New company from GiveDirectly founders aims to streamline payment systems

By Catherine Cheney 09 February 2016

Scheduling cash transfers to recipient mobile phones is possible using the Segovia console. Segovia is a software tech platform that help streamline payment systems. Photo by: Segovia

The Global Innovation Fund announced its first round of investments on Tuesday, the first of which went to Segovia, a software technology platform to streamline payment systems.

Michael Faye and Paul Niehaus, the co-founders of Segovia, launched the company in 2014 in response to some of the challenges they experienced in scaling their other venture, GiveDirectly, a nonprofit organization making cash transfers via mobile phones.

“To realize the gains of increased financial connectivity, we need to dramatically reduce the complexity of bulk payment for NGOs, governments and corporates,” Faye told Devex. "Segovia is a streamlined enterprise platform to pay people securely, efficiently and rapidly in the emerging markets.”

Named after one of the largest aqueducts in the Roman Empire, Segovia is modeled to do for cash distribution what these feats of engineering did for water distribution.

“Today, I think cash transfers are a critical resource for the poor, and we're still unfortunately sending them through leaky pipes,” Faye said. “Segovia hopes to change that.”

Segovia is working to address many of the operational challenges of distributing payments and services in developing countries by replacing tools like spreadsheets with a single, streamlined platform, Faye said. The company, which has seen $15 million in investment so far, allows its partners to integrate across payment providers and countries, so they can schedule, issue, and reconcile bulk payments or other distributions like vouchers more seamlessly.

It should come as no surprise that GiveDirectly is on the Segovia platform, which has allowed the organization to analyze data in real time, automate routine tasks, and track every action taken from donors to recipients in Kenya and Uganda.

Other partners include Save the Children, which is using the platform to distribute relief funds to communities affected by the Ebola crisis, and the International Rescue Committee, which is piloting the use of the technology in Pakistan.

While the rise of the global mobile money market presents the global development community with new ways to serve the poor, it also brings up a number of challenges, like ensuring that payments are going to the right people and developing standards for data security. Financial services companies like Visa, tech giants like Facebook, and startups like Branch, a digital microfinance institution from the co-founder of Kiva, are drawn to this growing opportunity at the intersection of big data and small credit. But the organizations that have traditionally served the poor may lack the lack incentives to make sure those resources actually reach this emerging class of financial consumers as quickly, safely, and easily as possible.

"In a world where the beneficiary is often not the same as the payer, there are weaker incentives for adoption of solutions to improve beneficiary service,” Faye said.

Once organizations commit to digitization and inclusion, the problem becomes how to operationalize it, said Arjuna Costa, a partner at Omidyar Network who has invested in Segovia.

“That is the problem Segovia is tackling,” he said. “They work with the governments and [nongovernmental organizations] to say, ‘You’ve got money to spend, you know you need to track it all the way through, but your biggest challenge is putting all these systems together and interconnecting them and making sure there’s integrity in the system.’”

Segovia has an impressive list of backers who bring cash as well as connections.

The GIF investment is sure to bring new partners in the global development sector. Arif Naqvi, who runs a leading private equity firm, brings contacts in what he calls growth markets. And Reid Hoffman, the co-founder of LinkedIn and an early executive at PayPal, brings unique insights from his success in the tech industry.

“Segovia is really the ideal investment for us,” Nishant Lalwani, senior vice president of GIF, told Devex. “There is a lot of evidence to show that cash transfers are an extremely effective way of delivering aid to the poor in developing countries. However, there is also a lot of data to show that it is extraordinarily expensive and inefficient to deliver cash transfers in some countries.”

Christopher Schroeder, a venture investor and Segovia board member, echoed other investors when he said the co-founders behind the project, and their emphasis on rigorous impact evaluation, were what convinced him to get involved.

But Niehaus and Faye said the experience of their engineers, recruited from top tech companies like Foursquare, will be central to the success of Segovia.

The team has said they will take on deployments, or new projects, only when they believe they can provide a substantial value add for partners. But the company has big ambitions and investors see applications for the technology in other areas including the hundreds of billions of dollars in annual remittances around the world.

“The real question for us is not whether but when,” Schroeder said.

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About the author

Catherine cheney devex
Catherine Cheneycatherinecheney

Catherine Cheney covers the West Coast global development community for Devex. Since graduating from Yale University, where she earned bachelor's and master's degrees in political science, Catherine has worked as a reporter and editor for a range of publications including World Politics Review, POLITICO, and NationSwell, a media company and membership network she helped to build. She is also an ambassador for the Solutions Journalism Network and the Franklin Project at the Aspen Institute.

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