Most of us in the developed world don’t think much about making phone calls. We have monthly contracts, often with unlimited minutes, so we just make calls whenever we want. But billions of people around the way use their phones very differently. They have prepaid plans that they top up, often multiple times a week, and do so in cash at a physical store.
Our next guest on the Lend Academy Podcast is trying to bring these people into the global financial system by providing credit in tiny increments to this population that is completely unbanked. Steve Polsky, the CEO and Founder of Juvo, is finding these people who are creditworthy and, in essence, giving them a digital identity for the first time.
In this podcast you will learn:
How Steve’s diverse background as an entrepreneur helped in the launch of Juvo.
What Juvo does exactly and what problem they are trying to solve.
How Juvo is able to extend credit in tiny amounts to prepaid phone customers.
Who Juvo partners with to reach these people.
What Juvo brings to the table for the mobile operators.
The geographies they have focused on.
Why their website leads with “Identity Changes Everything”.
How they are verifying identity and approving these people with no credit file.
How the mechanics work in getting credit to these people.
Why the major value proposition is one of convenience.
How they are mitigating against fraud.
Why they don’t charge the consumer interest or any fees.
Why the big opportunity is moving people up to other financial services.
The scale they are at today.
What the partnership with Samsung means for Juvo.
How the information and data on these people will end up being so valuable.
Welcome to the Lend Academy Podcast, Episode No. 147. This is your host, Peter Renton, Founder of Lend Academy and Co-Founder of LendIt Fintech.
Peter Renton: Today on the show, I am delighted to welcome Steve Polsky, he is the CEO and Founder of Juvo. Now Juvo are a fascinating company, they are trying to solve a very big problem because there are billions of people around the world who are credit worthy, who own a smart phone, but they’re using a prepaid plan and they don’t really have access to credit.
So Juvo was solving that problem starting with very small amounts as we hear in the interview and really talking about, building them up and getting them on a pathway to really be included in the financial system. They have been going for a few years now, they’ve got some traction, they’re in 25 countries. We talk about how their system works, how they approach this really big problem and how they need to partner with the mobile operators to really make this a reality. It was a fascinating interview, hope you enjoy the show!
Welcome to the podcast, Steve.
Steve Polsky: Oh thank you, thank you for having me today.
Peter: Okay, so I’d like to get this thing started by giving the listeners a little bit of background about yourself so they know kind of what you’ve done in your career up to this point.
Steve: Yeah sure, happy to give you a little bit of a background. You know, well be talking a lot about Juvo today, I imagine, and we’re about……Juvo’s four years old, but this is my 5th startup venture. My background, I’m an engineer and also a finance background, but for me, I really enjoy taking concept and trying to turn them into reality and building a team and bring products to market. So that said, from early voice messaging company called VoicePlex to data com company, educational software startup, most recently running Flixster and Rotten Tomatoes, if you happen to be a movie fan, and now on to Juvo and mobile financial services.
Peter: That’s quite a range of different verticals you’ve got there. So you’ve gone from the movie business to the mobile business, on to mobile finance, I guess. What are the experiences that you had that led to the founding of Juvo?
Steve: Sure, I like exploring new opportunities, learning different things and often it’s about the people and the team that involves building a company so diverse background, but there is a theme that actually comes through in the start of Juvo. It really is actually so many things for me come together in launching Juvo. But at the early route, the first startup company, a company called VoicePlex, we were….before you could leave a message for someone on their mobile phone, we were building the software and the hardware to enable mobile operators to do that and as part of that, not only did I…..you know, it’s in the communications vertical and work with mobile operators, but drove across the country of Venezuela in the back of a Ford Explorer, sold into Argentina and visited many cities there, took the company into China and made it just all over the country.
Out of that, I got the passion for international business. I just saw the reach and the impact and the power of just base communications, what was possible. That kind of stuck with me throughout my career and kind of tied together that experience which in some ways, in an odd sort of mix, what I had done at Flixster and Rotten Tomatoes where we were reaching out to hundreds and millions of people around the world directly on their mobile phones, be it there about movies and your interest in entertainment, but it was all about how do we engage users directly, re-engage and build just compelling consumer experiences and of those two experiences in particular came together and instrumental in how like the launch of Juvo.
It is fascinatingly possible to reach just a majority of the world directly today on their mobile phone and really what that enables, in this case in the financial services space for Juvo is how kind of a bunch of things come together. I mean, there are a lot of people involved and a lot of the things that happened, but that was the early foundation, they’re the ingredients that went into starting Juvo.
Peter: So let’s just take a step back for a second because not everyone will know what Juvo does so why don’t you explain what it is you do exactly and what problem you’re trying to solve.
Steve: Sure, so I’ll start like kind of ….it’s about how the idea came together and how we started the company. Fascinatingly, when you look really around the world, about 77% of the world’s population uses a pre-paid mobile device so that’s 5 billion SIM cards or 5 billion mobile plans. Interestingly, the majority of this population is unbanked or under-banked, they live in cash-based economies and for most of these people they don’t have access to just basic financial services that we all take for granted In the U. And yet there’s over a trillion dollars spent on communication services every year. I mean, this is all human beings, we all need to communicate.
When you look at the population of pre-paid users what’s also fascinating is that people top up their device in really, really tiny increments like 40 cents or a dollar at a time. They’re buying this must have utility in very, very tiny amounts and yet at massive scale. What dawned on us as a company was like, wait, for many of these people these tiny transactions are their most frequent financial transactions and what if we could be there when they’re making those transactions.
If we view these trillion dollars as financial services transactions then using what’s technically possible today, we thought it could be an amazing leverage point, an incredible leverage point to try to walk people up the pathway to build a financial identity and gaining access to financial services starting with their every day interaction s around their mobile phone. So that’s like the backdrop. What do we do?
What we try to do is meet people around the usage of their phone. We make very tiny credit extensions to consumers and I’ll explain exactly for an individual person how this works while we make little extensions for them to help them use their mobile phone and through all of the many, many interactions we have with the, we enable them to walk up the pathway to financial services. I mean, if it makes sense, it’s probably the best way to explain what we do is to start with an individual person.
Peter: That’ll be great.
Steve: That would be helpful. So again, amazingly, this applies to a majority of the world’s population. I man, people top up all the tiny, tiny increments so now let’s think about it. If we take a woman named Jackie and I’m in Jamaica and I’m one of these prepaid users, one of the many users, I’m at home, it’s 10:00 at night and I need to make a phone call, but I don’t have balance on my phone. I can’t go online I don’t have a credit card, I have to get off my couch, walk down the street, find a store that’s open, it’s 10:00 at night, remember, I put down some cash on my phone then I can make a phone call.
Effectively, my mobile device is really turned off for use of phone and use of data. If you rewind the tape, what Juvo does is we would reach out to Jackie on her couch in the moment and say, hey, we will provide you….we’ll turn on your phone for a day, very, very simple small transaction, but helping Jackie in terms of using her phone. And what we do is this tiny extension for her is the start of a relationship for us and we try through transparency and education we’ll say, look, we’ll give you mobile service for the day if you pay back on time ,next time we’ll loan you several days and you move from bronze to silver. If you continue to pay back on time, we’ll loan you data, we’ll loan you a week, two weeks, you’ll move up to gold.
What we’re trying to do here is actually create a repeat behavior, in this case good credit and financial responsibility and have like Jackie and a large part of the population try to walk up a path or understand as I move from bronze to silver to gold to diamond. Really what I’m doing is establishing a financial identity through good credit. That’s what we do. We walk people up to diamond and that’s just the beginning.
Around the Caribbean, we’re taking from consumers a tiny amount of money to a full month’s worth of service and later moving into hands of financing , from there into virtual credit card where consumers can be able to purchase online and really moving consumers up from nothing all they way up the whole set of basic financial services. That’s what we do in a nutshell.
Peter: Okay, so then I imagine you can’t just turn up in Jamaica and start kind of accessing these customers. You need to, I imagine, deal with the operators and I know you’ve done a deal with Cable & Wireless and others. Can you sort of explain how you’re able to get your business into these different countries?
Steve: Yeah, our bet for….like the way to reach a billion people in the world was through mobile operators. You’re right, Cable & Wireless is an example. We often talk about ….they’re a fantastic partner of ours for many years and we work with a number of operators in 25 countries.
We approached them and say, look, together we’ll approach your consumer base, we will help them build identities. It benefits the mobile operator too which I’ll talk about in a second and that enables us to reach a large portion of the population like where it gets exciting is I talk about the example of Jackie…..where it gets exciting is when we launch in a country, pretty quickly, we’re reaching a third if not a half of all the mobile users touched by the mobile operator. It ends up being double digit percentages of the entire population.
Steve: And while we’re able to do this is because for the mobile operators we’re also helping them understand their consumers better, build a relationship based on identity which translates into much more loyalty like their customers stay for twice as long. They double the value of a consumer relationship, they’re able to move upstream into higher value financial services so they operate in a very competitive world right now and we help them to change that to really build deeper, deeper relationships with their consumers and then turn up those identities and locks all the things that we’re trying to do as a company.
Peter: Right, I mentioned they don’t have the capacity or the capability to do what you do because, I mean, they’re not really in the credit business. Some of them may have plans that they offer it like the other 20 odd percent of the population, but for the unbanked, I imagine, it’s very difficult for them so that’s why they choose to partner with you. Is that correct?
Steve: Yes, I mean, look in all fairness some of them offer point solutions, they offer their very base amount. It’s like a tiny, tiny bit if you need if you make a phone call, right, but like what we saw is this is really a tremendous opportunity to really go upstream like to continue going upstream to a whole set of financial services.
For many individuals like creating a pathway around financial inclusion and I think to your point, it is like it’s a multi-dimensional problem. You really have to be great and understand consumer engagement, understand data science, understand how the operators around the world and work with mobile operators and also understand financial services so we’ve really built a team with all of these competencies to attack this problem.
Peter: So then do you consider yourself a business to business type company or business to consumer or is this really a hybrid of both because you really need the mobile operators, but you’re really going after the consumers so how do you think about yourself?
Steve: Sure, so we’re a b2b2c company, we partner deep, long standing partnerships with our mobile operator, our business partners, but the reason they like to work with us is because we are great as a company around consumer engagement. At the end of the day, if it’s not appealing to consumers, they don’t want too use it in large scale, it doesn’t really matter, right. That’s what we’re really great at so it’s really a b2b2c channel as a business.
Peter: Okay, so you mentioned Jamaica, tell us a little bit about the geographic footprint that you have today.
Steve: Over the course of four years, we’ve grown very quickly , we’re in 25 different countries right now from a focus and it applies to nearly 80% of the world, but from a focus perspective in building the company, we started out first in Latin America and have grown very quickly there. We’re also in Southeast Asia and recently, in Eastern Europe, some opportunities in the United States and after our recent round of funding last year, expanding more broadly around the world.
Peter: Okay, so then it’s interesting to me….when I go to your website and right there in big letters is “Identity Changes Everything” so you’re not talking really about mobile phones, you’re not talking about credit; you’re talking about identity and I thought that was really interesting. So tell me why is that the piece that you lead with?
Steve: We think that identity is the core to all of these, it’s really the thing that unlocks the most value for consumers, in particular, the segment of the population that we’re addressing, that a lot of these people don’t have access to services because they’re unable to establish their financial identity. If we can help them do that, that in and of itself is the big enabler.
What we mean by that is like…going back to Jamaica, I mean you can be the most financially responsible person in Jamaica and often you have no way to prove it and there’s no real reward for that and we’re trying to change that, we’re trying to enable people to build that. You know, I’m Steve Polsky, has a business, I am creditworthy and I am like trustworthy in terms of gaining access to services and having that identity really enables me to connect with the whole series of upstream financial services providers.
It’s interesting that in our world, in the mobile financial services space, I think for a long time, and this is in reading and researching and planning and starting Juvo, there was a lot of focus on mobile wallets. People often say that huge success in Kenya and East Africa….it’s actually amazing and really transformative, but really, it hasn’t happened. People thought it would happen in more places faster and that’s a focus on a wallet ecosystem which is complicated. You need enough people with wallets, enough merchants, enough ways to store your money, enough places to spend your money.
A lot of things have to come together to that ecosystem to take off and we felt there was a better starting point actually that’s helping people build identities we can do anywhere in the world. In fact, we’ve launched a country pretty much every six weeks since we originally launched our product and by unlocking identities it’s like a precursor, it’s an enabler to incentivize and enables people to get access to a whole set of upstream financial services. So we think it’s a great starting point and that is like the core to the company.
Peter: So then I’m curious, I want to dig in a little bit to the individual and how you’re underwriting this or how you’re making a decision. You know, you talk about how you started really small, but does that mean like how are you actually implementing this. Like this person sitting on their couch and you let them borrow a dollar or whatever it is, how are you approving them, how are you verifying the identity, how does the nuts and bolts work?
Steve: Sure, again keep in mind that the end goal here is taking a consumer up a whole pathway to a whole rich set of services. That’s the goal, but what we realize is that the right starting point is to meet people by like something immediate and tangible, something that they can appreciate in the moment and that’s how we start.
We really start from just like a simple need like I need to use my phone, I need to use data, I need to make a phone call and so like reaching out to people at that time and just helping them in a little way turns out to be like a really high value moment and that helps us really grow quickly, but that’s just a start, a very purposeful start as a way to build trust, have them understand the services, have them walk up the pathway and unlock more and more financial services over time.
So one of the problems we’re solving is a problem of lack of information and a lot of these are places like we’re launching where there is no FICO score, where you can’t reach out to the different credit bureaus so actually you don’t know when you first see consumers, not much about them and we’re solving that problem.
We’re helping people build this identity, building scoring, building identity, putting the power in the users’ hand, around that and we do it by…it’s a combination of data science, it’s a combination of like progressive approach, walking people up a pathway, it’s about priority incentives like we have found that the way we graduate people actually changes consumers’ behavior.
Peter: Right, yeah, that makes sense. I want to back and just see if we can….I want to understand because I’m not clear. This person sitting on their couch, they need a dollar, they just assume it’s a dollar, do you work with the mobile operator and say, right, give them a dollar and then do you lend them….like where does the money go, like do you lend them the dollar, do you sort of combine with the mobile operator, how does the flow work?
Steve: Sure, here are the mechanics. So we will reach out typically in partnership or on behalf of the operator and recognize that this person is potentially someone who would want this service. There’s a variety of ways to do that, either we literally know someone has run out or we can predict it just through data science and someone can opt in and say yes, I’m interested in this and then we will put the money on the phone, we will top up their phone.
They can just use their phone just like they do any other day and eventually the next day, weeks later we’ll walk down, top up their phone in the traditional manner putting down cash in one of the point of sale places and it will automatically settle with us. We’re not changing consumer behavior. In fact, one of the big use cases is one of convenience…..
Steve: ….and I guess we’re talking here, I’m not going to say, I’d like to excuse myself from this podcast because I have to go top up my phone, I’ll be right back. You know, it’s immediate, I can just say, go and that’s when we look at use cases. It’s often around convenience.
Peter: You said that it’s the next time they go down to the physical store that you get your money back, is that…..
Peter: …..so obviously they’re topping up their phone at the store, but then as….is there a mechanism…I mean, if I don’t have a bank account, like it’s hard for you to get paid any other way, right. You’ve got to go through the physical store, but I guess…are you trying to make it so that then instead of going to the store three times a week they have to go once a month. Is that the value proposition?
Steve: Yeah, you’re right. I think in both points. Again, remember, the person does not have a digital means of payment, so there’s no account….eventually, they physically pay in cash whenever they want. We do see change in behavior so instead of having to top up every several days, it can be a week, it can be two weeks. I mean, people can bill up the whole month’s worth of service so really just makes usage of prepaid phone much more convenient.
I mean, I talk about this in a lot of different ways with partners, but one of them is exactly what you’re saying. We’re allowing prepaid consumers to become more postpaid. If you live in the United States and you use your phone and you’re on Verizon or pay a monthly plan….when you take out your phone you really don’t think about using it as just ….it’s just there and you make a phone call, you don’t think about it.
That’s not the experience for most of the people around the world. You actually would take out your phone first see if you have any balance left, if not, try to find a place to top up then make your call. It is much more inconvenient and at a base level we just make the service much more convenient.
Peter: Right, I’m interested about frauds or defaults, you know, when someone has topped up and they throw away the Sim card they get a new Sim card and you never get your money. Like how are you mitigating against that?
Steve: People thought we were crazy at the beginning because it’s another part of our model which plays into this where we do this around the Caribbean with zero interest, zero fees. So effectively, what we’re doing is standing out on the street corner, you can think about it this way and handing out $10 or $20 or $40, $50 to people and saying, look, pay back whenever you want, pay back the exact same amount of money and though we would never say this, if you don’t pay back there is no recourse.
Look I know you’re gearing up for the LendIt conference, but we really felt like it was a different approach for extending credit or be it if you will, lending people money, right? It was a bet early on that rather than traditionally charging like interest and fees and having interest and fees cover bad debts because not everyone will pay back it’s about, wait, what about if we think about this differently.
Is there more value created by enabling a consumer to kind of knock down the barrier for consumers and enabling them to get access to more and more service. Would more value be created if we did this in a way which was just incredibly consumer friendly and it was a bet and it turns out it was exciting and it turns out we were right. It’s actually just enabling people to, in this case, use their phone service when they need to generate the most.
For the mobile operators, it generates the most revenue, it enables people to move up, all of it, but to get to your point it’s fundamentally based on data science like we both have to be able to model and understand like it will be the trustworthiness or the creditworthiness of consumers. We’re also, by the way, not only modeling, we’re building it.
By the time that someone graduates up, in our case, up a pathway up to diamond, they’ve unlocked the whole set of services and maybe they’ve got an access to a smart phone, other services, we’ve changed the way they think about their relationship, in this case, with their Sim card, they’re not going to throw it out. We’ve built loyalty which translates directly into our payback stats.
Peter: You must have defaults. I imagine there are going to be people that have hear about this and take advantage. Can you give us a sense in percentages or just give us a sense of how that process has gone and how…..I imagine it does vary between countries, but just give us a sense of how much there is of this kind of bad behavior.
Steve: What’s exciting is how low it is. I would joke that I say we need more bad debts. What I mean by that is it was a belief early on that amongst this 5 billion prepaid consumers in the world there is a large number that are creditworthy. Again, they just have no way to prove, but you can’t find them, like financial services providers can’t connect with them because there’s no way to differentiate.
We’ve shown through this graduation that there is a large portion of this population, a very large portion of this population, they are credit worthy if they can just find them and walk them up this pathway. The bad debt is very small and it’s enabling us to move in and provide more services, go higher upstream into some of the things that we’re doing.
Peter: So then can you give us a sense of the scale you’re at today? I mean, you said 25 countries, how many individuals have used your service?
Steve: As I said, 25 countries and in many of them we’ve reached 30/40/50% penetration with the app of our partners double digit percentages of the population, I’ll give you some stats. We’re ten transactions per second over 400 million transactions and growing quickly so we’re scaling very fast.
Peter: So then I’m curious…I saw that early this year you guys signed a deal with Samsung and they’re obviously one of the biggest mobile phone providers on the planet so tell me how you sort of how you closed that deal and what it means to Juvo.
Steve: We’re very excited about the partnership with Samsung and what it represents….I think when we met we talked to them when we built the partnership, it was around the goal of enabling….think about it as the next billion people to move from feature phones into smart phones. You can imagine for Samsung really to reach another billion people, it’s almost imperative that you go into this prepaid base where again you really don’t have very little credit information.
You’re not sure who can afford….many people can’t afford a phone outright so basically a partnership is around changing the experience of getting your first smart phone for this large portion of the population where through all the interactions that we have with them and the large penetration in the countries where we are, we enable people to graduate up and they get to pre-qualify for a Samsung handset and we provide it to them on financing so they can pay it over a series of payments. So yeah, we’re enabling….the goal is to enable hundreds of millions of people to move up into smart phones.
Peter: Well that is exciting. So as we’ve been talking, I’ve just been thinking that really what you’ve got is a data gold mine because you’re probably going to have data on people that nobody else has or very people have. I mean, you’ve talked about other services that you’re providing, how do you think about the data because you’re really in some ways a credit bureau. If you look at the intelligence that you have, I mean, how do you feel about …..what is your product, is your product really the data in the end or how do you view that?
Steve: So we’re early in the life cycle of Juvo, we’ve a lot of plans and I think it will vary some by geography in different parts of the world, but at the heart of it, you’re right. I mean, I think we’re trying to solve two problems; one is distribution and the other one is an information problem.
So when we launched, as I mentioned a couple of times, we reached a large segment of the population. When we’re reaching 15/20% of all the people in a country, it’s a broad cross-section. So first of all it’s a channel to reach those people and second of all, it’s around information. And by the way, the information is like put in the hands of the consumers enabling them to build financial identity and demonstrate that they’re financially responsible.
Once you’ve done those two things, I think there’s limitless potential. You can think about like connecting these people with a whole set of upstream financial services providers who would like to reach a broader segment of the population, but it’s not cost effective, it’s impossible. Like it’s hard to reach people at the distribution part and it’s really hard to know who will be good customers at the start. If we can connect those two, I think we can solve a big problem. We’re a double bottom line company, we want to build a big company, but really make an impact in the countries where we launch so that’s the goal.
Peter: Yeah, makes sense. So we’re almost out of time, but I do want to ask a couple of more questions here. One, we recently saw an announcement about you hired two senior female executives, I wanted to ask about that and how you approach diversity at Juvo?
Steve: So we’re very excited that both Liza and Meg joined us recently and diversity is at the heart of Juvo. I mean, we operate all over the world. What’s been exciting as a company is we founded like our mission and what we’re working on really resonates with a very diverse group of people. People experience this in their life in one form or another; their family, themselves. So the team from Juvo comes from around 30 countries, speak thirty-some languages and so diversity is a really important thing for us and that includes gender diversity.
We had an initiative really, it’s exciting at Juvo to focus on that and we’ve seen the results. When we thought about this early on…how can we solve a problem all over the world from San Francisco and I think a big part of that answer is building a very diverse team, just having all different perspectives on problems, genders from different parts of the world, all of that, So we made a lot of headway, still working on a number of things to make headway and we’re excited about it.
Peter: Okay, then so last question, what’s on the horizon here for Juvo? We’ve talked on some big picture things, but what are you focused on most? Is it geographic expansion, is it getting deeper into the countries you’re in or what’s your focus?
Steve: It’s a bit of combination to two different dimensions. One is geographic expansion, as I mentioned it applies all over the world so we’re expanding in Eastern Europe and looking at other geographies so growing very quickly and then also growing upstream, partnering with more and more financial service providers to enable a whole set of upstream services. So I think as we grow, you’ll see more information on both of those.
Peter: Well it’s a fascinating story and I can see there’s certainly a demand out there for services like yours. So I wish you guys all the best. Thanks for coming on the show, Steve.
Steve: Thank you very much.
Steve: Okay, thank you. Take care.
Peter: I think it’s exciting that companies like Juvo are really starting to get traction because let’s face it, there are billions of people as we’ve said that don’t really have access to the same services that the developed world has access to. And the only reason they don’t is really because we don’t have any data, we can’t really predict whether they’re going to be responsible people or not.
Well with the programs of companies like Juvo are doing are really bringing in the data that can help make those predictions far more accurate. As I said, they have a great treasure trove of data. I really think that’s their big asset here and they can really be a springboard, if they do get traction across the world and really they could easily provide a springboard for billions of people to bring them into the financial system and that to me is a very worthwhile goal.
Anyway, before I sign off, I would just want to request if you’re listening to this show. You know, we’ve done almost 150 episodes now and if you haven’t yet left a review, I would very much appreciate it if you went to iTunes, went to Stitcher, leave a review and tell us what you think about the show. I always appreciate it and read every single review that is received.
Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.[/expand]
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.