Untangling the impact evidence for digital finance products

The Partnership for Finance in a Digital Africa (FiDA) are thrilled to introduce the Digital Finance Evidence Gap Map (EGM)  and the Digital Finance EGM Analysis: Paving the Impact Pathway report, which we believe fill a critical gap in knowledge about the impact of digital financial products on resource-constrained clients.

Why we developed these resources

The digital finance community relies heavily on the impact evidence of traditional financial services and products, and indeed many studies have explored the effect of traditional finance products on clients. From these studies, the digital finance community understand that the benefits depend on the product, its design, the delivery channel, and the demographics of those using it. Despite this growing evidence base, less systematic attention has been paid to how the digitization of these products may vary or enhance the impact. FiDA’s impact mapping exercise scanned and assessed the state of knowledge of digital finance products beyond those accessible through analog channels.

An interactive Evidence Gap Map

FiDA’s Evidence Gap Map (EGM), summaries the impact evidence of diverse digital finance products on several client outcomes.  Its purpose is to present what products were studied, how they were designed and delivered, and the positive, negative or null evidence uncovered. Some takeaways from the EGM:

  • While 21 countries are represented in the EGM, sub-Saharan Africa dominates the literature with 65% of the studies. Within sub-Saharan Africa, Kenya accounts for 35% of the impact research.
  • Payments and transfer products are the most studied digital finance category, accounting for 54% of impact research. There are just seven studies on savings and one each on credit and insurance.
  • 26% of client outcomes tested focused on the adoption of a digital finance product. This was followed by effects on savings (15%) and income (13%). However, digital credit, savings, and insurance products have significant evidence gaps on outcomes beyond product adoption.
  • Overall, 78%  of the outcomes have come in as positive, 10% as negative, and 12% had no effect.

A deeper look into the impact research

While the EGM is an excellent step toward mapping the evidence landscape, gap maps alone can not determine the circumstances under which a product was, or was not successful. Therefore, to accompany the release of the first digital finance EGM, we undertook an in-depth review of the impact evidence for each digital finance product. FiDA’s report, “Digital Finance EGM Analysis: Paving the Impact Pathway” presents a synthesis of the findings from the impact studies in the EGM. Under each product, there is an outline of relevant impact studies, an analysis and summary of evidence by client outcomes. Below are a few examples of the numerous insights from the EGM analysis report:

Payments and transfers

  • Research supports that digital payments and transfers can improve investment in assets, welfare and income gains through fewer leakages, direct income, or informal loans remitted.
  • Business to person (B2P) and donor to person (D2P) digital transfers may be cost-effective but there is narrow evidence to suggest broader uptake beyond the receipt of salary or cash transfers.
  • There is limited evidence that digital payments and transfers improve savings behaviors.
  • In markets where digital payments and transfers are new concepts or uptake is low, client training and handholding may improve uptake.

Savings

  • Two-way SMS has the potential to improve savings behavior.
  • Digital savings products designed with minimal frills have resulted in successful adoption.
  • Integrating digital savings products with existing services has positive adoption effects.

Credit

  • A digital credit product which used a mobile money channel for loan repayments, used local peer educators to "handhold" new female customers. This resulted in a higher uptake of the mobile channel.

Insurance

  • A provider demonstrated the benefits of a freemium model and low fee add-ons by offering clients the option to double their free insurance coverage by paying a low fee monthly fee deducted from their mobile money account. This  convinced previously uninsured clients to opt in.

Mobile banking

  • Improving female adoption of mobile banking could be achieved through female targeted training.
  • Gamification could lead to an increase in mobile banking transactions.
  • As many financial services for low-income and rural populations are delivered in a group setting, digitization may disrupt the existing social architecture, leaving its overall effect uncertain.

This level of analysis, highlighted in the EGM analysis report, will enable the digital finance community to be strategic in our approach to product design and for commissioning and conducting needed research.

If something in the digital finance EGM has piqued your interest and you wish to learn more about the context of the tested products, the distinguishing features of product design and delivery channels, the quantified and/or qualified findings of the products per outcome and what the implications of the findings are, then Digital Finance EGM Analysis: Paving the Impact Pathway is the report to read.