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> Posted by Lizzy Bolze, Project Specialist, Investing in Inclusive Finance, CFI

Digital trends in the African financial inclusion sector are evolving quickly. With the entrance of fintech startups and a more tech savvy client base, the role of corporate governance is more important than ever. As David Kombanie, Board Member of VisionFund put it: “Disruptive innovations are here with us. It’s change or die.”

Kombanie, along with more than 50 CEOs, board members, investors, fintech leaders, and regulators from Africa’s financial inclusion industry, engaged in a peer-learning exchange roundtable, Governing in a Digital World. This video provides an overview of discussions and key takeaways from the participants:

Governance for Financial Service Providers in a Digital World

The roundtable’s peer-to-peer exchanges provided three important governance considerations and recommendations for the boards of financial service providers (FSPs) as they evolve with the digital world:

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Key fintech trends include publishing open APIs, which helps to expand customer bases and improve services offerings 

> Posted by Geraldine O’Keeffe, Chief Innovation Officer, Software Group

The following post is part of a blog series spotlighting perspectives and experiences from the Africa Board Fellowship.

Access to financial services in Africa is on the increase, up 10 percent from 2011 to 2014, according to the Global Findex. This change can largely be credited to digital financial services. New entrants to the financial sector such as telcos, fintechs, and in the near future bigtechs like Facebook and Google are all offering technology-centered financial services that are changing the landscape and posing a competitive threat to traditional financial services providers (FSPs). At the same time, new technologies can allow traditional FSPs to expand their outreach and radically improve operational efficiency.

Considering both challenges and opportunities, now, more than ever, financial institutions of all stripes have to accept that technology and innovation are integral to their business strategy. These changes require a shift in culture throughout the institution and among the leadership. Board members, for example, have to embrace this change, understanding the current industry trends, experiencing these financial innovations firsthand, and taking concrete actions.

Through our work with board members of financial service providers in the Africa Board Fellowship program, we have identified three key fintech trends especially relevant for institutions in Africa focused on financial inclusion.

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Microfinance institutions are uniquely positioned to benefit from emerging technologies but one key input remains largely missing

> Posted by Jacqueline Urquizo, Principal, Sygoes

When most people talk about digital finance, they are referring to business-to-customer (B2C) solutions like mobile banking products and other digital payment mechanisms. E-payments undoubtedly have the potential to reach and benefit remote populations, but there are other fintech solutions that make me even more enthusiastic. Though perhaps less developed, innovative business-to-business (B2B) solutions represent a tremendous boon for microfinance institutions (MFIs) and other institutions looking to advance financial inclusion. Among their many benefits, new B2B solutions have the potential to improve internal operational efficiencies drastically, lowering the cost of doing business, which in turn supports lower prices for financial services and expanded access to excluded populations.

A few examples of B2B fintech applications are: artificial intelligence (AI) that provides cognitive analysis and advice to credit officers evaluating the creditworthiness of previously-unbanked individuals; distributed ledger technologies (blockchain) that enable the viability of new forms of collateral that wouldn’t be otherwise trusted or usable without digitizing them in a ledger of value; and data analytics to better predict risks such as liquidity issues, client desertion, or loan default.

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Insights from a global seed-stage investor in fintech for the underserved

> Posted by Amee Parbhoo, Director of Investments, Accion Venture Lab

The following post was originally published on the Accion blog.

We’re in the middle of a fintech boom that could change the world. As a seed-stage investor in fintech for the underserved, Accion Venture Lab continues to see innovative startups increasing access to, reducing the cost of, or improving the quality of financial services for underserved individuals and small businesses around the world.

As we kick off a new year, we’re particularly excited about seven areas of startup-led innovation.

Digital neobanks

SmartMEI is a digital neobank serving small businesses in Brazil

In the last few years, we’ve seen the emergence of a number of digital neobanks. Neobanks offer a user-friendly digital interface and a platform for financial services without maintaining their own banking licenses. With a focus on user experience and digital applications, neobanks stand to offer faster and better service to the underserved. Moving forward, neobanks will need to provide both a compelling product for a targeted customer segment and a suite of offerings that go beyond basic accounts or credit cards to retain customers and improve unit economics. Innovators in this space include NOW Money, which offers migrant workers in the UAE a platform to more efficiently transfer remittances and access to other products and services over time, and SmartMEI, which offers small businesses in Brazil a free tax tool and access to a broader set of financial services.

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New data from InterMedia breaks down the impact of demonetization on financial inclusion across gender, locality, income levels, account types, and more. 

> Posted by Nadia van de Walle, Senior Research Manager, Financial Inclusion Insights, InterMedia

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Demonetization had a strongly positive effect on financial inclusion, leading to increases in account registration and active and advanced use of registered accounts, according to our data. Perhaps surprisingly, given some of the discussion in the financial inclusion community over the last year predicting demonetization increasing electronic payments, these account registration increases were mostly among bank accounts rather than mobile wallets.

InterMedia’s fourth annual Financial Inclusion Insights (FII) survey was underway on November 9, 2016 when approximately 85 percent of the banknotes in circulation in India were invalidated by the policy known as demonetization. The invalid notes had to be deposited in a bank or exchanged for new ones at banks and other financial institutions. The timing of demonetization in relation to InterMedia’s activities presented an opportunity for us to measure the impact on financial inclusion using a panel survey of 1,600 randomly selected individuals in the states of Gujarat, Madhya Pradesh, and Rajasthan. These respondents were first interviewed for the FII survey roughly one month prior to Nov. 9, and then re-interviewed seven months later.

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> Posted by Nadia van de Walle, Senior Research Manager, Financial Inclusion Insights, Intermedia

The State Bank of Pakistan’s (SBP) National Financial Inclusion Strategy (NFIS), launched in May 2015, set an ambitious goal of expanding access to financial services from 10 percent of adults to at least 50 percent by the year 2020. Intermedia’s newly-released Financial Inclusion Insights (FII) data suggests that, as of 2016, Pakistan’s progress was not yet on a trajectory to get to 50 percent. It also suggests ways Pakistan could improve the rate of progress.

FII’s new 2016 Pakistan Annual Report and Survey Data finds that financial access rose only incrementally, from 15 percent to 16 percent, in 2016. More than 45 million more adults would need to take up a formal financial account for the country to achieve 50 percent financial inclusion as defined by the NFIS. Further, even if access is improved, registration and regular use of accounts may lag and prove a steeper climb. The percentage of adults holding registered accounts with a full-service financial institution did not increase at all over the last year, measuring 9 percent in 2015 and 2016. Similarly, active registered users over the same period remained unchanged at 8 percent.

However, these figures could be improved if the gap between the formal products on the market and Pakistanis’ actual, day-to-day financial needs and preferences is addressed, FII data indicates.

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> Posted by Center Staff

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The volume of data in the digital universe doubles in size roughly every two years, estimates indicate. The phrase “data rich” has become common business parlance. In the financial inclusion sector, big data is revolutionizing credit underwriting, product development, client segmentation, financial capability-building, and more. But how is this revolution actually happening? For many banks, it’s through partnerships with fintechs. Ujjivan, one of the largest microfinance institutions in India, recently chartered as a small finance bank, had until recently a limited portfolio at the SME level, which was hindered by high operating costs. This changed thanks to a partnership with the Bangalore-based fintech Artoo.

This partnership is described in CFI’s new joint-report with the Institute of International Finance (IIF), How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines. We discovered dozens of partnerships between mainstream financial institutions and fintechs in emerging markets, and we detailed the workings of 14 of them. The partnership between Ujjivan and Artoo is just one example among many of how financial institutions are increasingly turning to fintechs to improve how they effectively collect, use, and manage data.

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> Posted by Dr. Katharine Kemp, Research Fellow, UNSW Digital Financial Services Regulation Project

The following post was originally published on the IFMR blog. 

Financial inclusion is not good in itself.

We value financial inclusion as a means to an end. We value financial inclusion because we believe it will increase the well-being, dignity and freedom of poor people and people living in remote areas, who have never had access to savings, insurance, credit and payment services.

It is therefore important to ensure that the way in which financial services are delivered to these people does not ultimately diminish their well-being, dignity and freedom. We already do this in a number of ways – for example, by ensuring providers do not make misrepresentations to consumers, or charge exploitative or hidden rates or fees. Consumers should also be protected from harms that result from data practices, which are tied to the provision of financial services.

Benefits of Big Data and Data-Driven Innovations for Financial Inclusion

“Big data” has become a fixture in any future-focused discussion. It refers to data captured in very large quantities, very rapidly, from numerous sources, where that data is of sufficient quality to be useful. The collected data is analysed, using increasingly sophisticated algorithms, in the hope of revealing new correlations and insights.

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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 Kimberly Lei Pang, Digital Learning Specialist, UNICEF

In the story of Ali Baba and the 40 Thieves, the magical word “sesame” was used to open the seal of a cave where Ali Baba found hidden treasure. In China today, the same word is connected to another kind of magic, one that reveals hidden identities of the socially and economically disadvantaged. Sesame Credit (“芝麻信用” in Mandarin) is a product launched by Alibaba that pulls from transaction records on e-commerce platforms to understand a person or company’s creditworthiness. Such innovation in credit scoring is part of the “social credit system” that the Chinese government is building to make up for the longstanding shortage of credit data.

Access to credit, a major indicator of financial inclusion, has gained increasing attention from Chinese policymakers in recent years. For a country experiencing an economic slowdown and widening income gap between the rich and the poor, credit accessibility has the potential to spur growth and level the playing field for the poor. However, despite China’s efforts to improve financial access, a large portion of its population neither uses nor has access to credit. Data from the World Bank’s Global Findex study showed that Chinese people (aged 15+) have relatively high levels of formal bank account ownership (79 percent, 2014) but low levels of credit usage (14 percent, 2014). In fact, China’s formal credit use is the lowest among the five BRICS economies. Aside from the rigidity and costliness of financial institutions, a significant barrier to borrowing is the lack of reliable credit scoring in China. Established just 11 years ago, China’s credit bureau CCRC covers credit profiles for only a quarter of China’s 1.4 billion population and shares that information only with selected banks. Lenders thus often have no access to borrowers’ financial histories and tend to make rather arbitrary decisions on borrowers’ creditworthiness. As a result, many individuals and microenterprises find it difficult to get a loan, as steady employment and collateral assets are commonly required for formal credit.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.


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.