The Long Game of Impact Investing

When I launched the Financial Health Network nearly 13 years ago, no one knew who we were, and virtually no one knew what it meant to be underbanked. All I knew was that I was supposed to figure out how technological changes in financial services could benefit the underserved. So I thought: What if we invested in the most promising innovations we found?

Together with Arjan Schütte (now the managing partner of Core Innovation Capital; back then Financial Health Network employee #3), we put out a call for innovators and a promise of capital, much like we do today with the Financial Solutions Lab. One of the very first companies we found was TIO Networks, a bill payment company founded in 1997 by Hamed Shahbazi.

We met Hamed at an ATM industry conference, where he was showing off his bill payment kiosk. The kiosk enabled people who pay their bills in cash to use the machine, which would suck in the cash and route it to the biller. What was novel about TIO at the time was that Hamed was placing the kiosks in corner stores, gas stations, and other similar venues to meet customers on their turf, in places that were convenient to them. In the early days, before the invention of the iPhone and before “fintech” was a term people used, this was one of the ways we thought technology could improve reach and access.

While we were excited about the technology and the business, we were also incredibly excited by Hamed. He genuinely cared about his customers and was one of the first entrepreneurs we met who was intentionally building a business around the needs of the underserved in a responsible way. He named the business TIO because one of his largest biller partners at the time was Cricket Wireless, predominantly located in the southwestern United States, and he wanted his Latino customers to feel like his company could be trusted like an uncle. He was eager to learn more about the consumer, gobbling up our research and our advice, and he quickly shifted his company’s mission to a focus on the underserved.

We invested a relatively small amount of capital in TIO in December 2005. When Arjan left the Financial Health Network to run Core Innovation Capital, the new fund we had launched, Core also invested in TIO.

Today, TIO serves 14 million consumer bill pay accounts. It has a network of more than 10,000 billers, and it processed 60 million transactions last year from point-of-sale, kiosk, web and mobile channels.

This week, PayPal announced that it was acquiring TIO for $233 million. In a post announcing the acquisition, PayPal CEO Dan Schulman mentions the consistency of TIO’s mission with PayPal’s own vision statement, “to democratize the financial system and enable those who are underserved to improve their financial health.” We share in Schulman’s excitement for what PayPal, now with the talent and technology of TIO, can do for the financial health of consumers.

I often say that the Financial Health Network is playing a very long game. TIO is the poster child for that idea. Early in our existence as an organization, we recognized the value of advancing our mission by providing investment capital to mission-aligned companies. TIO’s acquisition by PayPal proves that this element of the Financial Health Network’s strategy works.

This acquisition represents one of the biggest proof points yet of the Financial Health Network’s belief that bringing together entrepreneurs and incumbents under the banner of financial health can lead to great outcomes for consumers. Think about it: We found a talented, well-meaning entrepreneur and helped convert him into a financial health champion. He built an incredible business around a real consumer pain point, scaled it, and demonstrated it could be done profitably. And now PayPal, a global, publicly-traded company, is aligning itself with TIO’s mission and will scale the business even further.