"Living without a bank account is not only a hindrance to everyday life, but also stunts the financial growth of families and communities. Seymur Mammadov, Founder and CEO of Simbrella, wants to improve the quality of life for unbanked populations through access to financial instruments and microloans." I don't usually quote a different source for these, but when your guest wins the title of EY World Entrepreneur Of The Year™, you feel like you have to aim the spotlight that way!
Today the show is taking you to Azerbaijan, an unexpected home to one of mobile fintech's pioneers: Simbrella. Simbrella have now served 220 million customers via 25 companies in 20 countries worldwide, many of whom would otherwise have no access to credit. You can learn more about Simbrella and their services here: https://www.simbrella.com/
The full written transcript, with timestamps, is below:
Seymur Mammadov 0:00
If your balance goes to zero at night, the operator would just not serve you, that's why this service was offered to the market at that time.
Brendan Le Grange 0:15
It was in a letter to Robert Hooke in 1675 that Sir Isaac Newton made his famous statement: "if I have seen further, it is by standing on the shoulders of giants".
But sometimes, like with Easter Island Moai, the shoulders of those giants are themselves sitting upon something unexpected. The first company in the world to launch mobile FinTech services, has now touched 220 million end users via 25 companies in 20 countries around the world. It's a feat to be proud of, and we'll get into the how, but before we do, where would you guess they grew from?
Not Silicon Valley.
Not even Nairobi, where my mind immediately goes when the topic of discussion turns to those earliest waves of mobile banking.
But from Baku, Azerbaijan, a central Asian country of just over 10 million people that has never come onto my FinTech radar before. So in this episode, we will discuss AI and ML derived credit scores and how they are facilitating end to end lending solutions in developing markets, but we'll also find out what it is like to take on the world from uncommon foundations.
Welcome to How to Lend Money to Strangers with Brendan le Grange.
Seymur Mammadov, co-founder and CEO of Simbrella, welcome to the show.
Seymur Mammadov 1:50
Thank you, I'm really glad to participate.
Brendan Le Grange 1:54
I'm looking forward to it. Seymur, your background is more technical than many of the FinTech founders I speak to on here, but then again, Simbrella also has more of a telco flavour there many fintechs that I cover on the show. So what is the foundation of your career? What did your early career look like?
Seymur Mammadov 2:10
We are the children of Soviet Union, and our education and culture, it was different. We grew up under Soviet propaganda and that's why, when we are starting working in free market, we had to learn everything on the fly.
I have a background as a mechanical engineer and then I'm working for the trading company. Then I'm working for the company which was the distributor for mobile phones in Azerbaijan. I had a really nice knowledge in computers and it was my life, I was responsible for all computers in our company.
We had nice relationships with the mobile network operators, but as the distributors of mobile phones, nothing technical. But in that moment, Nokia launched the new personalising of graphics on the screen and the ringtones on mobile phones. And I got interested in the protocols.
Those protocols were available from the internet of this SMS they were using to upload this kind of content to the mobile phones; and me and my partner decided to optimise it and turn it to the business. Initially it was just made for fun by Nokia, but we decided to turn it to the business.
We made a "platform", but it wasn't really a platform, it was a two computers with two mobile phones connected to it - one mobile phone receives SMSes and the second one takes the content from database and sends an SMS to the customer!
We started to earn the money from that. In fact, it was really very popular and the mobile operator was very happy. And we became a first value added service provider for operators all over the world. Because at that time, this terminology was not used by operators. In this moment, we established our first company.
I started doing business, my own business, 23 years ago. And it was really nice and profitable business. We used our technologies in future for the SMS voting on TV. And this sector then started growing very fast. And this was during this process that we began to learn more deeply about telco technologies in our team.
We integrated to the operator's infrastructure deeply and in 2005 our team thought about crediting the balances of mobile network operator subscribers. It is not really a FinTech approach, it was just like our other services, but in fact, in future, we figured out that it was maybe the first FinTech service provided, in our country at least, but we call it just a 'value added service' and operators' approach for this service also was like a value added service.
Brendan Le Grange 5:19
What was it that shifted you in that direction that made you start thinking about managing or helping consumers to manage finances and perform basic financial operations via the phone?
Seymur Mammadov 5:31
What happened was that, when we started providing the service, we guarantee the bad debts in the service. And that's why we start actively use different kinds of analytics to develop the different kinds of scoring systems. And these scoring systems will work very fast on the fly will make the scoring on the fly. We start from the basic one, and then we start to improve it till we now use machine learning for our scoring.
The technological approach for this task grows year by year.
In the first three days we provided over 700 credits in Azerbaijan with our first operator - we were not expecting such success.
The most popular method of unbalanced applause, this scratchcards if your balance goes to the zero as the night, just afraid to just observe you. That's why this service was offered to the market on time. The only problem was that it was really very easy to copy this service idea was ours. But everybody who heard about that and had some technological knowledge repeated immediately all over the world. And we have to be very fast growing our market because it's very hard to get patents for this.
Brendan Le Grange 7:02
If I think about that time, and it's probably because I'm South African and I did some work in Kenya in the early 2000s, but the first name I always think about is mPesa when we're talking about mobile based banking emerging into the world, but actually, as you said, you might even have been before that - what were those early days, like when you were trying to get this up and running, taking on the world with us? While all this other crazy innovation and copying and catching up was happening? How was the experience of building Simbrella different to your earlier businesses?
Seymur Mammadov 7:31
Yes, when we decide to go globally, that day, we established Simbrella: that's why our had quarters are located in Singapore and in Amsterdam, because most of the operators asked to sign contracts with such kind of jurisdictions.
So we start use our connections in the neighbour countries like Georgia, Ukraine, Tajikistan, Uzbekistan, and then we hire two Hungarian guys who sell their products in Africa. And they had very nice and wide connections in Africa, and they started to sell our product to African operators - we established now a nice partnership with the local operators, and we started to grow.
At the peak of time, we added 25 iterations all over the world.
Brendan Le Grange 8:31
That's 25 operations around the world 220 million end users, I see, that have been service so a massive growth from you know, that one small idea.
Seymur Mammadov 8:40
Four years ago, our growth stopped.
And this kind of service no longer was wanted by the operators because they are already had vendors or their own solution. And we decided to adapt our knowledge, all our telco knowledge and our experience to other segments of economics: we started to credit utilities, the TV, and we figured out that this kind of service really very nice fit to the banks in developing countries.
Because in the some banks, they haven't any product for 80% of the customers!
Because the cost of crediting it's really very high in the traditional method. The customers are eligible for just $100 or $200, but crediting $200, it's not feasible for banks.
We started negotiation with one of the banks of Nigeria and agreed to build the pilot to be able to provide Add the small credits to this kind of customers who need just $50 for three days, or 10 days, not for the month, it's not that big of amounts, we build a system. And what happened now... this bank disperse more than $30 million for the 1.5 million subscribers.
And 25% of their customers use the funds as a working capital for the micro business, it's really, really nice impact to this micro business.
And we bring the approach of mobile network operators, we tell banks that ordering mobile operators, they spent $100 or $200, for acquisition of his customers for each customer, are ready to give you a SIM card for free, ready to give you some airtime for free gigabytes for free and just asking you to try the service. And if you don't like it, you can drop it. At retail banks, you could also spend this money for acquisition of your customers. And don't be afraid that that's in this case, because you built very healthy customer base for you in the process, maybe 5% or 10% from your customers and not not return your the first credit that you get 90 very nice customers who will bring you nice revenue in the future.
This is also very hard to accept from banks that actually could find some persons who support us in this way of thinking.
Brendan Le Grange 11:45
Now, you talked about that as your sort of their the pivot towards credit. But now there's a full suite of products you've got available for micro loans for you've mentioned, really this whole scoring engine to base this on BNPL, all sorts of products that you offer, how's that sort of shift in focus evolve to the products that you provide?
Seymur Mammadov 12:08
Today, we're using the same technologies, but we use it in the different industry, because we are very nice in telco knowledge, but we'll get some very nice people with financial knowledge onto our staff, we start educating our staff to be more convenient with financial terminology with with the IFRS, to understand our new partners, because they are using the different kinds of words different kinds of terminology. And we have to speak the same language.
So it was not very hard to change his focus, but it's hard to change the business model and feasibility of the businesses really dramatically change because revenue sharing with service fee in mobile operator is totally different with revenue sharing with the banks, because approach for this revenue, the time of generating this revenue, it's really totally different. In mobile network, you just crediting balance equals return to narrow maybe after one hour and you just calculate the service fee.
It's different kinds of calculations, because it's very strictly regulated sector. And we'll learn.
Brendan Le Grange 13:33
Simbrella is not issuing the credit, of course, you're helping a bank or a micro lender or an MFI to issue a micro loan. How does that process work? How do they work with you?
Seymur Mammadov 13:45
We are really very flexible in our business model with the banks. And with the micro lending platforms, we offer them three type partnership, it's based on revenue sharing, it's based on transaction fee, or it's based on the capex model.
Brendan Le Grange 14:04
Do you have scores in the countries you're working in that you can roll immediately? Or is this a case of your bold scores with your clients?
Seymur Mammadov 14:13
We build score with clients, we use available data and start to teach this model. During a couple of months. We have the scoring engine, but we have to teach this model in each iteration because we use the different kinds of data.
Brendan Le Grange 14:30
The amount of data that now travels through the the mobile phone networks, how's that change the way that you are able to measure the risk of a potential borrower?
Seymur Mammadov 14:39
We are very flexible with the scoring and we know that more data more precise scoring but it's if you have less data will you even put built a nice scoring based on this.
So in some banks, we're just using the the data available from the bank but we could also get the data from other sources like the credit bureau also. Now in Nigeria, it's a very nice data available from operator site. And we built the system inside the operator, it's we call it data as a service. And we had access to the really very big range of data of customer by his consent, when the customer asks for the credit. And it's happened from the mobile phone from USSD and not from the smartphone, they get a message that could we use your data from operator side, and after he give us the concept operator send us this data set.
And we use it for scoring of this customer. And what we are doing for banks, we use the telco technologies, which allows us to make this scoring on the fly.
Brendan Le Grange 15:59
You're operating in a lot of markets, where smartphones are still a luxury to some extent. So you're able to use any phone technology to make this all work.
Seymur Mammadov 16:08
Yeah, and some statistics that might be interesting for you, in the bank which I mentioned before, and 96% or 98% of customers use USSD for requesting that balance. And it's not depends on this for the smartphone or future. They are really more comfortable with USSD requesting for credit than from the app, they had a bank app on their smartphones by us the users differ, requesting this credit for the account.
Brendan Le Grange 16:41
One of the things I want to come back to is you expanded around the world from Azerbaijan. What was that startup ecosystem like then? What's it like now? And what's it been like growing into the world from an uncommon base?
Seymur Mammadov 16:57
A company with a wide footprint all over the world, it's unusual for Azerbaijan.
I mean the technological companies, I know just few of them in our market. It was really challenging time. But in my opinion, that time, when we starting to expand globally, it was much more easy than now. There wasn't this huge compliance system all over the world implemented by the banks and the governments, you just come to the country, provide your passport, establish the company and open the bank account.
Now it's Simbrella with a big history of his operation all over the world. It has now faced with a big problems with bank account opening in different countries, it's really very hard for Azerbaijan company and Azerbaijan citizens to open bank account in, for instance, in Singapore or in Europe.
It's a big problem.
I know that it's tough because of the fighting, please money laundering. But the companies like we act as agencies and really faced with a huge problems for making business and global. They're not about your open bank accounts, because it's a big risk for them because of regulation. It's not their position. It's not their policy is just from the regulatory side. So we were really proud of that.
We are so global, and we are from Azerbaijan, and we have a staff of 100 people, and most of them are citizen of our country. Our country is a young country, you know, it's just 30 years of falling down the Soviet Union and we start to build our own system. So we really know nice, digitalized economy, but our bank system and the FinTech market of Azerbaijan, it's really not developed because we have a very regulated financial system. And the only FinTech services, which are really provided by a lot of companies is just payment systems, money, collections and transactions, the other kinds of services is not allowed by Central Bank.
Brendan Le Grange 19:11
What is your focus on at the moment? Where are you putting your energies? Where are you looking to do new things at the moment,
Seymur Mammadov 19:18
The most challenging project we start in Azerbaijan, we are working with our government with our Ministry of Economy, to build a big platform and ecosystem for supporting small and micro businesses.
And idea was about that, the government has a lot of different kinds of information and data about the businesses, the taxes, which are they are paying and the cashback from the VAT from your purchase and all turnover data about selling the different goods available in the government servers. So we want to build the system when each small business after uploading the application for a smartphones after the remote KYC process called get the first small credit from the government, or maybe from some of the banks are interesting in providing this kind of small services, just give them an opportunity give them the chance to start building their own credit story, because we have the big governmental programme of supporting small business with a natural nice interest rate.
But it's a very bureaucratic structure and, let's say, for the $10,000 $20,000 or $200,000. But the small shop, sometimes you need just $300 of credit for the five days or a month.
And in that time, the banks couldn't provide this kind of services for them, and they going to their maybe mother in law to for several days, and we want to build this ecosystem for providing such kind of support for the small and small businesses. I think that this really nice future if we could build it,
Brendan Le Grange 21:20
if people are listening, and they want to learn more about Simbrella. They want to see how these other projects develop, where's a good place for them to go to find out what you're doing and follow that story.
Seymur Mammadov 21:31
LinkedIn and our website, we are really very responsive. We have email addresses in our website, where they could just send their request to get some more information.
Brendan Le Grange 21:43
Perfect, and that's nice and [email protected]. But I'll also put it in the show notes. It's a really nice website, actually. So go on there and have a look. And I can confirm very friendly on LinkedIn. That's how I got ahold of you again. So yeah, Seymur, thank you so much for for joining me. It's been great hearing your story.
Seymur Mammadov 22:00
Thank you, Brendan.
It was really great to speak with you, and during this conversation, I learned more about myself. Also because your questions. Make a nice journey through my history. Thank you.
Brendan Le Grange 22:16
That's great to hear.
And thank you all for listening.
Please do look for and follow the show on your favorite podcast platform and share the updates widely on LinkedIn where lending nerds are found in our largest concentration. Plus, send me a connection request while you're there.
This show is written and recorded by myself Brendan le Grange in Brighton, England and edited by Fina Charleson of FC Productions.
Credit goes to: https://www.howtolendmoneytostrangers.show/episodes/episode-111
To listen to the episode: https://open.spotify.com/episode/0zSSinwF1dPsaOwYoCRzN1?si=olbBbn2AQ-u-Z8RnvuKQpw&nd=1