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> Posted by Alexandra Rizzi, Deputy Director, the Smart Campaign
As part of the Smart Campaign’s #FintechProtects mini campaign, we’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. Learn more and get involved at #FintechProtects.
Agent networks play an integral role in increasing financial access by helping financial service providers broaden their reach without building more branches. For an agent network to succeed, however, the client must be able to trust the agent and perform transactions with confidence. To win that trust, providers need to ensure that agents perform up to a standard that minimizes customer harms. They need to practice responsible agent management. Read the rest of this entry »
> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign
The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.
Digital credit is growing fast in developing markets, particularly in Sub-Saharan Africa. Lenders such as M-Shwari, Jumo, M-Pawa, Eazzy Loan, Branch, EcoCashLoan, Timiza, KCG M-Pesa and others are attracting interest and investment. They are seen as having the potential to improve financial access and to make banking with poor clients more feasible and sustainable through technology that reduces underwriting and infrastructure costs. They offer small or nano loans starting as low as $5 or $10 dollars, make use of simple mobile user interfaces, and provide funds in real-time.
> Posted by Elisabeth Rhyne, Managing Director, CFI
When my son Gordon went to the senior prom in his rented tuxedo, he and his girlfriend were a gorgeous sight (see photo). Next day, he was supposed to return the tuxedo, but he couldn’t find one of the patent leather shoes. On the day after that the rental shop called me to complain that the tuxedo was late. Gordon said he had already returned it. I told the shop there must be some mistake. This went on for several days, Gordon insisting he had returned the tux, while I defended him to an increasingly irate tux shop. After a week, I went looking and found the tux stuffed into the bottom of a backpack, along with the shoe.
I came down pretty hard on Gordon for that. Why would an intelligent young man lie repeatedly to his parents over a simple problem that was not going to disappear? Why didn’t he admit the problem on day one instead of digging himself into a deep hole? Why didn’t he take the obvious action of searching for the tux? He paid a big late fee, but the damage to our trust in him was far worse.
I’m telling this story because it reminds me of the executives at Wells Fargo Bank. The CFPB has just come down pretty hard on the bank for opening unauthorized bank and credit card accounts for 2 million customers in a practice involving over 5,000 members of its staff. As a result, the bank is now suffering a $185 million fine, the firing of thousands of staff, and, in all likelihood, a major loss of customer trust.
> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign
The following is part of the Smart Campaign’s #FintechProtects mini campaign. We’re raising awareness about responsible digital financial services, spotlighting work from the Smart Campaign and others, and engaging with industry actors on how fintech can move forward in a way that’s best for clients. For more information on #FintechProtects, and to get involved, click here.
Do you have a credit card you don’t know about? Last week, we learned that over 5,000 employees across Wells Fargo, the United States’ biggest home lender and one of the nation’s largest banks, had opened at least two million unauthorized deposit and credit card accounts in clients’ names. In an effort to meet high sales targets and earn bonuses, bank employees transferred funds from customers’ existing authorized accounts to unapproved accounts in customers’ names. Clients had not consented and were mostly unaware of this, despite incurring late fees and other charges on these new unapproved accounts. The widespread practice had somehow gone undetected for 5 years.
> Posted by Jeffrey Riecke, Communications Specialist, CFI
Recently news broke that Google is developing an ambitious online platform that aligns with India’s flagship Pradhan Mantri Jan Dhan Yojana (PMJDY) financial inclusion scheme, and will support users in building their financial literacy and accessing appropriate financial services. If the platform does indeed come to fruition, and functions as intended, it could mean huge benefits for the country. It is reported that the PMJDY program has succeeded in enabling every household in the country in having a formal bank account, and as of the end of 2015, according to the Finance Ministry, 60 percent of the accounts opened under the program have been used and have a balance. However, concerns over account dormancy and lack of account usage in the country persist, as do concerns over financial capability. A platform that empowers Indians to best use PMJDY financial services, harnessing the horsepower of Google, could be a game-changer.
> Posted by Vitas Argimon, Credit Suisse Global Citizen Volunteer
With financial technology disrupting the industry, banks are turning to startups to help them innovate, and startups are turning to banks to help them scale. Banks are increasingly connecting with financial technology startups to reach the unbanked and underbanked. In the report, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, CFI and the Institute of International Finance (IIF) found that many banks are building a vast ecosystem of partnerships to expand their reach and service offerings and to improve internal processes. This growing interaction between legacy providers and new providers is taking a variety of forms. Many larger banks are engaging with startups in multiple ways, from partnering with the firms to providing support to incubate new firms. In my deep-dive into the ecosystem of this engagement, I discovered three primary types of interaction.
> Posted by Sonja Kelly, Director, CFI
Weather-indexed insurance is brilliant. It’s just not working.
It’s brilliant because it solves one of the basic challenges of insurance: moral hazard. Under the principle of moral hazard, having insurance tends to make an individual’s behavior riskier, increasing the likelihood that the product will be used. If I have fantastic health insurance, for example, I may be more likely to make riskier life decisions because I don’t feel the financial effects of the consequences of those decisions quite so acutely. If insurance is tied to the weather, however, nothing an individual does (unless you believe in the efficacy of a rain dance) will “trigger” the insurance.
Weather-indexed insurance is not a new phenomenon. Over the last decade we’ve heard exciting stories about weather-indexed crop microinsurance and the lifeline it offers to farmers given our world’s quickly-changing climate. Weather-indexed insurance was bundled with agricultural inputs like seeds or livestock, and the product was lauded as a way to increase the inclusion of poor people in insurance.
Amazing, right? So why, after a decade, aren’t customers buying? In India, for example, only 5 percent of farmers have taken it up where available.
Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Specialist, CFI
Going door-to-door to conduct surveys is expensive. Going door-to-door to conduct surveys assessing household consumption and poverty levels in far-flung areas around the world is even more expensive. And reliable data, of course, is crucial to financial inclusion and other international development efforts.
In recent years, the use of nighttime satellite imagery capturing civilizations’ lights or lack thereof has risen as a means to learn more about an area’s poverty levels without cumbersome surveys. But with these images alone, the picture is incomplete. A new project from a research team at Stanford University devised a computer model that brings poverty assessment into sharper focus. The model accurately predicts poverty levels, an ability built through machine learning using nighttime satellite imagery, high-resolution daytime satellite imagery, and household survey data. In fact, the model is able to predict up to 75 percent of the variation in local-level economic outcomes, and beats the nightlight models nearly all the time.
How does the model work and what are its limitations?
> Posted by Vitas Argimon, Credit Suisse Global Citizen Volunteer
This post is part of a multi-post series focused on partnerships between commercial banks and financial technology startups.
(click to enlarge)
Today’s financial sector narrative pits the new guy against the old guy. In the case of financial services, this narrative, as it is often portrayed, places commercial banks, the legacy providers, in direct competition with startups, with both parties vying for customers in a game defined by technological advances. While this narrative sometimes plays out in real life, it leaves out the complex ecosystem of interaction between the old and the new. In fact, when it comes to reaching new customer segments, old players are increasingly turning to startups.
In The Business of Financial Inclusion: Insights from Banks in Emerging Markets, CFI and the Institute of International Finance reveal that commercial banks are partnering with fintech startups in their efforts to reach the unbanked and underbanked. As challenges by tech-enabled competition mount, banks are seeking to link-up with startups as they see opportunities to reach new markets, bring down costs, and/or enhance their service offerings. Startups offer agility, a proclivity for risk-taking, and a disruptive mindset. On the other hand, banks already have the customer scale, comprehensive product portfolio, robust infrastructure, deposit insurance, branding, and experience/expertise. (See a full list of the relative strengths of banks and startups at right.) The combination of these strengths can be especially enabling when seeking out previously unreached population segments because the business models for serving those segments often depend on technologies that bring down costs. Startups can offer banks the tools they need to serve lower-income customers that would be difficult to serve within the confines of their traditional banking models. At the same time, many startups need access to customers and financial resources that banks can provide.
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