Because of their work status, independent contractors that partner with delivery or ride-hailing companies have a tough time building a credit score. Their biggest disadvantage is the lack of a steady income.
That’s why they’re often prey to companies that offer loans with insanely high interest rates and invasive practices, says José V. Fernández. He’s the founder of Bankuish, a new company that wants to “bring dignity to the financial lives of independent workers in Mexico”.
The Mexico City-based company is currently on “stealth mode” – growing organically as a beta product mostly through recommendations and a referral system among delivery workers and drivers. Founded in 2020, it’s raised US$1.3 million in a pre seed round led by Wollef. Other investors include Global Founders Capital, Wayra and Lightspeed Ventures.
Bankuish also has a roster of individual investors coming from some of the region’s most notable startups. These include the founders of Colombian delivery giant Rappi, Brazilian food ordering and delivery platform iFood, Brazilian ride-sharing app 99, corporate credit card Jeeves, and Peruvian online commerce company Favo.
Fernandez, originally from Spain, worked in the financial sector in the U.S. before coming up with the idea for Bankuish. “As an expat in that country, I was a first-hand witness of what the lack of credit history can do for your financial security,” he told Contxto. “It’s a trap not only for expats, but for the millions of people that live outside of a formal credit system”.
Ratings As Risk Assessment
What concerned Fernandez most was that traditional credit institutions usually only consider one thing to grant a loan: the person’s ability to handle debt. “You could own a house and have a bank account, and it’ll all be worth nothing if for some reason you miss your monthly credit card bill,” he explained.
That’s what he’s trying to change with Bankuish. The company doesn’t provide financial products itself. Its main customers are the traditional bank players like Santander, BBVA, and Sabadell. What Bankuish then does is prescreen customers for them among the pool of independent workers in companies like Uber, Didi, Rappi and Beat.
According to the company, there are about 3 million independent drivers and delivery workers just in Mexico. Authorities want to attract 500,000 of them to voluntarily join the country’s social security program, which benefits anyone who has proof of employment.
Bankuish links its API with these companies’ platforms. They then send a push notification to all independent workers in their platforms, and they have to voluntarily link their accounts to the Bankuish app. Once they’ve done this, Bankuish is able to analyze each worker’s performance data: their amount of transactions, star ratings, GPS location of trips, and every fulfilled order or trip.
“We try to make an exhaustive qualitative analysis to determine the user’s future income”, Fernandez explained. Once they’re screened, they get what Fernandez calls a Bankuish score. This score is sent to the large banks who are then in charge of onboarding the customer with products like loans, insurance and other pre approved products.
In other words, the lack of a steady income doesn’t stop these workers from being considered for credit. Bankuish uses their own work as a resource to make a risk assessment and have a bank grant them a loan.
Bankuish’s CEO says privacy is a very big concern for the company. “We keep the workers anonymous and just give the banks the info they need to consider them as customers.”
Bankuish monetizes from charging a commission to the banks for each carefully pre screened customer they onboard. As for the gig economy companies, these also benefit from the relationship between banks and independent workers. Fernandez says that they’ve seen an increased amount of hours worked by the drivers and couriers who’ve acquired formal financial products by the partner banks.
Financial Services “As a Service”
Working very closely with these independent workers, Bankuish says it’s identified liquidity as their main concern. That explains the size of the loans it is pre screening for: they range between $20,000 and $40,000 Mexican pesos (about US$985 and US$1,970). This is much higher than immediate loans available online, which start on $1,000 Mexican pesos (about US$50).
According to Fernandez, the loans facilitated by Bankuish are the first formal loans these workers have received. “Dignity begins in financial products that bring support and power to users, not troubles,” he said.
Why not connect these independent contractors with the multitude of fintech companies that are granting credit cards or online loans? “The current regulatory environment in Mexico allows loans at any interest rate,” said Fernandez.
“I’ve seen terrible things, like ridiculous interest rates and really aggressive collection practices. I want to get contractors away from these predatory practices they’re willing to accept, and instead link them to reasonable and fair banking institutions,” he claims.
Bankuish also claims to work with the banks to offer contractors the best possible terms for their loans. For example, interest rates based on what Mexico’s three largest banks are offering, and paybacks that don’t represent more than 40% of each user’s average income. As an extra perk, these independent workers keep unlocking access to new financial products as they keep repaying their debt.
So far, Bankuish has been well received. By the end of 2020, it had allowed banks to loan $82 million pesos (around US$4 million). In 2021, it had grown fivefold: $409 million pesos, or US$20 million by the end of the year. Fernandez says Bankuish will keep growing in 2022, both in terms of expansion and capital raised.
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