Cho-Nan Tsai

@chonantsai

A CTO Journal: Building a fintech company for the unbanked — Part 1

The Origin

Faces of The Unbanked

Starting a new life in another country is not easy. I witnessed this first hand as a young child when my family moved away from our home country. We didn’t have a lot of money back then. Language, culture, food and social norms — everything was new to us. The most memorable thing about that time was watching my parents struggled in starting and maintaining their business. Running the business was vital because, without it, we wouldn’t have any income. Being so new in a foreign country, we had no credit history or assets to be used as collateral. Therefore, we had no chance with a bank for a loan. Like most entrepreneurs, my parents tolled long and hard most days to try to put food on the table. Being frugal was a constant theme in our family. Everyone (including children) helping in the family business chores was expected from day 1. This definitely left quite a mark on my childhood...

Fast forward to present day, I came across a curiously interesting gentleman as I was looking for a new opportunity after wrapping up my China gig. Initially, I thought he was running one of those Latino payday loan business. So I looked him up on LinkedIn. But his Harvard education and Wall St. background didn’t struck me like he would be the kind of person that might do that for a living. He even has an identical twin who almost have the same identical academic and professional experience helping him in the same business. Is this for real? Perplexed, I decided to reach out to him.

The Salas Brothers

After 5 lengthy email exchanges, 2 conference calls and a face-to-face meeting with the team, I finally understood his mission — he wants to help the unbanked get access to capital in order to grow their businesses!

In no time, I became convinced this could be a great opportunity. Most importantly, the mission of the company aligns with my personal values and the outcome could have positive social impact. So I decided to join this gentleman’s startup as a CTO.

Now the hard part comes — how do you build this fintech startup from scratch, in light of these tough challenges i.e. niche market play, non tech savvy users, existing paper-based loan applications and manual underwriting, and shark-circling cut throat competitions?

Read on to find out how we started it!

Building the tech stack

My love for open source has led us to an open source stack no doubt. But what’s more surprising is that we realized, after the fact, using open source stack is so fitting when building a platform for the underbanked.

Some of the open source software technology we use

1_ we need to pass on whatever savings we can via technology to our clients. Although we are venture-backed, we are very frugal by nature. It is largely influenced by the nature clients to whom we serve. These clients don’t drive luxury cars or live in mansions. They are more like a small business owners who may own a mom-and-pop shop on Main Street.

2_ If you are in fintech and building using a closed source stack, you may run into fund raising issues as no VCs would want to pay millions of licensing fees to companies like Microsoft as your business grows exponentially. If your tech stack can’t scale financially, then you are dead meat.

Our main stack consist mainly of Python, Nginx, MySQL and Redis. This is a great setup to get most products off the ground. One thing I decided to do differently this time is leverage containerization technology such as Docker to help run dev environments. This turned out to be a great choice as there are many advantages to using Docker in dev environment. We are using Docker in production for less demanding sites but have kept Docker away from busier sites. This may change later once we spend enough time to set up our microservice architecture.

Cybersecurity in fintech companies

If you are building a fintech company — mark my words — fraudsters will definitely come find you!

Like any fintech firms or financial institution, we too have to invest heavily in cybersecurity to protect the interests of our clients and investors. We went through a lot of ordeal to write up and implement a cybersecurity policy at the company. This took considerable amount of time. We also hired outside cybersecurity experts to conduct pen tests. We also regularly conducted elaborate table top exercises and we used an emergency ‘red book’ to guide us in the event of a cyber attack. At the end of the day, it turns out that implementing these cybersecurity safeguards helped not only in terms of deterring cybercriminals, it also helped us in gaining trusts of our potential partners, VCs and clients.

One of the main challenges of running a fintech company is that there is always fraud and people are always trying to steal money from us. We know other lenders that have lost millions to identity thieves and have written these losses as bad debts. We know there are professional hackers looking over our every move, trying to get within our organization via malware, rootkit, spyware and such. We were cyber-attacked on several occasions and things could have gotten ugly fast.

To bolster this department, we heavily invest in networking equipment in the office and implement security measure on our servers. We actually do manual phone screening on our clients, too. This is great because:

1_ We get to know our clients more and can help deepen that relationship.

2_ Any manual screening is certainly an effective deterrent against fraud, unless you have so much volume that you’d need AI to assist. ;)

Last but not least, it is vital to maintain a culture of security vigilance within the company. As Prof. Peter Drucker once wrote, “Culture eats strategy for breakfast.” No cybersecurity equipment or software is sufficient to deter cyber criminals if employees do not use any common sense when dealing with cybersecurity issues.

Peter Drucker. Getty Images.

In the next post, I will talk more about the product, the fund raising journey and some of the tasks we are currently working on.

Please share the story with those that might find this post useful. Connect with me on LinkedIn or Twitter. Appreciate it!

More by Cho-Nan Tsai

Topics of interest

More Related Stories