In 2016, the number of refugees worldwide crossed the 60 million mark, according to the United Nations — today it’s around 65 million and growing. These displaced individuals are in a state of impermanence, crossing borders often and sometimes sleeping in a different location every night. They also have very limited access to banks or technology to store and transfer financial assets.
This creates a $1.9 billion untapped financial market, based on numbers crunched by a fintech startup that pitched this week in the SXSW Accelerator Pitch event. That’s approximately how much the world’s individuals in transit have to unlock — stuck in-between countries and official economic identities, there’s often no avenue for them to transfer their money to purchase goods or services, send it to help relatives, or receive and store it.
The Nashville-based startup, Leaf Global Fintech, is led by a team of foreign exchange and financial services veterans that wanted to find a new way to tackle this problem. Leaf is a virtual bank primarily for refugees and vulnerable populations in volatile regions.
Nat Robinson, Leaf’s founder and CEO, is a Vanderbilt MBA (currently finishing up law school at same) who spent seven years leading rural microfinance initiatives providing loans to farmers in Kenya. He saw firsthand how cross-border asset transfer was a huge problem for the individuals and families he worked with.
He teamed up with Tori Samples, a fellow Vanderbilt MBA student, data scientist, and now Leaf’s CTO, to tackle the statelessness problem.
Their solution? Blockchain, the decentralized ledger system that allows for safe and secure asset transfer. The Leaf platform allows users to store cash or transfer money on the public, yet secure and anonymous, blockchain, to enable transactions.
“These individuals are mobile and can’t really carry a lot of cash considering the risks that are involved in that,” says Robinson. “One of the use cases of blockchain is those cross-border asset transfers. There’s a lot of hype around blockchain, but this is a way to really solve a problem.”
They’re focusing on making it as seamless as possible for users — the platform has a web-based app, but they intend for the primary user base to conduct transfers by text message. Users don’t even need a smartphone — they can just send an SMS or USSD (another form of mobile messaging) message with the amount of money to be transferred or stored and where it’s going.
“The current use of mobile money, which is already common in all these countries, is SMS-bases. We’d like to mimic that pattern,” says Samples. “Smartphone attrition is actually pretty high but nobody wants to use their data, so having it be SMS-based is going to help with adoption a lot.”
The startup makes revenue by charging a 2-3 percent transaction fee, as well as by investing customers’ savings and using the foreign exchange spread created by buying local currency in bulk. Samples says the model is similar to Xoom, PayPal’s money transfer service, and that they’ve projected to break even at 22,000 accounts.
The Leaf team, which has now swelled to 11 social entrepreneurs, financial experts, and blockchain developers, just completed a trip to Rwanda near the border of the Democratic Republic of the Congo — a line that is crossed by 50,000 each day.
They piloted the platform with about 25 traders — individuals who cross the Rwanda-DRC border multiple times a day to funnel goods — as well as interviewed 30 refugees to find out firsthand exactly what they need.
“These are all people carrying cash across borders, dealing with banks and telecom operators who don’t talk to each other,” explains Samples.
“The ones who we piloted it with were like, when can we use this?” adds Robinson. “We need this now. That was something I found very validating.”
Leaf has taken no outside funding thus yet — they’ve been self-funding and working off of wins from several pitch competitions, including last year’s 36|86 conference in their hometown of Nashville where they garnered $15,000.
This week their lean operation paid off when the team took home the Best Bootstrap Award from SXSW, along with an additional $1,000.
Samples says it’s likely that, in order to scale, they’ll soon be raising a seed round and are starting to have conversations with potential investors. They’re also hoping to gain advisors from their SXSW experience — the conference has a track specifically geared towards social impact and attracts a broader community of investors and leaders than those represented in the southeast, who tend to be more traditional tech investors.
“We’re curious to see what the SXSW community thinks of this, because we are tech and for-profit but also have that social component,” says Robinson. “We’re hoping that resonates well with the community here. Our goal was really to identify some of those individuals, to start having those conversations.”
Photos provided by Leaf