Fund targets innovative companies offering improved financial security to more than 60 million Americans who rely on alternative financial services
Core Innovation Capital I, L.P., a venture capital firm created by the Center for Financial Services Innovation (CFSI), has closed its $45 million private equity fund that invests in companies committed to improving the financial security of underbanked consumers.
The firm, which invests in innovative and socially responsible financial services for underbanked and unbanked consumers in the United States, has closed its first fund, led by Goldman Sachs and several top banks, asset managers, and endowments, and plans to manage a series of specialized funds targeting innovative financial service companies.
“In the current economy, there is an urgent need to help people cut costs and make consumers more upwardly mobile,” said Arjan Schütte, principal for Core Innovation Capital. “We are confident the investments we have made, and will continue to make, will generate positive opportunities for the American emerging market, while generating excellent financial returns to our investors.”
According to a 2009 Federal Deposit Insurance Corporation (FDIC) study, more than 60 million U.S. adults, or one quarter of all households, rely on alternative financial services – such as short-term payday loans – for their cash and credit transactions. Consumers pay an estimated $45 billion annually in fees and interest alone for these services. Core Innovation Capital’s investment fund invests in businesses that are reducing costs to consumers while creating solid financial returns.
The fund targets high-growth companies that use technology to drive down costs and create new business models for providing better basic financial services for underbanked consumers, while helping underbanked consumers build savings, establish credit and move into the financial mainstream.
Two of the fund’s first investments are SavvyMoney (formerly known as GoalSpring Financial), a do-it-yourself online tool for debt reduction, and Plastyc, which provides affordable Internet-based banking services. Both companies embody the innovative transformations taking place in the consumer finance industry and seek to streamline the high-cost, highly fragmented and inefficient consumer finance industry.
“Premium banking services are critical for the underbanked, and the Internet and mobile are the right platforms for affordability and speed to market,” said Patrice Peyret, founder and CEO of Plastyc. “Core Innovation Capital’s support has helped us increase credibility, improve access to opportunities and capital and gain strategic insight into this growing consumer segment.”
For consumers, the cost of being underbanked is high. Even if they have a bank account, underbanked consumers often spend more to conduct basic transactions like cashing a paycheck, utilizing bank overdraft protection, paying bills and sending money to family members. Many lack a credit score or are experiencing credit challenges at a time when credit scores can determine everything from getting an apartment to landing a job.
“Whether due to unemployment, foreclosure or the pain of deleveraging, a growing number of Americans are financially challenged. Coupled with dramatic changes afoot in the financial services industry, more consumers are finding themselves poorly served and in need of high quality alternatives for making payments, saving, borrowing and planning. Technology and the entrepreneurial spirit it is fueling offer a significant opportunity for serving consumers responsibly and creating new, profitable business models. The launch of Core Innovation Capital is testament to this opportunity,” said Jennifer Tescher, CEO of CFSI.
Typically, venture-backed financial service companies are underserved by the capital markets, representing two percent of total investments despite delivering eight percent of returns. “Core Innovation Capital’s unique perspective and track record make us ideally positioned to identify investment opportunities that can succeed in the marketplace while making a positive difference in the lives of America’s emerging middle class,” said Michael Harris, a principal in the fund.
The Core Underbanked Innovation Challenge
Across the country, people and businesses are creating new ways for Americans to access lower-cost and higher quality financial services. Innovative savings and investment products that work for underbanked consumers are in short supply.
Core Innovation Capital is challenging the financial services industry to do better, and is offering a $10,000 cash prize for the most innovative product servicing the unbanked and underbanked. More importantly, Core and CFSI will actively promote the finalists and winner and facilitate introductions to industry leaders and investors. Four finalists will have the main stage at CFSI’s Underbanked Financial Services Forum, June 13–15, 2012 in San Francisco, in front of top industry executives from banks, retail, technology, AFS, regulators, nonprofits and investors present. The audience will select the final winner in real time, based on live product demonstrations.
Visit http://challenge.corevc.com to learn more and submit an application on or before April 20, 2012.
About Core Innovation Capital
Core Innovation Capital is the only venture capital fund that invests exclusively in financial technology companies serving America’s underbanked consumer market. Its target segment consists of more than 60 million consumers, who generate over $1 trillion in annual income and spend more than $45 billion in fees and interest on financial services per year. The fund partners with proven entrepreneurs who seek above market-rate returns and share its vision to improve the lives of low- to moderate income Americans. For more information about Core Innovation Capital, visit http://www.corevc.com.
The Center for Financial Services Innovation (CFSI) is the nation’s leading authority on financial services for underserved consumers. Through insights gained by producing original research; promoting cross sector collaboration; advising organizations and companies by offering specialized consulting services; shaping public policy; and investing in nonprofit organizations and start-ups, CFSI delivers a deeply interconnected suite of services benefiting underserved consumers. Since 2004, CFSI has worked with leaders and innovators in the business, government and nonprofit sectors to transform the financial services landscape. For more on CFSI, go to www.cfsinnovation.com.
For Core Innovation Capital:
David Hlavac, Haberman