A reputation for inclusiveness, multiculturalism, a plethora of economic opportunities and a world-class education system has contributed to Canada emerging as one of the most popular destinations for immigrants and students alike. With Canada welcoming more than 341,000 permanent residents in 2019 alone, this population represents a huge business opportunity for the country’s financial system, with major players vying for a piece of the growing market.
I. The predicament of immigrants
However, the personal credit history of an individual does not cross the border with them, requiring them to start afresh at a new place. Though financial institutions like banks make all efforts to share extensive information on how newcomers to Canada can start their financial journey in their new country, the dissimilarities in the banking system between their former country and Canada, and difference between key financial tools like credit instruments between countries, can be difficult for newcomers to understand.
A research report analysed the marketing material available to newcomers to Canada for underlying strategies and readability, makes the following observations:
a. The language used for different products offered is jargon heavy, making it generally hard to understand.
b. The strategy used by several financial institutions is more focused on building a loyal customer base, highlighting promotions and free services rather then providing localised financial education.
In this situation, newcomers to Canada from different destinations often face similar challenges in face of a new financial ecosystem which can lead to mismanagement of financial services, negatively impacting their credit score.
The report recommends a focus on financial literacy as a solution to keep new Canadians from falling into the trap of indebtedness.
II. Woveo - Fintech empowering immigrants
“Jonah Chininga, Daniel Ohaegbu, Sergio Fernandez, and James Muhato, decided to bring a digitized form of the rotational savings concept to the Canadian market and founded Woveo.”
Arriving from Zimbabwe, personal difficulties faced by founder Jonah Chininga in finding financial footing and tapping into affordable debt instruments after his move to Canada in 2014, made him spot the opportunity to create a product that could help Canadian immigrants build a solid credit score and access affordable financial assets.
In 2020, Chininga, along with his University of Prince Edward Island (UPEI) mates Daniel Ohaegbu, Sergio Fernandez, and James Muhato, decided to bring a financial tool widely used in emerging markets to the Canadian market - a digitized form of the rotational savings concept - and founded Woveo. Woveo is an application available on IOS, Android and on the web, meant to be used by groups of friends as an affordable alternative to bank loans. The concept of rotational savings refers to a group of people pooling their money and taking turns borrowing from the collective fund without paying interest.
With its unique product offerings Woveo works as a platform for communities to:
a) Organize fund pools
b) Help members to access funds & interest-free loans from their social circles
c) Help members build their credit history by reporting timely payments to major credit bureaus
D) Support the creation of healthy saving habits
The purpose of the company is not to function as a financial institution but to improve
financial literacy and awareness through automated reminders about savings and withdrawals.
III. A booming industry
The fintech market is booming - broadening in scope and services well beyond its early definition as evident from the following numbers:
i. The global fintech market size is projected to reach USD 16,652,680 Million by 2028 from USD 6,588,780 Million in 2021 at a Compound Annual Growth Rate (CAGR) of 13.9% between 2022 and 2028.
ii. Marking an incredible end to the year, global fintech investments in H2 2021 were recorded at US$210 billion across 5,684 deals.
With the once clear distinction between fintech and financial services providers fast blurring, financial institutions are increasingly engaging in innovation drives. The increased collaboration between the two makes fintech business models today more compelling than ever.
IV. Fintech as an enabler of financial inclusion
“By lowering transaction costs, enabling cashless transactions & increasing access to credit, fintech is making a significant contribution toward financial inclusion in several ways for the underserved and underbanked segments.”
While there are many factors (mobile wallets, digitized money, paperless lending, etc.) that are driving the rise in fintech, one area of business, neglected by traditional financial set-ups, which fintech companies have successfully moved into, is a focus on underserved and underbanked segments for financial inclusion.
The World Bank defines financial inclusion as having “access to useful and affordable financial services” that make the day-to-day lives of individuals and businesses easier. In its report measuring financial inclusion, the organization states that "Globally, about 1.7 billion adults remained unbanked - without an account at a financial institution or through a mobile money provider”. While many of a large part of the unbanked segment lives in developing countries like India & Indonesia, there is a large unbanked population in the U.S & Canada too.
An estimated 63 million adults were either unbanked or underbanked in the U.S. in 2019. Close to 5 million Canadians are underbanked and about 1 million Canadians are unbanked as per the latest estimates. Further, minority segments like Black and Hispanic communities comprise a large part of this underbanked population. With 22.3% of the population in Canada identifying as "visible minorities" (a number projected to go up to 36% by 2036) digital financial inclusion enabled by fintech platforms can help faster progress toward a more inclusive and productive society.
V. First impressions & the way ahead
When we first met Woveo, we loved how they were uniquely positioned to fill the credit gap faced by new comers or debt averse Canadians. Jonah's entrepreneurial family background made him extremely intentional towards the problem that he was aiming to solve. It reassured us to see that he had gone to great lengths to build his knowledge about the sector and surrounded himself with a team of experts to truly understand the market. Jonah and team's first-hand experience with the transition to the Canadian financial system as newcomers has resulted in the creation of a business model which is working not only for profits but also to empower more people with great capacity to contribute to our common goal of advancing our nation.