Announcing the 2019 Fellows: Researchers to Tackle Important Questions on APIs, G2P Payments

Dan Kleinbaum and Larry Reed will deepen our understanding of key issues surrounding application programming interfaces and government-to-person payments.

After considering many highly qualified applicants, we are excited to introduce 2019 CFI Research Fellows Dan Kleinbaum and Larry Reed. As all participants in the CFI Research Fellows Program have done since its genesis in 2015, the new group will examine important – but different – questions in financial inclusion. Kleinbaum will focus on how application programming interfaces (APIs) can support small financial service providers (FSPs) to partner with fintechs to reach the underserved, while Reed will explore the incentives facing banks when they attempt to serve the recipients of government welfare and related programs profitably.

Take a moment to learn about the fellows’ planned research below. For more information, tune in to a webinar on February 7 — “Meet the 2019 CFI Fellows: Making APIs and G2P Payments Work for Financial Inclusion” — when the Fellows will provide a preview of their research and the motivations behind it.

Dan Kleinbaum

API-Enabled Partnerships Between Financial Institutions and Fintechs

How do financial institutions use mass APIs, open APIs, custom APIs and bespoke partnerships to partner effectively with fintechs to reach the underserved?

Traditional financial institutions are increasingly feeling threatened from upstart technology companies offering financial services digitally – and figuring out how to create alternative business models to remain relevant is becoming a top priority. Institutions that cannot “do digital” alone recognize that they need to leverage application program interfaces (APIs) to gain the connections needed compete in the digital ecosystem.

Doing so is not easy. The API space is crowded as different companies offer a wide array of APIs, with the process of integrating, on-boarding, and receiving support differing for each. Adapting to each API can be resource intensive and thus affects profitability.

There is a concern that the pressures of adapting to this competitive marketplace are felt more by small and medium-sized FSPs that are not as well positioned to build and manage APIs. For these players in particular, knowledge of the landscape of APIs, including their costs and benefits, can be critical to their ability to remain competitive. CFI Research Fellow Dan Kleinbaum’s research aims to provide that analysis as well as illustrative case studies of how FSPs and innovators are using APIs to reach the underserved.

Larry Reed

Improving G2P as an On-Ramp for Financial Inclusion From the Supply Side

How can banks and other financial institutions provide a set of accounts and services for G2P recipients in a profitable way?

In 2016, CFI Fellow Guy Stuart showed that although digitizing government-to-person (G2P) payments was often touted as an on-ramp to financial inclusion, this was more a hope than a reality. Most recipients cashed out payments soon after receiving them. With a focus on client-side barriers, he demonstrated that access to products was not enough to promote use of a diverse set of financial services.

But there are provider-side barriers as well.

Historically, banks have not invested in leading G2P recipients on this journey because of the difficulty of getting a return on their investment. The time horizon of government contracts to distribute payments is sometimes too short to guarantee FSPs will be able to build a relationship with recipients while designing products and offering financial capability training can be resource intensive.

What would it take to change that paradigm so that FSPs would build the on-ramp to broader financial inclusion for G2P recipients? CFI Research Fellow Larry Reed’s research will seek to answer that question.

Be on the lookout for..

Between now and the end of summer 2019, both fellows will produce a final report, one blog post based on their findings, participate in one webinar each (open to the general public), and one in-person event held at CFI. Stay tuned for updates!

In the meantime, don’t forget to sign up for our webinar on February 7 to meet the Fellows and ask them your questions.

CFI thanks FMO, the Dutch development bank, and Accion for their generous support of the CFI Research Fellows Program.

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