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> Posted by Saborni Poddar and Brett Hudson Matthews, Associate at MicroSave and Executive Director at My Oral Village

The financial inclusion industry often asks the question of how can we best configure mobile money products and services to support increased adoption and usage. But how about when prospective users are illiterate and innumerate (unable to decode large written numbers), as is the case for many unbanked individuals at the base of the pyramid?

In search of insights into designing mobile wallets for such illiterate and innumerate (oral) populations, we traveled through the Indian states of Punjab, Uttar Pradesh and Bihar, interacting with potential users. As our conversations got underway, and we began to understand the implications of designing a mobile wallet that an oral individual can use with ease, we could visualize why a conventional mobile wallet design would not be as clear to a daily-wage unskilled laborer as it is to the readers of this blog.

To start with, almost everyone we talked to had a feature phone, but most used it only for voice calls and were unfamiliar with basic syntax and navigation rules. Most could not use an address book; each time they make a call, they dial numbers from scratch. This gave us a first-hand glimpse into the potential intimidation caused by technology.

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> Posted by Sonja Kelly, Director of Research, CFI

WeBank started piloting facial recognition for KYC (“know your customer”—verifying that a customer is who they say they are) last year—we heard about it when we talked with Jared Shu, a partner with McKinsey, as part of our deep dive about the different ways banks pursue financial inclusion. At that point, the technology was mere possibility, with some question about whether the regulator would allow it. Now, it seems, facial recognition is indeed serving as a form of identity in China. With the help of technology, customers can quite literally authorize a transaction using their face.

Alipay, a mobile payment app launched by Alibaba in 2004 and used by 120 million people in China, is partnering with Face++ (pronounced “face plus plus”) to allow people to use their face as a credential to make payments. The technology is a natural extension of using a fingerprint to verify a person’s identity, and it is far more secure than just comparing a signature on the back of a credit card to a signature on a receipt.

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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 Ross Tasker, COO, Nobuntu

A worker prunes trees

A worker prunes trees

Imagine an elderly lady in her late seventies, who lives in a township in South Africa. Her income is very little, some US$120 a month in assistance from the government, and her body is old and sore – she is now too old to work. With no savings to draw upon, and no other sources of income, she struggles to afford medication for her chronic ailments. Two of her three children are unemployed, and her grandchildren are hungry and unable to pay the taxi fare to get to their school. This position isn’t atypical in South Africa. There are hundreds of thousands of older adults in the country (8 percent of the total population). Making matters worse, there is a distinct lack of a formal savings culture in the country. Imagine the impossible financial decisions faced by so many elderly South Africans on a daily basis.

There are various reasons for the shortage of savings in South Africa. One of which is the legacy of structural exclusion along racial lines that the pre-democratic regime left behind. During this time, a large part of the population was denied access to basic services and human rights, let alone access to any meaningful financial services.

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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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> Posted by Sonja Kelly, Director of Research, CFI

The role of data is increasingly crucial as the financial services industry shifts to digital delivery, alternative analytics, targeted marketing, and data-driven customer segmentation. As outlined in the recent Accion report, Unlocking the Promise of Big Data to Promote Financial Inclusion, the future of financial inclusion will include higher volumes of better quality and more wide-ranging data to expand access, lower prices, reduce bias, and drive innovation. However, the use of big and alternative data in financial inclusion is not a value-neutral trend—nor should it be.

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> Posted by Todd A. Watkins, Paul DiLeo, Anna Kanze, and Ira Lieberman

Fintech is a shiny attractor for impact investors. Emerging financial technologies shimmer with disruptive potential for the delivery of a wide array of financial, educational, health, and social services for the poor. While microfinance still makes up a major share of impact investing portfolios, many investors appear to have moved on to fintech, the next wave of creative destruction. Rather than be toppled by it, microfinance institutions (MFIs) look to ride that wave too, to extend reach, reduce costs and prices, improve and deepen client services, and improve risk management.

Fintech, whether new digital services or proprietary software used to evaluate and underwrite credit, brings glittery potential for MFIs, no question. But in fairy tales unicorns glitter too. Are MFIs chasing something equally illusory? Microfinance has decades of success growing and strengthening a high-touch business model. As growth slows, should MFIs now abandon that approach and use high-tech to go low-touch for cost efficiency? If MFIs stay their course, will they be overtaken by new entrants with new models, like Chinese online peer-to-peer lender Yirendai, which went IPO on the New York Stock Exchange last year? Or instead, will MFIs find innovative high-tech ways to further leverage their deep relationships with clients and understanding of client needs?

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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.