Steve Polsky has a simple vision: Take financial inclusion to the world’s unbanked and underbanked by extending short-term microloans through their smartphones so they can stay connected on those devices longer and more conveniently.
“We have an opportunity to walk hundreds of millions of people up the pathway of financial services through their mobile phones,” he said. “Nearly 80 percent of the world is on prepaid phone, but their usage is very different than in the United States.”
To that end, prepaid phone users spend trillions of dollars every year on transactions related to those devices. In fact, Polsky said, the most frequent financial transactions for a large number of smartphone users are done on their mobile phones. Many smartphone users prepay for their service by the day, but Juvo allows them to extend their service by borrowing the money to pay for it while building a credit history that can then be used for future credit. After starting in Latin America three years ago, he has taken his brainchild into 25 countries with 500 million downloads.
Juvo’s Explosive Launch
Chief Executive Officer Polsky founded Juvo in 2014, but the actual launch of the app didn’t take place until September 2016. Out of the gate, the company saw 100 million downloads. Growth since that time has quintupled, a big stretch of business from the launchpad of Guatamala and El Salvador where the first users logged in.
“Today, 43 percent of Guatamalan smartphones transact with us multiple times and 47 percent of smartphones in El Salvador transact with us multiple times,” he said.
From these countries, Juvo expanded quickly into Southeast Asia and Eastern Europe. To get to the users in those countries, however, the company had to establish relationships with the mobile operators that provide the service to smartphone users. He spent two years setting up the infrastructure in order to do business and get the reach that he has. Currently, Juvo partners with Millicom, Cable & Wireless, and Tune Talk in the countries where they are operational. In the U.S., they work with Sprint. Every three months, the number of transactions processed through the mobile app doubles putting them on pace to register half a billion transactions by the end of this year.
Financial Identities in the Developing World
In essence, what Juvo is attempting to do is help people in developing countries establish a financial identity. According to World Bank figures, two billion people worldwide in 2014 didn’t have bank accounts. That was down from 2.5 billion three years earlier. At that pace, it will be 12 years before the entire world has a bank account. Juvo wants to make that happen more quickly.
“We call it identity scoring,” Polsky said. “In 83 percent of the world, there is no underlying credit scoring, no signals about financial capabilities, and we can reach a broad number of people to help them gain access to more financial services.”
Those services include checking and savings accounts, credit and debit cards, mortgage products, personal and consumer loans, business financing, investment vehicles, insurance products, credit scores, and more—services that many of us in Western societies take for granted. By bringing the world’s unbanked and underbanked into the financial ecosystem, they’ll have access to more buying power and consumers, and it has the potential to increase the service clout of companies with the ability to service them, such as online lenders. In short, a rising tide raises all ships.
Juvo’s Financial Clout
Recently, the company closed a B Series funding round with $40 million led by New Enterprise Associates and Wing Venture Capital. That takes their total funding up to $54 million including the Series A round completed in September 2016. On top of that, in May, Juvo appointed Ron Suber to its board of advisors.
They’ve also got backers across a broad spectrum of telecom and fintech sectors, Polsky said.
“We partner with these big mobile operators and help them with the way they service their customers,” Polsky said. “And we do it without charging the end customer.”
Instead, they provide the funding to extend mobile service for those consumers without charging fees or interest. A person in Africa, for instance, may be paying for mobile service by the day because that is all they can afford. But they can download the Juvo app and get an extension on their service for one day. After paying for that day’s service on their own timetable (no late fees) they are able to move up to a larger commitment and get funded for two days of service.
“So the consumer can move up as they pay off the previous commitment to bronze, then silver, then gold, then diamond,” Polsky said. “And we do it without ever using the words ‘bank,’ ‘loan’, or ‘credit’.”
This benefit is provided at the expense of the mobile operators, who pay Juvo a percentage of the extra business they gain by extended longer mobile service agreements with their customers. Everyone wins.
Polsky said the worldwide average revenue per user (ARPU) per month is about $12, but it varies in different parts of the world. In the U.S., it’s $30. In other parts of the world, the ARPU is $2.
Communication is a Basic Human Need
Consumers in various parts of the world download Juvo at Google Play, the Apple store, and anywhere mobile apps are available. Most users, Polsky said, are on Android devices because they tend to be more affordable, but the company wants to be available anywhere customers may download the app.
Worldwide, the smartphone is the most important device for most people because communication is a basic human need. And because computers are so much more expensive compared to smartphones, the smartphone is an entry-level device to access of much of what the developing world has to offer. Still, Juvo is a unique company even in Silicon Valley where it is located because of the global nature of its business and the channels through which they reach their customers.
“The idea of someone being out of data and needing to get more minutes on their phone and being able to borrow the money for that, that actually started in Africa,” Polsky said. “But we take it to another level. We’re willing to go up to a full month.”
In Africa, everyone is familiar with M-Pesa, a mobile-based money transfer and microfinancing service. That company is popular in Tanzania and Kenya. Nevertheless, Polsky doesn’t see anyone competing directly with Juvo at this point in the company’s lifecycle. That doesn’t mean there won’t be competition at some point in the future.
“Any time you’re doing something well, you’re going to have competition,” he said.
Right now, though, he’s focused on expansion.
“We’re hoping to partner with upstream financial services and with more big mobile operators,” he said. “That’s how we’ll grow.”