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Insights from new CFI Fellows research on integrating human touch in Kenya’s digital financial services landscape.

> Posted by Alexis Beggs Olsen, CFI Fellow

Mbugua, owner of a restaurant, a butchery, and a dry goods store in Nairobi, Kenya has actively used financial services to grow his businesses from the meager beginnings of a small stall selling boiled cow heads. He is currently juggling four digital loans and two microfinance loans. Whenever possible, Mbugua prefers to interact with his financers digitally to save time. Yet, like most of the Kenyans my research associate and I spoke with as part of our CFI Fellows research project, Mbugua considers in-person interaction to be critical at certain stages. “Face-to-face is tiresome. There’s a time factor,” he said. “But it’s 100 percent perfect. Your questions will be exhausted. And you can’t negotiate with the phone.”

Our research seeks to understand when and why customers prefer human over digital interfaces across their financial services customer journeys – and vice versa. We focused on value-added financial services, including loans, savings, and insurance, and we chose Kenya because of the country’s deep penetration and market maturity of mobile phone-based financial services. We conducted in-depth qualitative interviews with 104 respondents.

We discovered that a “centaur” solution—one that unites the strengths of both tech and human touch—offers the most promise for both customers and financial service providers (FSPs) targeting the base of the pyramid.

Digital interfaces outperform human interaction in a number of areas: digital services are often more convenient (once you learn how to use them), more predictable and consistent (with the exception of loan approvals and rejections, which are often opaque), and less stressful for customers during collections. However, most Kenyans – even those who already use low-touch digital products – prefer to interact with a person face-to-face at key stages in their customer journey. We found that while Kenyans are very comfortable conducting transactions digitally, other key aspects of the financial service customer journey are not adequately handled by digital means alone.

Like most of our respondents, Mbugua wants to interact directly with a person to accomplish three critical tasks:

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> Posted by Elisabeth Rhyne, Managing Director, CFI

Client of Akiba Bank in Tanzania

Around the world today, financial service providers, technology entrepreneurs and policy makers are engaged in building a financial system that reaches out to previously excluded people, such as lower income people, very small businesses, rural dwellers, and women. Although this work is carried out in the name of the consumer, all too often, scant attention is paid to the real needs and desires consumers and very small enterprise owners have.

With that in mind, here is a thought experiment. A thought experiment is an “exercise of the imagination used to investigate the nature of things.” The question for this experiment is this:

Imagine that consumers were the creators of the inclusive finance system. What would such a system look like?

What characteristics would emerge if the needs, desires and preferences of the target customers of financial inclusion were the driving force to shape their services? The observations here are drawn from consumer research conducted or commissioned by the Center for Financial Inclusion, including research in Peru, Pakistan, Georgia and Benin for the Client Voice project of the Smart Campaign, in Kenya and India for our project on financial health, in India and Mexico for our study of financial capability, and again in Kenya and India for two CFI Fellows’ projects on the role of human touch in the digital age. I offer ten propositions based on this research.

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CFI Fellow Patrick Traynor, an Associate Professor in the Department of Computer and Information Science and Engineering (CISE) at the University of Florida, explains the second part of his research effort on the security and privacy of data in digital lending applications. Patrick’s previous post, explaining the first part of his research on evaluating the privacy policies of digital lending applications, can be found here.

“I’m sorry, but we are just not interested in providing security for our customers.”

Here is a phrase that you are unlikely to see from any company, at least if they want to stay in business. In fact, you are far more likely to see statements to the opposite. Yet time and again, the same services that tout security as something they care about prove to be tremendously vulnerable. Think about it – when was the last week that you didn’t hear about stolen Bitcoins, ransomware attacks, or data breaches?

If companies care so much about security, what is going on?

What Does “Secure” Mean?

Security is one of the least well-defined terms I know. By itself, it completely lacks context. Secure against what? Against whom? Under what conditions? Based on what assumptions?

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> Posted by Shreya Chatterjee, Senior Research Associate and Misha Sharma, Project Manager, IFMR LEAD

Group of people waiting to make their transactions at Padma’s house

It was almost three in the afternoon when we arrived at Padma’s house in the sleepy village of Katpadi in Tamil Nadu. In a state where 55 percent of women in rural areas don’t participate in the labor force, Padma is the only business correspondent (BC) in her village, working for the sole bank in the area. In 2006, the Reserve Bank of India (RBI) passed guidelines that allowed banks to employ third party agents, using decentralized technology to provide banking services in rural and remote areas.

Padma works 12 hours a day, providing localized basic banking services to her immediate community. As a business correspondent, she helps customers open bank accounts, deposit and withdraw cash often linked to government schemes, link Aadhaar IDs with banking accounts, and even pay utility bills.

As part of our CFI Fellowship study on effective human touch in India’s digital age, we made a visit to Padma’s village to understand her work process as a business correspondent, the challenges she faces in her work, and how she perceives her customers’ readiness to move from cash based to digital financial services channels. There are pockets in India of staggering innovation and adoption of digital financial services. But they aren’t widespread, and the optimal mix of human touch versus digitized customer experiences remains elusive. Our CFI Fellowship project aims to better understand the barriers impeding digital financial services and how human touch can help to overcome these obstacles and improve client outcomes more broadly.

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> Posted by Alexis Beggs Olsen, CFI Fellow and Independent Consultant

Building the right channels to serve the financially excluded is one of the most important (and daunting) challenges facing senior executives, boards and investors in the financial inclusion space. They are not alone. As digital technology disrupts a wide swath of industries, leading global consulting firms have engaged in research to understand how best to help companies configure and prioritize digital and human-based customer engagement channels. While affirming the importance of digital innovations and ongoing investment therein, Accenture also sees a need for curbed enthusiasm. “Customers aren’t as predictable as we like to think,” cautions a recent Accenture Strategy paper. “Profitability resides in the digital / physical blur.” Verint also commissioned research in twelve countries that found customers want “a human element” to remain part of customer service and that “those who receive more ‘human’ or traditional customer service display more positive behaviors toward brands.”

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CFI Fellow Patrick Traynor, Associate Professor in the Department of Computer and Information Science and Engineering at the University of Florida, explains his research on the privacy and security of data in mobile lending applications.

We have all seen privacy policies before: sign up for a credit card and you receive a pamphlet with tiny print detailing your bank’s particular policy. Create an account at an online service and you will get a link to something similar from it, too.  These policies are supposed to provide consumers with detailed information about which pieces of their data will be stored, how they might be used, with whom they can be shared, and how they will be protected. Privacy policies are now mandatory for financial institutions in developed nations, and here in the United States we are provided protection by laws such as the “Gramm-Leach-Bliley Act” (also known as the Financial Services Modernization Act of 1999).

Unfortunately, the reality of such policies is often not so clear. Many of these policies are written by attorneys with the sole intention of being consumed later on by other attorneys. That means that, in some cases, even highly educated individuals without a degree in law may not be able to fully understand what they are reading. What chance does the common consumer have to understand such policies?

You would think that consumers would be up in arms. But, let’s be honest – most people have never actually read these privacy policies, yet alone tried to understand them. Have you?

So then why is it important to examine the state of privacy policies?

Let me offer first an insight into the role of studies like ours and then some comments on why privacy policies for digital credit matter.

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As soon as we solve the 6,000 languages problem

The following post is from Kas Kalba, President of Kalba International, Inc., a global telecom consultancy. It’s drawn largely from Kalba’s forthcoming book Mobiles We Don’t Know. In this post Kalba discusses three key obstacles impeding the proliferation of smartphones. To learn about how limited network coverage is hindering the utility of smartphones, check out CFI Fellow Leon Perlman’s recent report.    

Major languages by number of native speakers (click to enlarge)

When a highly reputable publication announces “Almost two-thirds of the human population is connected to the internet by smartphones,” it signals how loose our assumptions about technology adoption have become. This estimate, which implies roughly 5 billion users compared to the total global population of 7.5 billion, is not even close. The actual number is about 2 billion, when counting individual smartphone users—not the same as smartphones sold to date. So why is the smartphone still not in the hands of 5.5 billion potential users—or 4.5 billion if we discount a billion as under age?

If adoption of smartphones progresses at the same pace as the initial adoption of mobile phones, connecting 3 more billion people to smartphones could take 10 or more years. Even this rate would leave 2.5 billion of us without smartphones.

Based on Kalba International’s work in Africa, Asia and Latin America, we think there are three factors involved—the language gap, the income gap, and the recharging gap. This is in addition to extending internet coverage to many areas without it.

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> Posted by Patrick Traynor, Associate Professor, the University of Florida

CFI Fellow Patrick Traynor, an Associate Professor in the Department of Computer and Information Science and Engineering (CISE) at the University of Florida, is launching his research effort on the security of data in mobile lending applications.

Mobile phones and networks are transforming the world of financial inclusion. However, we know that we cannot simply “copy and paste” traditional financing mechanisms into this mobile context and expect widespread inclusion. For example, the traditionally-excluded often lack the standard data lenders use to underwrite credit decisions (such as government audited tax forms, formal pay stubs, property deeds, and so forth). A plethora of companies are attempting to measure creditworthiness using alternative data – including the data trail created through mobile money applications. Alternative data for underwriting holds the potential to dramatically expand access to credit if successful, but it also poses new challenges.

For instance, how secure is data used in digital credit?

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> Posted by Elisabeth Rhyne, Managing Director, CFI

What a marvel it is that a couple living in a remote region of the world, despite limited education and financial means, could use their cell phones to receive money from their children in the capital city! Like many techno-wonders of our world, the mobile financial services people all over the world use operate atop a complex set of distinct technologies zipped together. A host of systems work beneath every successful transaction, each driven by and subject to forces specific to that system, not all of which prioritize mobile money. It’s not a wonder, then, when things sometimes fall apart.

CFI Fellow Leon Perlman has the technical chops to unpack these systems, and this is exactly what he has done in his research for us. He went to 12 countries and tested multiple mobile financial services, the main handset brands available, and their component hardware and software. CFI just released his report, Technology Inequality: Opportunities and Challenges for Mobile Financial Services, and I recommend it to the technology savvy and novice alike.

I suggest using Perlman’s work as a mobile money technology primer. For example, do you understand the difference between Unstructured Supplementary Service Data (USSD), SIM Application Toolkit (STK) and Java-based applets used in mobile financial services? I didn’t. Now I know that each technology has its own merits and shortcomings, and that in the dynamic telecoms market the relevance of each is continually shifting. Leon’s paper explains these interface technologies, along with handset features and mobile signaling technologies—and more important, how they work together, or sometimes don’t. Along the way, readers are introduced to the many companies and government bodies involved: telecoms regulators, banking authorities, competition regulators, MNOs, handset manufacturers, operating system providers, user interface designers and financial institutions. These organizations have a wide range of objectives, interests and constraints, making it challenging to bring all the requirements together into a functional operation and viable business model.

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> Posted by Bobbi Gray, Research Director, Grameen Foundation

We need to ensure products and services help family units, not just individuals, thrive.

Writing in 1982, about Fred Astaire, Robert Thaves wrote “Sure he was great, but don’t forget that Ginger Rogers did everything he did, backwards…and in high heels.” Since then, this quote about two legendary dancers has been used to celebrate the skills and talents of women and to demonstrate their ability to juggle complexity and pull it off gracefully.

At Grameen Foundation, we celebrate women for the potential they carry for ending poverty and hunger. In fact, some statistics suggest that if women farmers had the same resources as their male counterparts, the number of hungry people in the world could be reduced by 150 million. Beyond access to quality farm inputs, credit, and land, we also know that when women have equal access to education, health services, and business services they can thrive economically. Helping mothers be healthy before and during pregnancy also results in healthier children and more productive societies. Women are a key driving force against poverty.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.