Date archives "November 2017"

Opportunities and challenges for financial inclusion in the shift to digital

Last week, prior to the Symposium for Financial Inclusion in Accra, we formally launched the Mastercard Foundation’s Partnership for Finance in a Digital Africa at a one day Learning Event at the Labadi Beach Hotel.  It was an exciting day for our team!  Here are some of the great resources that are now available:

  • Learning Advances in Digital Finance: This report puts a spotlight on specific advances in knowledge that will influence the future of digital finance.
  • Snapshots: Short papers that highlight “what we know” about critical questions in the digital finance space and identify implications for future research and investment.
  • Theory of Change: The foundation for the FiDA Partnership.

We also launched our twitter handle @FiDAPartnership and our LinkedIn Group – see our social media activity from the day on Storify.

The event itself was a great success. There were 70 people in the room from 39 organisations and 12 countries. We also had a great diversity in the room; including banks, fintechs, academics, consultants, mobile network operators, donors and investors.

Mark Wensley and Chris Locke opened the session, introducing the Partnership, talking about the role of finance in a digital Africa and the financial inclusion vision. The two key themes: “shift to digital” and “meaningful financial inclusion” were introduced by Olga Morawczynski and Jonathan Donner and discussed over the course of the day

Will Croft of Caribou Digital Data catalyzed debate in the room with his session on Ten Provocations for Digital Finance. He introduced the Measure tool and the data collected from a panel of 1,000 people in Kenya during September 2017. The Provocations and their sometimes surprising results will be revealed as blogs over the coming months, so stay tuned!

Following this, Marissa Dean, remotely from Cape Town, presented her research on business models in Kenya and Tanzania. A number of the 30 organisations interviewed as part of the research were in the room and leaders from Equity Bank, Tala and Apollo Agriculture participated in a panel discussion.  The panel discussed a range of topics, including the use of Satellite data and the challenges and benefits that this data presents. For more information on the research will be released in a blog series over the next few months.

Professor Bei from Remnin University then took the discussion to China and explained the Digital Financial Services landscape there. He talked about how the large population, well developed infrastructure, innovative spirit and unmet financial needs leads to China running ahead in the digital finance space.

Finally Yanina Selzer of BFA closed the interactive morning by getting everyone on their feet for a creative tensions session. She tested the room on their opinions of who will lead the shift to digital, what will drive digitization in African Markets, what will the shift to digital will mean to local fintechs and whether MNO’s and banks will become obsolete in the shift to digital. It was exciting to see the people move around and physically see what people thought. We will definitely continue to use this session approach in the future – thanks Yanina!

We reconvened in the afternoon for an Unconference session. There were 8 topics which all sparked interesting discussions. If you are interested in learning more, please sign up for updates or get in touch.

Baffled by behaviors: understanding nuanced barriers to adoption

Snapshot 2: Which attitudes, behaviors, experiences, and beliefs—including non-digital and non-financial ones—influence DFS adoption and ongoing satisfaction? is one of 16 Snapshots designed to address a range of questions within the digital finance space. These questions cover a number of client, institution, ecosystem, and impact level topics. The Snapshots give a current view of “What we Know” about the topic in question, highlight “Notable New Learnings,” and call attention to “Implications” for future research and investment.

Why we wrote this Snapshot

Understanding what drives customers to adopt and regularly use a product or service—be it a mobile phone, a savings account or agricultural technology—involves more than understanding needs. Behaviors, attitudes, experiences, and beliefs play an instrumental role in driving, or hindering, adoption and use.

Distrust of formal financial institutions can negatively impact perceptions around—and use of—formal financial services.  A 2016 study showed 70% of bankable adults in Nigeria save outside the formal financial system citing reasons such as corruption, instability, and distrust for keeping their money away from banks. We have also observed that cultural norms affect the adoption and use of financial services. Early research into the use of M-PESA in Kenya found that some men denied their wives access to a mobile phone—and therefore an M-PESA account—because they feared their wives would either use it to hassle them for money or to call and receive money from other men. Recent research by GSMA found that safety and harassment issues in Egypt are a significant barrier to mobile internet adoption, especially for women. This will likely have a knock-on effect for customers seeking to access digital financial services across mobile internet platforms.

While Snapshot 1 focused on understanding the financial needs of the poor, and how digital finance can address these needs, this Snapshot focuses on understanding attitudes and behaviors—such as those mentioned above—in the hopes of delving deeper into dynamics of adoption and use. In combination with an understanding of needs, unpacking the unique behaviors of low-income individuals will allow the digital finance community to appropriately design and deliver services that customers will desire, trust, and use on a regular basis.  

What we found

As with financial needs, behaviors that influence adoption are multifaceted, context specific and often unexpected. While there are a vast array of behavioral factors influencing adoption, this Snapshot focuses primarily on the impact of social norms, social networks, and social relationships. From restrictive social standards imposed on women—such as limited mobility outside the home—to the power of “social proof,” the research highlights the enduring importance of social relations and cultural norms in the communities in which we work.

Moving beyond behaviors, evidence suggests that while positive experiences using digital finance build trust, negative experiences can erode it. From complex user interfaces, to poor customer service and privacy and security concerns, it is clear that more work is needed to build services that customers will intrinsically trust and use in place of the existing informal and formal alternatives.

Looking ahead, the Snapshot also highlights the importance of building out an understanding of digital, online behaviors and how these might influence adoption. As more daily interactions move online—from streaming music to chatting with friends across social networks—an analysis of these behaviors and experiences is of equal importance. Along these lines and together with the expansion of smartphones, the introduction of apps and increasing use of digital attributes (from chatbots to data), Snapshot 2 also calls attention to the need to ensure that consumer protection practices are developed in tandem with these technological innovations.

Read Snapshot 2 for more details on our findings.

The struggles of success: addressing the poor’s financial needs through digital finance

Snapshot 1: Which Financial needs can be (and should be) addressed by DFS?” is one of 16 Snapshots designed to address a range of questions within the digital finance space. These questions cover a number of client, institution, ecosystem, and impact level topics. The Snapshots give a current view of “What we Know” about the topic in question, highlight “Notable New Learnings” and call attention to “Implications” for future research and investment.

Why we wrote this Snapshot

It’s been more than ten years since Kenyan mobile operator Safaricom launched M-PESA, one of the first digital finance innovations to hit the developing world. Since then banks, mobile network operators, FinTechs, and other third party organizations have followed suit and now offer a range of digital financial services to underserved customers. Mobile phones enabled Africans to leapfrog the inaccessible and underdeveloped landline networks. Similarly, digital finance has enabled many to bypass the often unreachable and impenetrable banking system. Digital technology and innovation have brought financial services deep into rural, hard-to-reach, poor areas. This access has given digital finance a leading role in the journey to financial inclusion in sub-Saharan Africa and beyond.

While access to these services has continued to grow, meaningful use of the available digital financial services has struggled to keep pace. Despite significant annual increases in account registration, there is a growing gap between adoption and use. At the end of 2016, only 21% (118 million) of the 556 million globally registered mobile money accounts were used more than once a month (GSMA). In this Snapshot we wanted to explore where digital finance has successfully addressed financial needs, and where it is struggling to beat existing informal and formal alternatives.

What we found

We found that while access to digital finance continues to grow, there is a gap between access and use. Limited uptake has been attributed, in part, to a failure to digitally replicate the complex financial needs and money management strategies of low-income populations. Many digital financial services were developed without a solid understanding of the complex means by which the poor manage their money. Consequently, these digital financial services struggle to deliver a superior alternative to customary informal financial tools.  While digital finance has successfully addressed many payment and transfer needs in developing markets, sophisticated financial services — such as saving, insurance and credit— are still struggling to compete with informal alternatives.

What’s more—as the digital finance ecosystem expands—unanticipated, negative consequences are emerging.  These include unsophisticated borrowing behaviour leading credit bureaus to blacklist customers for defaulting on their digital loans, as well as the use of mobile money to finance gambling.  The digital finance community should track and note both these unexpected repercussions and the challenges that limit usage.

Ten years on, while the potential for digital finance is undeniable, using digital technology to meet a range of financial needs in developing markets is a work in progress. Read Snapshot 1 for more details on our findings. Click here to sign up for alerts when new Snapshots are released.

Learning Advances in Digital Finance 2017

This document focuses on a series of “learning advances” identified throughout the first year of the Mastercard Foundation Partnership for Finance in a Digital Africa. It introduces two key concepts to help frame the challenge of financial inclusion in sub-Saharan Africa: Meaningful financial inclusion (involving not only access, but also the effective use of a suite of financial services products), and the pursuit of these goals against the backdrop of an ongoing “shift to digital” both in financial services and in the broader economy.Continue reading

Announcing 2017’s report on Learning Advances in Digital Finance

Today we are pleased to make the inaugural version of the Learning Advances in Digital Finance report available on the website. This document focuses on a series of “learning advances” identified during the first year of the Mastercard Foundation Partnership for Finance in a Digital Africa.

The report introduces two key concepts to frame the challenge of financial inclusion in sub-Saharan Africa: “Meaningful financial inclusion” (involving not only access, but also the effective use of a suite of financial services products), and the pursuit of these goals against the backdrop of an ongoing “shift to digital” both in financial services and in the broader economy.

The shift to digital, we argue, presents not simply a chance to pursue existing business models at better or lower costs. Instead it is both an opportunity and an imperative to reconfigure the role of financial services in enabling participation in the broader economy.

To illustrate these points, the document consists of interconnected chapters that operate at the three levels of the Partnership’s Theory of Change: client-level insights on “effective use,” institutional level business models, and the growth of open APIs in the ecosystem.

This document is best suited for practitioners, policymakers, and researchers in the digital finance community (especially those with an interest in financial inclusion), but given its modularity, elements of it can be read by anyone with an interest in client learning, emerging digital finance business models, or the suitability and promise of APIs in the African digital finance landscape.

Paving the impact pathway: What do we know about the impact of digital financial services on low income clients?

To accompany the release of the first digital finance Evidence Gap Map (EGM), we undertook an in-depth review of the impact evidence for each digital finance product. “Digital Finance EGM Analysis: Paving the Impact Pathway” presents a synthesis of the findings from the impact studies in the EGM. Under each digital finance product, there is an outline of relevant impact studies, an analysis and summary of evidence by client outcomes. This level of analysis will enable the digital finance community to be strategic in our approach to product design and for commissioning and conducting needed research.Continue reading