just capital needs, by providing management experience and help navigating the choppy regulatory waters, Schütte says.
"The regulatory world … this is an area of particular consternation and an area of particular opportunity," he says.
Rules overseeing the financial services industry are increasingly complex and intimidate entrepreneurs, Schütte says. But the types of companies Core Innovation Capital plans to invest in will jibe with the current direction of policymakers, he says.
"Where we want companies to be strong is very aligned with where the regulators are going in terms of stricter, better disclosures and better structured products on more favorable terms," he says.
The fund has so far invested in two companies: SavvyMoney and Plastyc. He would not disclose how much the fund has invested in either firm, but said it is in the dollar range the fund plans to put into other companies.
Schütte describes SavvyMoney, a debt reduction tool, as a "Weight Watchers for debt." The fund initially invested in the company, which used to be called
Meanwhile,
The challenge also gives the fund an opportunity to look for prospective investments.
"While we already, by virtue of where we sit, get a tremendous amount of deal-flow opportunity, this challenge is a great accelerator of that," Schütte says.
The winner gets a cash prize, but the challenge's biggest draw may be the notoriety it can offer the companies, he says.
