Oakam CEO Frederic Nze Talks Financial Inclusion

Sarah Kocianski sits down with the CEO of Oakam, Frederic Nze to talk about financial inclusion, tackling financial exclusion, the alternative to doorstep lending, and the underbanked.

Listen to the full interview here or click play below, otherwise read on for a quick take on what was said.



What problem is Oakam Solving?

We’re a microlender that provides credit to those who have a limited credit footprint. We do that by leveraging alternative data and using behavioural science to nudge our customers into better financial habits.

So What Makes You unique?

The uniqueness is tech, the usage of data and smartphones as a way to distribute. We have limited ideas of how people who are low-income or are migrants are gaining access to credit. Not just in the UK but in places like Uganda, Nigeria, or Mexico etc. In the UK, the dominant player in our market is the doorstep lender. These are people who just knock on the door, give cash and collect cash every week. That has been the number one model for 135 years. It’s a very human-intensive model. Part of our uniqueness comes from us attacking a human-intensive market with technology. If we compare ourselves to mainstream lenders, then we’re breaking away from the dominant model where you have to be in the system to be in the system. You start by using a credit card when you’re a student and that gives you your first footprint, you’re creating scorecard. That goes into the Credit Bureau and that tracks as you progress in life. If your score drops off then you become sub-prime.

Underbanked Not Unbanked

The problem is it doesn’t work well for people who enter the country at a later stage. So if you come into the country when you’re 35, then you’ve got a thin file. If you’re low-income then you have to face products that are not designed for you. So if you’re earning less than £1000 per month in the UK and you only want to borrow £200 - £300 there are few suppliers that provide loans of that nature. As a result we see many customers who are not unbanked but underbanked. We’ve used psychometrics to get people in the system without having a footprint, and the last thing that makes us unique is using a mix of retail outlets and smartphones to access customers. We used retail outlets to make first contact with customers and then progressed to app-based lending.

In loan interviews first impressions count but underwriters carry a lot of unconscious bias. @Frednze says the @OakamLtd solution was to show 15 #psychometric flashcards. It beat the bias 📻 https://t.co/RgJMLMFad5 📻 #automated #underwriting #digital #financialinclusion pic.twitter.com/skVnty9yT5

— FinTechInsider (@FinTechInsiders) May 18, 2018

How Do You Acquire Customers?

Years ago it was through shopfronts, 40-50%. Today it’s less than 4%. It’s mostly online, we generate applications through word-of-mouth and some social media. Shopfronts now contribute very little. We’re just in the UK, but we set up the business from the start to attack a global issue. Our strategy now is to leverage that platform to enter markets where the underbanked and unbanked are a much larger portion of the population.

Why Is That Market Important to You?

A mixture of personal story and professional experience. I’m born in Congo, I grew up in Central Africa. When I was studying my passion was Mathematics and Pure Maths. I realised it was a complete disconnect to the problem most people were facing in the country I grew up. I got into economics and how financial access impacts the growth of SMEs. There was a personal interest in terms of how do I find something that enables me to have a reconnection with my home country. Then there were a series of accidents in my career. The first had me find myself trying to figure out how to finance people who were coming to stores wanting to buy a TV in Brazil. But they had no proof of address because they were living in a shanty town. I started to get interested in how do you access people who don’t have KYC. The UK is interesting because most people don’t have an ID card. Some countries have more than an ID card, they have a unique number that follows you everywhere. Between proving who you are, where you live, and how much you earn, things are relatively easy for most of us because we have a payslip every month with that information.

Global Issue

In places like South-East Asia we were seeing people who had capacity to pay, because they were in a cash economy and had no documentation. We had to reinvent the whole underwriting system. The last accident was when I came to the UK and I was leader a consumer finance business here and we had customers on a limited bank account with no card or overdraft. When we digged into the accounts we found a lot of them were migrants or low-income. Soon it became obvious these customers were using financial services outside. Whether it was remittances or similar with very thick margins. I didn’t understand why banks weren’t serving these customers. The response was that they’re harder, don’t speak the language and can’t be sold an ISA or mortgage. That was the last incident that convinced me to create something closer to my heart and gave me a route back into the geography of sub-Saharan Africa. Don’t forget to subscribe to the Fintech Insider podcast here and comment below with any insights you’ve got to share or join the Fintech Insider News community here. Financial inclusion is a topic close to the heart of the 11:FS team and you can learn more about it here.