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What if your employer told you that your next paycheck would come in the form of  Bitcoin. How would you react?

Woman using mobile phone in olive farm

> Posted by By Chrissy Martin, U.S. Global Development Lab, USAID
Note: This post originally appeared on ICTworks and is re-posted here with permission.

Do farmers really want to be paid in mobile money? To answer this question, I’ll ask you to first entertain a brief thought experiment.

Imagine that your employer told you that next pay period, your company will start paying you in Bitcoin.  How would you react?  Sure you’ve heard about Bitcoin, but you have lots of questions as to what it will mean to receive your salary this way, such as:

  • Am I getting swindled?!
  • Where can I use bitcoin?
  • Can I spend it like dollars, or will I have to convert into dollars first?
  • Where can I convert?
  • How much is the conversion fee?
  • Will I be paid into my same bank account?

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What if we opened millions of bank accounts but nobody used them? That is one of several conundrums raised by the recently released Global Findex data for 2017.

> By Elisabeth Rhyne and Sonja Kelly, Center for Financial Inclusion at Accion
This post originally appeared on Next Billion’s blog and is reposted here with permission.

geographic distribution of 3 billion people without active accounts, 2017
About 3 billion people in the world either have no account or have an account that sits unused. The countries with the largest number of financially excluded people are also the highest population countries: India and China. This picture has changed little in the past three years.

The Global Financial Inclusion Database (Findex) is a survey of the financial habits of adults in 144 countries with data from 2011, 2014 and now (2017). Governments, foundations, big financial companies and fintechs alike rely on the Findex to understand how people are using (or not using) financial services. It is the best available yardstick through which we measure global progress toward financial inclusion.
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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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From pay-as-you-go models to products that do away with exclusions, the rules of inclusive insurance are changing 

This post is adapted from the recently-released publication “Inclusive Insurance: Closing the Protection Gap for Emerging Customers,” a joint-report from the Center for Financial Inclusion at Accion and the Institute of International Finance, in partnership with MetLife Foundation.

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With digital channels and effective aggregators, it becomes possible to offer insurance to lower-income segments. But the products themselves must also be designed with both cost control and the needs of the client segment in mind. After all, the financial margins for inclusive insurance are smaller, and the value proposition of insurance is typically tough to sell to customers.

Drawing on insights from our recently-released report Inclusive Insurance: Closing the Protection Gap for Emerging Customers, here are a few of the key approaches for building inclusive insurance products that work for the insurer and the customer.

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Consumer protection is a driver of revenue, and not a regulated compliance cost

> Posted by Dylan Lennox, Partner, MFX

Educating digital financial services (DFS) providers to understand that consumer protection is a core business strategy is as important – if not more important – than consumer protection regulation supervision if we hope to ensure that vulnerable consumers are well protected. For this reason, as I articulated in my last post, I would like to see DFS providers and their managers take the lead when it comes to driving consumer protection, and that consumer advocates and regulators’ efforts are aligned to make sure this happens.

There are many possible reasons why DFS managers are not taking the lead, however, beyond a general lack of awareness of consumer protection and its importance:

  • They might be driven to achieve short-term targets with limited resources, prioritizing their time, budgets and activities to meet high ROI expectations. Or they might be under pressure to launch innovations and take advantage of the “next big thing” like digital credit or data monetization.
  • They could lack the necessary knowledge and experience in their teams to properly address consumer protection. Such know-how involves truly understanding customers’ needs, developing intuitive user interfaces, designing appropriate sales incentive structures, assessing customers’ loan affordability, and implementing effective internal control frameworks to address security, loss of privacy, or fraud risks.
  • Or perhaps the technology they have implemented does not have the required functionality to properly implement basic consumer protection requirements – like those of data security, for example. In such a case, it is left up to the individual DFS managers to make specific technical developments to address consumer risks. Such an institution-by-institution approach increases the overall cost of consumer protection to the industry and decreases the likelihood that it will be implemented as these measures compete with other priorities.

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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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> Posted by Anisha Singh and Suraj Nair, Senior Research Associate and Research Manager, IFMR LEAD

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Patel, 62, father of two, spends an hour learning how to use mobile money wallet A from his daughter. The interface, navigations and services offered are all quite new to him. The next day, he tries to pay for a taxi but finds the taxi provider only accepts mobile money wallet B. He’s quite confident he should be able to use wallet B as the knowledge of how to use A is still fresh in his mind. However, he struggles with navigating the new platform and is unable to locate certain payment options. He’s also apprehensive to try out different keys as he wants to be careful not to transfer money incorrectly. Giving up, Patel pays in cash and waits for his daughter to return home to teach him how to use mobile money wallet B.

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> Posted by Dylan Lennox, Partner, MFX

Embed from Getty Images

After launching and operating mobile money businesses in a number of markets over the last ten years, I was aware of the necessity of protecting consumers. I knew it was a regulatory priority alongside important issues such as AML and interoperability, but that’s where I left it: in the compliance box, while I waited to be told what to do. All the consumer protection literature I read gave me the same heavy feeling, laden as it is with long lists of requirements: protect customer’s funds from loss and fraud, ensure proper disclosure and transparency, keep their data private, make sure customers can have their complaints resolved, and so forth. These looked like the core business processes I needed to implement anyway, so I felt we would be in fine shape if we were ever to have a supervisory inspection. I never looked any deeper.

In the days when enabling regulation meant “Please leave us alone to grow,” I kept my head turned firmly in the direction of my business goals, growing a base of active customers to reach scale, and then taking advantage of those network effects. After all, financial inclusion was also an objective we shared with the regulator, and as long as we were growing they maintained a light touch.

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New report from CFI Fellows Program on effective agent banking

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

India’s financial services industry is poised for a digital revolution. From payment banks to India Stack to the recent expansion of mobile financial services, policy makers and financial service providers are energetically pursuing digitization of financial services. But the country still has a tremendous way to go. Roughly half the population has low digital literacy, and adoption of digital financial services (DFS) is skewed towards higher income population segments. For example, only 9 percent of those with lower education levels are online, as compared to 38 percent for those with higher education levels.

As CFI Fellows, we explored how frontline banking agents can advance the adoption of DFS by helping first-time DFS users become comfortable transacting in new ways. We evaluated the factors currently shaping the adoption of DFS by emerging consumers in India and assessed how well agents are playing their crucial role in helping customers successfully transition to digital platforms.

In the blog post we wrote at the outset of our project, we pointed out that there are benefits and drawbacks to deploying human touch in digital financial services, and that an optimal mix of human and technology-enabled customer touchpoints needs to be achieved. Over-reliance on banking agents could cause overdependence on the part of customers, possibly eliminating potential cost savings unlocked by technology. But banking agents may also present great benefits, including in assisting with product adoption, facilitating transactions, resolving problems, building trust, and supporting customers’ transitions to more advanced services.

However, not all agent banking services are created equal, and in India we observe a wide range of models in action. In our research we studied three types of agents, each with a different profile and relationship to their parent organization. We wanted to answer these questions:
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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.