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In the era of digital credit, we need not just new laws, but also new mental models for responsible digital credit provision.

> By John Owens, CFI Fellow

Responsible Digital_Credit Report CoverAs digital credit providers have grown exponentially over the past few years, and as digital products and models have proliferated, so too have concerns around consumer protection. In the recently published report, Responsible Digital Credit, I argue that ensuring that digital credit customers receive responsible treatment requires more than enhanced consumer protection laws and regulations. It also requires strong commitment from the digital credit industry. Finally, it needs consumers who are empowered to play a more proactive role in managing their digital credit responsibly.  Read the rest of this entry »

100 Certified Seal Final - IBarres 4-24-2018Adapting Smart Certification for Digital Financial Services

>Posted by Alex Taylor, Marketing and Community Outreach Manager, Smart Campaign

This is the fourth in a series of blog posts exploring the impact of Smart Certification on the financial inclusion industry.

Since launching Smart Certification in 2013, we’ve witnessed rapid changes in the financial inclusion space driven by digitization of financial services and fragmentation of traditional business models. Nearly $100 billion in investment has flown into the global fintech market since 2010, creating an explosion of digital innovations and provider models. Our analysis of the Global Findex data shows that recent gains in inclusion have been largely driven by the rise of mobile money and digital payments.

Digital financial technology is central to making financial products more accessible to underserved people around the world. This is an exciting moment for digital finance, and an equally important for time for client protection. The industry has the opportunity to marry the client-centric approach embraced by so many fintechs and the industry-accepted consumer protection standards to develop quality products, build trust, and encourage usage. The Smart Campaign will leverage its experience to help lead the charge on this.

As we celebrate 100 Smart Certifications, we look forward to the next 100. Looking to the future requires defining responsible practices and standards given the technological advances that allow nearly instant access to credit, payments, savings, and insurance. The standards and the certification program must become more agile, mirroring the fast pace of change. We envision an adaptable approach that takes into consideration the product and client delivery mechanism, as well as the provider’s function in the value chain. The flexibility of this framework could eventually allow any type of provider to seek certification, but the process will begin with a focus on digital lenders and expand to encompass additional business models on a demand-driven basis.
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Woman holds POS device

Demand for credit in Africa exceeds supply, despite the rise in mobile money. Yet start-ups, growing daily in number, are at risk of accelerating over-indebtedness, by supplying credit to clients without conducting appropriate repayment capacity analysis. Digital lenders need to understand the risks of over-indebtedness from a client perspective, and algorithms need to evolve to take this into account. Regulation also must guide good practice for fintech digital lenders.
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For Financial Inclusion Week 2017, WSBI highlights the ways that new partnerships and new products are helping its members make progress toward financial inclusion.


Posted by Mina Zhang, Senior Advisor, WSBI

The World Savings and Retail Banking Institute (WSBI) and its members are committed to Universal Financial Access (UFA), doing their part to help realize the “account for everyone” goal. Our data from the end of 2016 shows that we’re making progress, with 136 million new clients and 236 million new transaction accounts, since the UFA benchmarks were set at the end of 2014.

For Financial Inclusion Week 2017, we are highlighting the ways that new partnerships and new products are helping us achieve this goal.
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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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> 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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In the following post, John Owens offers an overview of his research project with the CFI Fellows Program.

Background & Research Questions

More and more online credit providers have started to offer loans to not only consumers but also to SMEs around the world.

Outside of digital banking platforms, new alternative online and digital platforms that target consumers and small SMEs include:

  • Peer-to-peer (P2P) SME lenders
  • Online balance sheet lenders
  • Loan aggregator portals
  • Tech and e-commerce giants
  • Mobile data-based lending models

While the rise of alternative data-based lending has opened new and innovative credit opportunities for individuals and SMEs, these new technologies and providers also come with several consumer protection challenges. These can be categorized into seven main areas:
Read the rest of this entry »

> Posted by Nadia van de Walle, Lead, Africa Partnerships and Programs, the Smart Campaign

A keynote speaker at a recent conference I attended described consumer protection as “incredibly important,” before adding that it was also “boring.”  Palpable excitement buzzes around new products or technologies, but consumer protection can be a real buzzkill. After all, it is often viewed as a dry, bureaucratic subject, costly for providers, and entailing barriers to pace of change and convenience.

As the Smart Campaign’s Africa team lead, I’m excited about client protection! And that’s not because it’s my purview. First, I think that client protection should not be seen as pumping the breaks on financial inclusion’s momentum. Rather, it guarantees a longer, more enjoyable ride. Secondly, client protection need not be a dull compliance exercise. It too can crowdsource, beta-test, gamify, and so forth to hack innovative, agile, disruptive approaches. But seriously, as an industry we can consider and engage in client protection practices that are data-driven, and that use behavioral economics, human-centered design, fintech, and other disciplines to not only ensure fair consumer treatment but strengthen financial bottom lines.

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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.

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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.