- Victory Park Capital is partnering with the International Finance Corporation on a new fund that will invest in fintech startups in the developing world.
- Fintech adoption is being driven by countries in emerging markets, a recent EY study suggests.
Fintech adoption is ramping up in the developing world, and one Chicago-based investor is looking to capitalise on the red-hot market with a new fund.
Victory Park Capital (VPC), the Chicago-based alternative investment firm, announced it is partnering with the International Finance Corporation (IFC), a private-sector investment-focused sister organisation to the World Bank, to launch a new fund that will invest in financial-technology companies in the developing world.
VPC has been involved in over 45 transactions in the financial-services sector, adding up to approximately $US5.5 billion. But the new partnership with the IFC, which provided $US19.3 billion in financing to companies in developing markets in 2017, opens the firm up to developing markets for the first time.
“The reliance on mobile devices for day-to-day life is more prevalent in emerging markets and that creates a big opportunity,” Brendan Carroll, a senior partner and cofounder of VPC, told Business Insider.
VPC and IFC have worked together on deals before, Carroll said.
“I do think working together will be beneficial and a continuation of our global-investment focus over the last ten years,” Carroll said.
Carroll declined to comment on the size of the fund. He said the fund will invest in 3 to 4 transactions per year.
A recent study by consultancy EY found that one in three digital consumers used two or more fintech products. This level, according to EY, indicates fintech has crossed the threshold of early mass adoption. The firm said adoption was being driven by emerging markets, such as China.
“FinTech adoption by digitally active consumers in Brazil, China, India, Mexico and South Africa average 46%, considerably higher than the global average,” the report said. “From an individual market perspective, China and India have the highest adoption rates at 69% and 52% respectively.”
The firm said emerging markets were more open to fintech disruption because of the large populations of people who are underserved by existing financial infrastructures. Here’s EY:
“Our five emerging markets are characterised by having growing economies and a rapidly expanding middle class, but without traditional financial infrastructure to support demand. Relatively high proportions of the populations are underserved by existing financial services providers, while falling prices for smartphones and broadband services have increased the digitally active population that FinTechs target.”