A recurring theme that I talk about is how traditional sectors, bloated with process and seemingly unable to innovate, are ripe for disruption. Two areas of particular interest are the telecommunications and banking industries. Banking in particular is an industry that is heavily protected by regulation. This regulation helps it maintain its position but also masks the incredible potential for disruption to occur. While some banks are making efforts to rebuild what they do in a way that feels innovative (Commonwealth Bank of Australia, for example, has recently rolled out a real-time banking core), it’s hard for these organization to truly innovate at the base level.
It was interesting then to have a conversation recently with Frederik Pfisterer, one of the founders of Mambu, a software platform that aims to be the engine that powers banking for innovative and emerging banks. Mambu has been built by a very diverse team with the goal of changing the landscape of microfinance (and, by extension, putting a dent in the landscape of finance more generally). Mambu emerged in 2009 as a research project based out of Portugal and focused on Africa to uncover the needs of microfinance organizations and how new approaches to technology could be used to support their operations.
The goal of the Mambu team was to find ways that technology can help spread microfinance, enable organizations to provide it easier, faster and cheaper and to reach more clients who need it. Obviously this part of the sector can gain much value out of emerging approaches to mobile money and agent networks but those services rely on a fundamental information platform – in order to deliver agility, flexibility and the economics that emerging finance organizations need, this platform has to be easy to use and lightweight – contrast this from the massive monolithic systems that banks use and it’s easy to see why many microfinance organizations rely on manual systems to run their operations. Two examples of organizations using Mambu to run their operations are megamitch.com or lenddo.com who do banking – sort of – but in a very 2.0 way, leveraging technology. Mambu isn’t yet serving banks in the western world but according to Pfisterer small Credit Unions without capital markets access or trading could theoretically use Mambu to run their entire operation.
Mambu was designed from the bottom up to be a flexible, extensible platform. It has a range of APIs that enable third parties to build solutions on top of the platform and it also exposes some of its data in ways that finance organizations can take data and deliver it in different ways. It’s also attractively priced in a part of the sector that costs are critical – Mambu has three different versions ranging from $25/user/month to $85/user/month. At the top end, the Mambu product will allow a finance organization to take deposits, run branches, manage their clients, fully account for funds, provide mobile access, run overdraft and credit accounts and much more – it really is a turn-key platform to run bank-like organizations upon. Mambu already has integrations with third parties that provide some interesting add on services such as credit scoring and factoring.
This is a big opportunity – there are over 100000 small financial institutions around the world that fit within Mambu’s customer profile – the ability to utilize a robust platform, all on per-month utility pricing, is immensely empowering for these sorts of institutions. Of course that also introduces some risks – it means that a disreputable loan shark sitting in a third world country can build themselves and image of being a legitimate bank – this is no doubt the angle that large banking institutions will take – that only by dealing with a reputable entity can consumers be secure about their funds – of course the last few years have shown that even allegedly reputable financial organizations can come seriously unstuck – size is no determinant of stability.
Mambu already has 900 customers, and this with little attention and fanfare. I believe that Mambu is in the process of looking at fundraising – an influx of cash would help them tell their message wider and scale their business. Of course most traditional funding parties will questions Mambu – products that sell into third world markets are always a little confusing to VCs who prefer that holy grail – uptake in first world (and generally US at that) markets.
Mambu has a clear product vision – they want to start breaking into the regulated bank sector, and will, over time, introduce plugins to enable trading, stock brokerage and other related functions, into the system. Another area for development is integration with e-commerce – Visa, Mastercard and Western Union are all attractive targets. POS is yet another area where Mambu are doing some work.
Key for it’s current emerging markets focus is mobility however, I’m told that over 30% of financial transactions in Kenya, for example, are transacted on mobile devices – this is a massive area of opportunity and one which is easier for a vendor with much more flexible architecture to deliver.
Banking is ripe for disruption, but achieving this requires the underlying infrastructure to run these Banking 2.0 organizations – Mambu is an important step in that process.