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Report cover pageNew CFI/IIF report examines the role that alternative data plays in helping mainstream financial institutions reach underserved customers.

>> Posted by Tess Johnson, Research Associate, CFI

With the explosive growth of data and the breakneck pace of digitization, mainstream financial service providers (FSPs) are increasingly turning to new and alternative data sources and analytics tools to more efficiently reach emerging markets and help bring the world’s 1.7 billion underserved people into the formal financial system. This “new data,” largely separate from traditional credit bureau data, represents a tremendous opportunity for commercial banks to identity new customers, many of whom were previously “credit invisible,” and to better understand and serve the needs of their existing client base. However, the path to greater data utilization is not always clear, as FSPs must weigh the benefits of embracing a data-centric approach with significant operational challenges, including changing a risk-adverse banking culture, recruiting top technical talent, upgrading legacy IT infrastructure and navigating a complex regulatory environment. Building upon in-depth interviews with banks, fintechs and other actors, Accelerating Financial Inclusion with New Data—the newest joint report from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), supported by MetLife Foundation—examines the data landscape and evaluates the progress FSPs have made in innovating around data and areas where they have faced obstacles. Read the rest of this entry »

Recommendations for how Colombia’s banks, fintechs, telcos, and government can better harness technology to boost inclusion

> Posted by Miriam Freeman

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In Colombia, where institutional factors favor technology as a tool for development, fintech has proven helpful in promoting financial inclusion, but only through a narrow definition of inclusion—more access. If we broaden our definition of financial inclusion, the country’s progress in leveraging fintech is less substantial. What can the business community and policymakers do to advance fintech for financial inclusion in Colombia?

First, let’s take a step back. In terms of financial inclusion broadly, how does Colombia measure up?

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How the government of India, Swiss Re, and others are collaboratively combating climate change-related risk

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.

As many know too painfully well, catastrophic events like climate change-related disasters can cause financial stress long after they have occurred. In fact, less than 30 percent of losses from catastrophic events are covered by insurance, which means the remaining 70 percent of the burden is carried by individuals, firms, and the “insurer of last resort,” governments. According to the Insurance Development Forum, a 1 percent increase in insurance penetration could reduce the disaster-recovery burden on taxpayers by 22 percent.

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How partnerships are enabling insurers to profitably reach the base of the economic pyramid

> Posted by Center Staff

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.

Inclusive insurers cannot afford to go to market alone. They must attract and connect with new customers through distribution partners that already interact with those customers. Such partners can offer scale and cost efficiency, creating a solution that works for the insurer, distributor, and customer, even when premiums are very small.  In some eyes, this is the most critical piece of the inclusive insurance puzzle.

“Good distribution partners are by far the most important issue,” says Martin Hintz, former coordinator of microinsurance at Allianz.

As the inclusive insurance industry has bloomed over the last ten years, we’ve seen providers link with obvious distribution partners, like microfinance institutions, as well as with some surprising ones, like retailers and pawn shops.

As part of our latest report Inclusive Insurance: Closing the Protection Gap for Emerging Customers, we asked providers about their preferred distribution channels. Here’s what we found.

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Insurers are increasingly deploying “insurtech” innovations to connect with and serve lower-income customers

> Posted by Center Staff

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.

New technologies are dramatically changing the landscape for insurance around the world and enabling insurers to reach new mass market segments. New data sources and analytical tools are changing risk models by enabling new ways to create, capture, and analyze valuable information that can help insurers better calculate and manage the risk associated with customers. Machine learning applied to satellite imagery is changing agricultural and disaster insurance, allowing for more sophisticated claims management, even facilitating pre-loss payments that can help minimize the cost of a disaster before it is full-blown. The expansion of identity solutions and onboarding options is lowering operations costs and enhancing convenience. These innovations are helping the global insurance industry transform from a passive risk-transmission industry into an active risk mitigation and advisory partner for individuals, businesses, and governments.

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> Posted by Susy Cheston, Financial Inclusion Consultant

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

I have been an inclusive insurance enthusiast ever since I worked for Opportunity International and witnessed the experiments that later became MicroEnsure. In those early days, Richard Leftley framed insurance as the missing piece in the game of Chutes & Ladders (Snakes & Ladders for those outside the U.S.). He likened credit and savings to ladders that could provide a way up for those with lower incomes –but without insurance, each borrower or saver was just one disaster away from slipping back down into destitution. I remember his—at the time—revolutionary concept of paying insurance claims within 10 days or less. He would say that days-to-payout was the only report he wanted on his desk every morning. (Today, of course, payouts can be automatic or even come pre-loss.)

As is often the case with breakthroughs, Richard, of course, was not alone. Thanks to many innovators, an entire industry has emerged with profitable models reaching millions of people, and there is a growing understanding around the world, across social strata of the impact that insurance can have for families, communities and societies. The NGOs that pioneered microinsurance spurred the interest of commercial giants such as Allianz, AXA, MetLife, Swiss Re and Zurich, which have lent their considerable weight to solving the business challenges of extending insurance to underserved and unserved customers. Market catalysts such as A2ii, MicroInsurance Centre, MicroInsurance Network, ILO’s Impact Insurance Facility, and Cenfri have offered insights on everything from the customer experience, to good product design, to proving the business case, to creating an enabling regulatory environment for reaching new insurance markets.

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> Posted by Center Staff

2017 was certainly an eventful year. And our year at CFI was no exception. Through our CFI Fellows Program and partnership with the Institute of International Finance, Mainstreaming Financial Inclusion, we produced thought-provoking research on fintech partnerships, the role of human touch in a digital age, breakthroughs in insurance and more. In the client protection area, 24 financial institutions were Smart Certified, bringing the total number of certified institutions to 94. The Africa Board Fellowship Program continued to make a difference at the governance level of financial institutions across Africa, and now roughly 200 CEOs and board members have participated in the program. And more…

Before we celebrate the New Year, we wanted to pause and look back at some of our favorite moments of 2017.

Financial Health as a Global Framework

We developed a new model for assessing financial health. The financial health framework was developed through a project led by the Center for Financial Services Innovation (CFSI) with CFI and Dalberg as partners. The framework offers a globally applicable model for financial health that includes six indicators of financial health and four contributing factors that are particularly relevant to the developing world.

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> Posted by Center Staff

With Financial Inclusion Week 2017 less than two weeks away, we’re excited to share a full calendar of events and specifically, 11 webinars or online events that you can join from wherever you are. Topics include micro pensions, IndiaStack, interactive voice response technology, and more. Don’t pass up an opportunity to hear from organizations and experts from around the world – register today!

Monday, October 30

Digital Fireside Chat: How Are New Products and New Partnerships Unlocking Access to Insurance?
Hosting Organizations: AXA, Center for Financial Inclusion at Accion
To kick of Financial Inclusion Week 2017, Elisabeth Rhyne, Managing Director of the Center for Financial Inclusion at Accion will join Garance Wattez-Richard, Head of AXA Emerging Customers for a digital fireside chat. During the webinar, Rhyne and Wattez-Richard will discuss how new products and partnerships are opening up new potential in the inclusive insurance space. They will take a specific look at how AXA is working to reach emerging customers.

Technology-Enabled Financial Inclusion in Myanmar
Hosting Organizations: ThitsaWorks, Internet Journal
ThitsaWorks and Internet Journal will host a Facebook Live conversation on the impact of digital services on financial inclusion in Myanmar, where mobile phone ownership has grown rapidly from 5 to 90 percent between 2011 and 2017.

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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 Center Staff

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BBVA Bancomer in Mexico and Bancolombia in Colombia partner with Juntos, a fintech startup, to deepen their customer engagement and product usage. Why wouldn’t the two banks just strengthen their customer engagement capabilities in-house?

A few weeks ago, we released a joint report with the Institute of International Finance (IIF), How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines. As part of the report, CFI and IIF interviewed over 30 individuals from across the industry, including representatives from Juntos, BBVA Bancomer, and Bancolombia. Here’s what their story taught us about the value of successful customer engagement partnerships.

Engaged customers are better customers. Because large portions of the populations in the emerging markets in Mexico and Colombia are outside the formal financial sector, bringing them into it requires financial education and well-designed products and services. Simply providing products and services is often ineffective, as people also need to understand how they work and develop confidence using them. Several financial institutions we interviewed echoed the importance of frequent interactions with new low-income customers to build stronger relationships and increase loyalty, trust, satisfaction, and retention. They hope this kind of engagement will improve public perception and understanding of financial products and services, and ultimately increase the demand for such offerings.

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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.