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A Middle Man Could Bring Smartphones to Millions of Mexicans for the First Time

In Mexico, a pioneering company uses sophisticated data sets to replace credit scores and provide access to mobile phones and the internet.

After two years of intentionally losing money in a very smart way, a Mexican cell phone company is set to change the way the country’s consumers use mobile phones to access the internet. If their plan works, it could transform not only the Mexican phone industry, but consumer finance systems in developing countries around the globe.


When you bought your cell phone, you might have earned a few hundred dollars in discounts in exchange for the promise of sticking with your carrier for two years. Those shackling cell phone contracts might seem like a hassle, but they’re a first-world luxury. Mobile plans that bill you later, rather than forcing you to pay upfront, end up saving you money and making your life easier.

“When you're 35 years old, you have a job, you have a family, being on prepaid and running out of minutes in the middle of a conversation, or not having access to a data plan because you're buying megabytes on a one-off basis at the convenience store, can be a huge deterrent,” says Gabriel Manjarrez, CEO of Mexican cell service provider Micel.

A prepaid plan is essentially a loan from the cell phone company to the user—the company provides airtime now if the user promises to pay it back later. But that only works if the phone company is confident it'll be paid back. Mexican phone companies have a difficult time maintaining that confidence because 85 percent of Mexicans don’t have a credit card or the kind of payment histories that make for a good credit score. Consequently, 85 percent of Mexican cell phone users have prepaid accounts without consistent search access.

To get a credit card, you often need a credit card. That's a non-starter for most Mexicans, especially those working in the informal economy or without a history of paying bills under their own name—TV companies won't install a cable box for someone without a credit card, for example. Those who do have a credit card often pay twice the interest rates for the same card as an American would, so even some who would be eligible don't enroll.

“Not having a credit card becomes a tax on people,“ Manjarrez says. “So what we've done is we went to the carriers and we said, ‘You don't actually need a credit card in order to give someone a post-paid plan. What you need is someone to guarantee that person's payment.’"

Micel buys time from cell carriers and resells it to clients who can't otherwise get a contract. The company only uses Android smartphones with data plans, and many of their customers are getting consistent internet access for the first time. Forty percent of clients don’t have email addresses when they sign up, so a Micel agent must talk them through setting up a free webmail account, like Gmail or Yahoo. “It’s like our customers are living in 1996,” Manjarrez says.

Helping them get to 2012 can have a real impact on their lives: One study found that in Brazil, giving people access to internet search increased their personal GDP by 0.5 percent, largely by helping them find cheaper goods and services more efficiently.

In lieu of a credit history, Micel performs a customized background check, a system that could point to the solution for all kinds of industries and billions of consumers worldwide. The company piloted its method for the last two years, using investment funding from socially minded venture capital firms like the Omidyar Network to give cell phone plans to Mexicans with no credit history. The company is tolerating early losses in order to build a predictive data set it hopes will replace traditional credit scores for people who have never borrowed money. “The best way to understand whether somebody will pay you is by putting them in the position to pay you, and then seeing if they do or if they don't,” Manjarrez says of his gamble.

Micel, originally called Finestrella, collects heaps of data on each user—everything from personal information to user feedback. Manjarrez and co-founder Pedro Zayas, an MIT-trained computer scientist, asked questions about customers’ employers, who they live with, how many children they have, where they live, and more. “This is true big data play,” Manjarrez says. “Plus we gather outside data. So we go into social networks and gather data from them.”

But his customers aren’t on Facebook, so when Manjarrez says social networks, he means real life. Micel agents call up customers’ neighbors, school friends, even mothers-in-law. “You would be surprised how many people will give you a phone number of someone and then that someone will say, 'No I don't recommend them, he owed me money and he didn't pay me back,’" Manjarrez says.

Micel also taps publicly available datasets, then combines all the information in an algorithm designed by Zayas to produce a credit score for someone without a credit history—a potential gold mine considering how many new customers the model could create for the banking, credit card, and phone industries, among others.

“We reject about 40 percent of the people” who apply, Manjarrez says, noting that’s down from 70 percent. “Our defaults have gone down significantly.” Micel is still losing money, but Manjarrez expects to turn the corner into the black this year, and then consider expansion into other industries.

“Banks are very happy that we exist,” Manjarrez says, fully aware that if his smartphone plan works, he’ll be in position to help finance a large swath of Mexican consumers.

Image courtesy of Micel.mx

Articles

The healthcare systems in the United States and the United Kingdom couldn't be more different.

The UK's National Health Service is the largest government-run healthcare system in the world and the US's is largest private sector system.

Almost all essential health services in the UK are free, whereas in America cost can vary wildly based on insurance, co pays and what the hospitals and physicians choose to charge.

A medical bill in the US

One of the largest differences is cost. The average person in the UK spends £2,989 ($3915) per year on healthcare (most of which is collected through taxes), whereas the average American spends around $10,739 a year.

So Americans should obviously be getting better care, right? Well, the average life expectancy in the UK is higher and infant mortality rate is lower than that in the US.

RELATED: The World Health Organization declares war on the out of control price of insulin

Plus, in the U.S., only 84% of people are covered by private insurance, Medicare or Medicaid. Sixteen percent of the population are forced to pay out of pocket.

In the UK, everyone is covered unless they are visiting the country or an undocumented resident.

Prescription drugs can cost Americans an arm and a leg, but in the UK, prescriptions or either free or capped at £8.60 ($11.27).

via Wikimedia Commons

The one drawback to the NHS system is responsiveness. In the UK people tend to wait longer for inessential surgeries, doctor's appointments, and in emergency rooms. Whereas, the US is ranked as the most responsive country in the world.

RELATED: Alarmingly high insulin prices are forcing Americans to flock to Canada to buy the drug

The New York Times printed a fair evaluation of the UK's system:

The service is known for its simplicity: It is free at the point of use to anyone who needs it. Paperwork is minimal, and most patients never see a bill. … No one needs to delay medical treatment until he or she can afford it, and virtually everyone is covered. …

According to data from the Organization for Economic Cooperation and Development, the United States spent 17.2 percent of its economic output on health care in 2016, compared with 9.7 percent in Britain. Yet Britain has a higher life expectancy at birth and lower infant mortality.

Citizens in each country have an interesting perspective on each other's healthcare systems. UK citizens think it's inhumane for Americans have to pay through the nose when they're sick or injured. While Americans are skeptical of socialist medicine.

A reporter from Politics Joe hit the streets of London and asked everyday people what they think Americans pay for healthcare and they were completely shocked.

Health

Bans on plastic bags and straws can only go so far. Using disposable products, like grabbing a plastic fork when you're on the go, can be incredibly convenient. But these items also contribute to our growing plastic problem.

Fortunately, you can cut down on the amount of waste you produce by cutting down on disposable products. And even more fortunately, there are sustainable (and cute) replacements that won't damage the environment.

Coconut bowls


Cocostation

Who says sustainable can't also be stylish? These cute coconut bowls were handmade using reclaimed coconuts, making each piece one of a kind. Not only are they organic and biodegradable, but they're also durable, in case your dinner parties tend to get out of hand. The matching ebony wood spoons were polished with the same coconut oil as the bowls.

Cocostation Set of 2 Vietnamese Coconut Bowls and Spoons, $14.99; at Amazon

Solar powered phone charger

Dizaul

Why spend time looking around for an outlet when you can just harness the power of the sun? This solar powered phone charger will make sure your phone never dies as long as you can bask in the sun's rays. As an added bonus, this charger was made using eco-friendly silicone rubber. It's win-win all around.

Dizaul Solar Charger, 5000mAh Portable Solar Power Bank, $19.95; at Amazon, $19.95; at Amazon

Herb garden kit

Planter Pro

Put some green in your life with this herb planter. The kit comes with everything you need to get a garden growing, including a moisture meter that helps you determine if your herbs are getting the right amount of food to flourish. All the seeds included are certified to be non-GMO and non-hybrids, meaning you can have fresh, organic herbs right at your fingertips.

Planter Pro's Herb Garden Cedar Planter, $39.00; at Amazonedar Planter, $39.00; at Amazon

Reusable Keurig cups

K & J

Keurig cups are convenient, but they also create a ton of plastic waste. These Keurig-compatible plastic cups are an easy way to cut down on the amount of trash you create without cutting down on your caffeine. Additionally, you won't have to keep on buying K Cups, which means you'll be saving money and the environment.

K&J Reusable Filter Cups, $8.95 for a set of 4,; at Amazon

Low-flow shower head

Speakman

Low-flow water fixtures can cut down your water consumption, which saves you money while also saving one of the Earth's resources. This shower head was designed with a lighter flow in mind, which means you'll be able to cut down on water usage without feeling like you're cutting down on your shower.

Speakman Low Flow Shower Head, $14.58; at Amazon

Bamboo safety razor

Zomchi

Instead of throwing away a disposable razor every time you shave, invest in an eco-friendly, reusable one. This unisex shaver isn't just sustainable, it's also sharp-looking, which means it would make a great gift for the holidays.

Zomchi Safety Razor, $16.99; at Amazon

The Planet
Instagram / Leonardo DiCaprio

This August, the world watched as the Amazon burned. There were 30,901 individual fires that lapped at the largest rainforest in the world. While fires can occur in the dry season due to natural factors, like lightning strikes, it is believed that the widespread fires were started by loggers and farmers to clear land. Brazil's president, Jair Bolsonaro, cites a different cause: the actor Leonardo DiCaprio.

DiCaprio wasn't accused of hanging out in the rainforest with a box of matches, however President Bolsonaro did accuse the actor of funding nonprofit organizations that allegedly set fires to raise donations.

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The Planet