Capital as a Commodity: How Technology is Reshaping Global Finance

How do traditional banking models give way to innovations, why is it worth tapping into the potential of the subprime and near prime customer segments, and what is trending now in the fintech industry? I have discussed these and a few other issues with Sergey Mosunov, co-founder of a financial startup B9 and a serial tech entrepreneur.

B9 provides financial services, including 0% fast loans. How did you come up with this idea, and how is your offering different from that of other market players?

Well, founding B9 was a logical step in my development trajectory as an entrepreneur. By that moment, I had already built a successful manufacturing company R'ain Group that specialized in producing optical materials and equipment. Then, I started investing in IT and finance startups, and, as of now, I have over 100 companies in my investment portfolio.

So, with B9, we’ve managed to create a dream team: our CEO Sergio Terentev previously was the Head of QIWI’s operations in LATAM and worked on the IPO application process (he invited me to join the project), and Dmitry Egorenkov, our Head of Marketing, has vast expertise in the finance area and worked with several top finance companies in Russia. As for me, I’m responsible for the growth strategy, technology, and fundraising.

B9 is primarily focused on the consumer finance area. Our mission is to provide our customers with access to funds at a 0% interest rate—so, this is basically the capital as a commodity business model. We target an audience with an average monthly income of $2000-3000 who often live from paycheck to paycheck and might not be able to allow large unexpected expenses in case of urgency. These are mostly blue-collar workers: field technicians, construction workers, car service employees, etc.

Brick-and-mortar banks traditionally focus on the premium segment and simply don’t view this demographic as their potential customers, and, thus, we are not competing here. We’re just dealing with different audiences. 

Generally speaking, our key value proposition is that we provide the fastest way to get a cash loan on the market. Normally, if you urgently need $200-300, you’d go to a lending agency or a bank, but then, you’ll need to wait up two weeks before they screen you and approve (or not) your request. And even when it’s approved, you’ll end up paying a huge interest which might amount to 700% a year, according to our stats.

But what if you need this money right away? For example, there’s a sudden medical condition or unexpected expenses that exceed your budget. Here’s where we can be of help. The process of scoring and approval at B9 is fully automated and takes only a couple of hours, so you can get the required sum in almost no time. All you need is to install our app and switch to getting salary on your B9 bank account. The subscription fee for using the service is as little as $9.99 per month.

So, I would say the speed of providing loans along with the 0% interest is our killer feature.

Can you elaborate a little more on how exactly this works?

As I already mentioned, we have a subscription model. To start using our service, customers need to install the B9 app and create an account. Next, they deposit money from their paycheck to the B9 account, undergo a short automated approval procedure, and gain early access to 0% loans (up to 100% of their earnings for the last 15 days.) 

So, for example, if a client deposits $2000 each month, they can get a two-week revolving overdraft worth $700 and spend it on any purpose using the B9 Visa card or simply withdraw cash from an ATM. No additional overdraft fees are applied.

We believe this is a highly promising model that meets the needs of our target audience. One of our customers shared a story when he suddenly had to pay for the medical treatment for his child which cost something like $300. With B9, he was able to get the money in just two hours and pay for the treatment. And there are different other cases like this.

Of course, we, as lenders, need to constantly estimate risks. But since we have access to our client’s financial behavior data, we can apply our scoring model to figure out the risks. If we see that a client’s behavior complies with our expectations, we grant them access to larger sums and a wider range of products such as mortgages or other types of credits. We always encourage clients to improve their scoring and, thus, transcend to a new level of economic activity. 

So, how is it going right now? What are your plans for the year?

EWA (early wage access) is currently our flagship product, but in the future, we’re also looking to develop an entire financial ecosystem. At the moment, we have 100,000+ customers, of whom 15% are active users. We plan to reach 500,000 customers by the end of 2022. Our primary sources of traffic are organic search and referrals. Speaking about acquisition costs, at this stage, our CAC is less than $5. 

One of B9’s innovations is our proprietary scoring model. Most banks and credit organizations use models tailored to the premium segment, while a large part of the lower-income audience is left underserved. We have developed a unique rating system based on customer data that enables us to deliver high-quality services for this demographic, which we call the “new prime.” 

In our mission statement, we aspire to contribute to socio-economic well-being by making financial services more inclusive and accessible to everyone.  

In your opinion, what are the main fintech trends now?

Well, if we look at the statistics of emerging fintech companies, we’ll see a surging number of them in the last couple of years. For example, in 2021, venture funding for fintech startups hit $130+ billion globally, showing a 250% year-on-year increase. On the other hand, classical banking models seem to have reached their peak in 2012, while in recent years, the number of US bank branches has been slowly but steadily dropping. So, there’s a noticeable shift toward a more innovative financial ecosystem. 

When talking about trends, I would certainly mention decentralization and increasing focus on customers. Decentralized models primarily rely on self-executing blockchain contracts. Typical examples are startups concerned with cryptocurrencies or NFTs. Customer-centeredness and data-driven approaches are what most fintech companies are now betting on. This entails end-to-end digitalization, thoroughly configured CJMs as well as the ongoing process of product discovery and improving UX.

At B9, we’re somewhere in between the traditional banking models and cutting-edge decentralized ones, leveraging the potential of both models to offer our best. I’m personally very enthusiastic about blockchain, but at B9, we don’t use blockchain and cryptocurrencies since we hold a license and are required to abide by American laws. But, as soon as we have this opportunity, we’ll grasp on to it.