The market for underbanked Americans is worth about $45bn in fees based on $455bn in principal borrowed, dollars transacted and deposits held, according to Core Innovation Capital, a venture capital firm backed by investment bank Goldman Sachs and the Center for Financial Services Innovation.
Core was founded to help fund entrepreneurs targeting this sector and at the 6th Annual Underbanked Financial Services Forum in the summer said GoalMine had won its Core Underbanked Innovators Challenge.
GoalMine helps people to start investing with as little as $25 and to choose their savings goal and the time-frame in which to achieve it.
GoalMine is integrating its product with prepaid cards, so cardholders can link their transaction account with an investment vehicle easily. As the US economy deals with the credit crunch, services for poorer people, such as prepaid cards, have been growing rapidly.
Core said such general-purpose reloadable prepaid cards grew by a third last year – and were behind the successful flotation of Green Dot – only slightly slower than the 35% annual growth in internet-based payday lending as people struggle to meet their obligations.
Arjan Schütte, managing partner of Core, said in releasing the data earlier this month: "Our vision is to transform this market in a way that is significantly more profitableto the industry, will save consumers billions of dollars and help create upward mobility for tens of millions."
The market is not confined to the US, although American companies are behind many of the financings for international firms in this area. In India, the world’s largest listed private equity firm, Blackstone Group, joined Intel Capital, the corporate venturing unit of US-listed chip maker Intel, to back microfinance technology company Fino.
Fino provides a technology platform that allows a range of basic financialproducts and services to be sold to more than 35 million customers across India. Fino said it would double its number of customers after the $33m round.
Also in India, an investment unit of US bank Citigroup entered the latest round backing Janalakhsmi Financial Services, a Bangalore-based microfinancecompany, reportedly helping it raise more than $14m.