Shivani Siroya is the CEO and Founder of Tala, a mobile technology and data science company that is expanding financial access for underserved people in emerging markets.
Ahead of her keynote presentation at the upcoming LendIt Fintech Europe event, we sat down with Shivani to discuss Radical Trust, financial inclusion, and the role of mobile technology. We hope this whets your appetite for her presentation this November.
What is Radical Trust? This is core to what you do and I think it would be helpful to better understand what this concept is.
Radical Trust is about starting with a fundamental belief in people. Right now the entire global financial system is built on skepticism.Traditional lenders start with an assumption of risk and work to reduce their own stake. They don’t readily bet on people outside of what they know, and especially not people who make $2 or even $20 a day.
At Tala, we like to look at the world differently. We start with a fundamental belief in a person’s potential. We work relentlessly to try to prove that potential using alternative data, and we don’t just stop there: we also take the first risk and offer them credit.
Because we put ourselves on the line for our customers, they start to believe in us, too. They often think of us as a friend or partner – not a financial services provider. This two-way trust street is what makes our product work. Our vision is to be the most trusted financial services provider in emerging markets.
When building a credit model for the underbanked, how do you decide on data that is most useful and will most accurately determine risk?
The idea that we can use alternative data to open financial access is rooted in 3500 interviews I did with underserved consumers across West and Sub-Saharan Africa. While most of these individuals had no formal credit records, I saw that their daily lives were rich with data that could be used to make a lending decision. Today, much of that daily life data is captured in how we interact with our smartphones. This unique device data enables us to confidently underwrite consumers who have little or no financial history – a massive potential market considering credit bureaus cover only 31% of the adult population globally.
Smartphones have the added advantage of helping us reach and service customers seamlessly. Through Tala’s Android app, customers grant us permission to analyze specific device and behavioral data points including merchant transactions, app usage, and personal identifiers. We only collect the data we need to underwrite a customer’s loan application – we’ve even turned off collection of certain data classes that proved not to be useful. We determine the weights of these data points using state-of-the-art machine learning techniques, trained on historic user data. Once a customer has taken a loan with us, his or her repayment behavior and ongoing interactions in our app inform future lending decisions.
What we like to focus on though are the stories behind the data. In order for a signal to be useful to us, we have to know the why behind it. We engage in regular user research to make sure our models actually reflect the way our customers live their lives and our own commitment to financial inclusion. For example, we have a policy on data ethics that has been in place since we first started lending. We don’t factor traits like gender into our decisioning, even though we know gender correlates with repayment outcomes.
How important is credit access with it comes to financial inclusion?
Over the last decade, new technologies like mobile money have been big drivers in accelerating financial inclusion. The ability to safely send, store, and transact money via one’s mobile phone enables more people to participate in the economic life of their communities, particularly those people who historically have been excluded from traditional financial systems. In Kenya, for example, 96% of households now use the mobile money system M-Pesa, and more than 10 million transactions are conducted on the network per day. Numerous studies have highlighted the positive impact on families’ income and security, particularly in rural areas. We believe credit is the next critical step, and not just because there’s a $2.1 trillion credit gap in emerging markets. Unlike savings or insurance, credit builds a financial identity and offers a pathway to the formal sector. With a credit history, customers become more visible to the financial system as a whole and can access additional products on their own terms.
Can you talk about the importance of technology and building a product via the mobile phone. Is technology like AI and blockchain the great equalizer to increase access to markets and compete with traditional financial institutions?
The mobile revolution offers unprecedented opportunity to understand and reach the financially underserved at scale. In 2017, the number of unique mobile subscribers surpassed 5 billion globally, with the fastest rates of adoption coming from emerging markets like China, India, and Sub-Saharan Africa. Additionally, the number of people accessing the internet from a mobile device has doubled over the past five years to 3.6B; it will rise to 4.7B by 2020.
What’s especially unique about Tala’s combination of machine learning and mobile technology is that it extends critical financial access while also creating a seamless experience for the user. Customers don’t need collateral or paperwork to apply; gone are the days of long visits to a bank or loan officer. The speed of our decisioning and loan delivery surpasses anything previously available in the market and meets customers wherever and whenever they need a loan. Repayments are fast and easy. The app also provides a direct connection to our customer experience team.
In other words, we can service customers faster, cheaper, and more efficiently than traditional institutions. This is especially important when we’re talking about loans between $10-$500.
As a woman Founder & CEO what advice can you give to other women in fintech about building a company from an idea?
Trust your gut! I think that because women are underrepresented and starting from the outside, we are often looking for advice and connections on the inside – but it’s important to remember that no one knows your business or idea as well as you. I had no intention of being an entrepreneur, I just discovered a problem that I became obsessed with solving. Of course I had a lot of guidance from advisors and mentors along the way, but I really had to rely on my intuition and my own understanding of the problem and our customers to bring that idea to life.
I would also stress the importance of building a diverse team from day one. Shaping an idea into a successful business takes exceptional talent and a variety of experiences and perspectives. Again, trust your instincts – incredible talent can come from anywhere.
In your opinion, what does it take to be a successful woman in fintech, and how can companies create work environments that are supportive to women?
Being a successful woman in fintech takes the same determination and toughness that women need to succeed in any field traditionally dominated by men. In some ways fintech is a little more dynamic and less entrenched than traditional finance, so there is an opportunity for companies to build supportive environments for women (and other underrepresented individuals) earlier on. The way that Tala has approached this is through our uncompromising sense of trust and belief in people, or “radical trust,” as we talked about earlier. Building a diverse and equitable team and environment is not just a surface initiative at Tala, it’s part of our DNA and critical to fulfilling our mission (read more about that here).
In this sense, companies should not only focus on achieving goals but also on how we achieve these goals. Aside from establishing affinity groups for underrepresented team members, which can be a starting point, companies need to focus on establishing cultural norms and values that all employees can engage with equally. At Tala, we use six founding principles to guide almost all aspects of Tala’s culture and working environment. These principles are grounded in trust, empathy, curiosity, courage, humility, and servant leadership. To take two examples, “Put Power in People’s Hands” and “Listen and Learn” are principles that help guide all staff at Tala, including women, to be heard and empowered to grow and do their best work.
Want to hear more from Shivani and 150+ other thought leaders? Register today for LendIt Fintech Europe, Europe’s leading event for innovation in financial services.