<p>Pablo manages CFI&#8217;s research projects on financial inclusion topics as diverse as client consumer protection, financial capabilities, financial health and human centered design for digital credit innovations. Prior to joining CFI, he worked as a Development Effectiveness Officer at the Inter-American Development Bank (IDB)’s Opportunities for the Majority Sector, where he was in charge of monitoring the social performance of their portfolio of operations in Latin America, through the development and use of standard metrics. Before that, he worked for the United Nations Population Fund (UNFPA) in New York supporting the International Conference on Population and Development (ICPD) Beyond 2014 Review, and for Innovations for Poverty Action (IPA) in Mexico City, coordinating the implementation of an experimental impact evaluation on financial literacy for the World Bank’s Development Research Group.</p>
<p>He also has experience working for the private sector in sales and marketing, at Aeromexico (Mexico’s largest commercial airline) and PEPSICO. Mr. Antón is an Economist from the Instituto Tecnológico Autónomo de México (ITAM), and holds a Master of Public Administration (MPA) degree from the School of International and Public Affairs at Columbia University in New York.</p>
<p>&nbsp;</p>


Research Manager

Pablo Anton-Diaz

<h2>Three Stages in the Customer Journey</h2>
<p><a href="http://www.finca.pk/">FINCA Microfinance Bank of Pakistan</a> employed the flash mob described above as part of the first, or “discovery,” stage of the customer journey, when an underserved client finds out about a digital product and becomes convinced that the product is actually for her.</p>
<p>Broadly, the discovery stage incorporates three steps by the customer: developing an awareness of potential options, evaluating those options, and selecting the most appropriate product. While digital apps can bring many more products to a customer’s fingertips, it is not so easy for companies to bring their products to the attention of prospective customers. Companies compete for customers’ attention in this stage in an attempt to build brand awareness and communicate value. Our report delves into ways the human touch combines with tech to attract customers to digital financial service offerings. This is where FINCA Pakistan’s flash mobbing experience came in, but a variety of techniques have been employed.</p>
<p>In addition to the discovery stage, the covers the onboarding, and continuing use stages. This simple taxonomy helps clarify the often co-mingling and iterative parts of the customer journey, giving clearer picture.</p>
<p>Onboarding involves providing detailed information about product terms and conditions, determining customer eligibility, signing contracts and setting up accounts. For credit, it also includes underwriting decisions. Once known as “paperwork,” it used to involve a lot more dead trees and multiple trips back and forth to a brick-and-mortar branch. The case studies we discuss in this section include novel examples of digitization from Poland, Saudi Arabia and Indonesia in which providers use digital tools and programs such as <a href="https://www.centerforfinancialinclusion.org/charting-the-customer-journey-in-the-digital-age#onboarding-stage-two">optical characters, an e-government customer portal and the national ID system</a> to streamline the onboarding process.</p>
<p>The goal of stage three, continuing use, is to get customers to remain active users, a <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-hype-vs-reality-deconstructing-the-2017-findex-results">continuous concern</a> for providers of services to new and previously underserved customers. Not only do new accounts often go dormant, but customers often only use one of multiple digital products and services offered by a single FSP.</p>
<p>In the continuing use chapter, the reader also finds out that, as nifty and time saving as digital tools can be, human touch is still critical for driving continued usage, particularly in areas such as complaint resolution, as people feel a strong need to interact with a person if something goes wrong. Without well-timed human touch, users might just give up or switch to another product.</p>
<h2>What We’ve Learned Along the Way</h2>
<p>As we conducted the investigation for this report, we learned that FSPs must prioritize innovation – they must look for opportunities to be creative – in order to implement products that can help them serve the underserved effectively. We also saw that digitizing customer journeys can improve the sustainability of reaching underserved segments and encourage potential customers to be actively engaged.</p>
<p>A few other stand-out findings from this new report:</p>
<ul>
<li><a href="https://www.centerforfinancialinclusion.org/uniting-tech-and-touch-why-centaur-products-are-better-for-consumers-and-providers-evidence-from-kenya">Tech touch balance</a> is especially important during the discovery phase, to assist newly banked customers get familiar with complex financial services and products.</li>
<li>We were also struck by how important the role of <strong>regulators</strong> is in enabling financial institutions to simplify onboarding procedures. Electronic onboarding is either prevented or enabled depending on the regulatory environment, national ID programs, and the like.</li>
<li>We saw that to keep customers actively engaged institutions need to focus on <strong>product design and tailoring offerings based on customer behaviors</strong>.</li>
<li>To create a seamless digital customer journey, <strong>financial institutions need to digitize the entire operational chain</strong>. Having a mobile application or a functioning internet banking page is not enough to attract/retain customers in this technological era. The focus should be on creating an entire experience that caters to customers’ needs in a highly efficient manner. Partnering with fintechs through open banking and utilizing data analytics, machine learning and artificial intelligence are just some initial ideas for doing so.</li>
</ul>
<p>If I’ve piqued your interest, have a read of <a href="https://www.centerforfinancialinclusion.org/charting-the-customer-journey-in-the-digital-age">Charting the Customer Journey in the Digital Age</a> to find out more.</p>


<h6>LEGACY AND NEW FINANCIAL SERVICE PROVIDERS HAVE A LOT TO GAIN FROM NEW DATA</h6>
<h3>The traditional boundaries separating players in adjacent industries are blurring, and the future market for financial services is up for grabs.</h3>
There are many internal and external challenges that providers must address for the promise of new data to be fully realized. From getting the right culture and technical talent in place to engaging with regulators and partners on data sharing and management, there are numerous obstacles to negotiate in capitalizing on the explosion of new data to reach underserved and unserved markets with new commercially viable solutions.

This report is intended to help mainstream financial institutions accelerate their efforts to confront these challenges and future-proof themselves for what the data revolution has in store, but may be useful to other financial service providers as well. However, this report is not an attempt to provide a “how-to” guide for navigating the various stages of the data value chain—there are too many contingencies to prescribe a “one-size-fits-all” solution. Instead, it is an effort to shed light on the potential of data to improve financial services for the underserved.

Accelerating Financial Inclusion with New Data

<em>Banking Sector Approaches to Customer Engagement and Capability</em> explores how financial institutions are leveraging innovation, new technology, social networks, and other tools that inform and engage customers. This brief builds on the belief that good product design builds the financial capability of customers. The research captures a number of successful models, including:
<ul>
 	<li>RBL offering unsecured loans that allow customers to build up a credit score for the first time in India</li>
 	<li>Standard Bank leveraging existing informal group savings culture combined with a lottery to incentivize and reward savings activity in South Africa,</li>
 	<li>A small cooperative bank “rounding up” loan repayments to create an auto-saving mechanism among credit recipients in Mexico<em>.</em></li>
</ul>
This brief is part of the Mainstreaming Financial Inclusion: Best Practices initiative which aims to facilitate learning and action on how mainstream financial institutions around the world can reach underserved populations with quality financial services. The project is completed in partnership with the Institute of International Finance (IIF), with support from MetLife Foundation.

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Banking Sector Approaches to Customer Engagement and Capability

We use the term “inclusive  insurance” to encompass many different approaches to reaching the unserved,  underserved, vulnerable, or low-income populations in emerging markets with appropriate and affordable insurance products. These range from microinsurance for people with very little disposable income to new  products and  services for an emerging middle class around the globe who have not been served by traditional  insurance. Based on insights from written submissions and in-depth interviews with 30 people across 22 institutions, this report invites us to re-think the concept of insurance and its fundamental role in society.
<h2>Major Findings</h2>
In  the  broadest  terms,  the  challenges  of  providing  insurance  to  lower-income  population segments are similar to those of providing mainstream insurance: identifying, understanding, and connecting with customers; providing relevant products; and carrying out the administrative work of collecting premiums and paying claims. For customers at the base of the economic pyramid, the small incomes from which premiums must come require insurers to solve these challenges in highly cost-efficient ways. Adding to the intensive cost pressure, several factors amplify the challenge of connecting with these customers: their remote locations, lower education levels, and lack of experience with formal institutions.

Strategies for effectively serving this target market include:
<ul>
 	<li>Simplifying products so they are easy to understand, easy to enroll in, and easy to claim against. For institutions, such simple products engender trust and are lower cost to provide.</li>
 	<li>Finding new distribution channels and aggregators-from telcos to farmer cooperatives to banks—to identify and connect with low-income customers.</li>
 	<li>Leveraging digital channels and new “insurtech” (insurance technology) innovations to connect with, and serve, low-income customers.</li>
 	<li>Implementing new business models and products to provide and administer the risk mitigation solutions at scale that meet low-income customers’ needs.</li>
</ul>
This report is part of a two-year initiative, <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/mainstreaming-financial-inclusion">Mainstreaming Financial Inclusion: Best Practices</a>, to help advance efforts of financial institutions to reach customers at the base of the economic pyramid. This report was completed in partnership with the <a href="http://www.iif.org">Institute of International Finance</a>, and made possible with support from <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html">MetLife Foundation</a>.

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Inclusive Insurance: Closing the Protection Gap for Emerging Customers

This report examines how partnerships between mainstream financial institutions (e.g., banks, insurers, and payment companies) and fintechs are addressing financial inclusion challenges and expanding access to the formal financial economy for underserved segments of the global population, particularly in emerging markets. It incorporates insights from 24 in-depth interviews with people at the frontlines of this innovation and highlights 14 partnerships focused on financial inclusion that we think exemplify best-case scenarios and good practice. Contrary to the popular narrative, financial institutions view fintechs as partners in innovation, not threats to their core business. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institutions with help from fintech partnerships.
<h2>Major Findings</h2>
Mainstream financial institutions partner with fintechs to improve product offerings, increase efficiency, and lower costs – goals with special relevance to low-income customers. By partnering with mainstream financial institutions, fintechs get to scale their technology and can access capital to grow. As a result of these partnerships, low-income customers who are left out of – or poorly served by – the financial sector have greater access to higher quality, more convenient, and less expensive financial products and services.

To facilitate productive fintech partnerships, mainstream financial institutions are organizing internally for innovation, strategically integrating systems and staff, and developing contractual agreements to ensure stability and success. Fintech partnerships enable legacy institutions to engage with and learn from new technology in low-risk, low-cost ways. They are also key to allowing incumbents to compete in a world where alternative players, like Facebook and Amazon, are threatening the central role of financial institutions in the lives of customers. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institution.

One encouraging and somewhat unexpected finding is that the partnerships between financial institutions and fintechs represent a slow but pervasive financial industry shift toward customer-centricity. Better data management and use, new digital banking products, and greater customer engagement all enable better service for underserved customer segments.
<h2>Who Should Read This Report</h2>
The primary audiences for this report are those in mainstream financial institutions who want to know how their contemporaries are engaging with innovators to pursue financial inclusion, and those in fintech companies who want to understand the way banks are likely to approach them. In addition, venture capital firms, multilaterals, and industry associations have much to learn from this research about what drives banks to partner, what gets in the way, and what comes next.
<h2>Acknowledgements</h2>
This report is part of a two-year initiative, <a href="/about/what-we-do/mainstreaming-financial-inclusion-best-practices/">Mainstreaming Financial Inclusion: Best Practices,</a> to help advance efforts of financial institutions to reach customers at the base of the economic pyramid. The initiative and this report were made possible with support from <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html">MetLife Foundation</a>.

How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines

Mainstreaming Financial Inclusion: Best Practices

New CFI report illustrates novel approaches to an increasingly digital customer journey.

Blog Post

Picture this scene: hundreds of people cram into a financial service provider’s storefront, arriving seemingly out of nowhere, mobile phones in hand. They act excited, as if they are about to attend a dance party. Curious passersby stop to see what the buzz is about.

This technique, which organizers call a flash mob, is one innovative approach for generating sign-ups and interest in a new product aimed at underserved clients. The flash mob attracts people otherwise hard to reach to FINCA Pakistan’s mobile service, Sim Sim.

Creative approaches, powered digitally, are transforming the customer experience – hopefully for the better. Digital processes can dramatically increase convenience, speed and variety of the services available to the previously unserved. But digital products and processes succeed only with good design – and with the strategic use of human touch.

In our recent report, <a href="https://www.centerforfinancialinclusion.org/charting-the-customer-journey-in-the-digital-age">Charting the Customer Journey in the Digital Age</a> , Amin Khairy of the <a href="https://www.iif.com/">Institute of International Finance</a> and I explain how mainstream financial institutions create effective digital customer journeys for underserved clients. With support from <a href="https://www.metlife.com/corporate-responsibility/metlife-foundation/">MetLife Foundation</a> and CFI’s founding partner, <a href="https://www.credit-suisse.com/us/en.html">Credit Suisse</a>, this report explores how the three main phases of the customer journey evolve through digital transformation and provides examples of how innovative financial institutions are creatively addressing challenges for emerging customers. It’s the penultimate report from our two-year partnership, <a href="https://www.centerforfinancialinclusion.org/program_teams/mainstreaming-financial-inclusion">Mainstreaming Financial Inclusion: Best Practices</a>.

Creative Solutions to Digital Mainstreaming

Amin Khairy

<p>During the interviews we conducted for this report, it became abundantly clear that the mobile phone plays an essential role in fostering the digitization of customer journeys, particularly in the case of products that cater specifically to low-income segments. Indeed, the increased penetration of mobile phones and mobile money services among low-income segments has highlighted handheld mobile devices as the appropriate tool to finally incorporate financially excluded individuals into the financial sector. GSMA’s Mobile Economy 2017 report highlights the growth trends of mobile money transactions. Between 2012 and 2017, mobile money transaction value increased by 350 percent to $31.5 billion, while the number of transactions increased by 428 percent to 1.8 billion.</p>


<p>How are mainstream financial institutions creating effective digital customer journeys for lower-end clients? In this report, which is based on interviews with senior staff members from fifteen financial institutions in the financial inclusion space, we explore the challenges of digital transformation in each phase of the customer journey: <strong>discovery</strong>, <strong>onboarding</strong> and <strong>continuing use</strong>. We provide examples of how innovative financial institutions are addressing these challenges with creative solutions for emerging customers.</p>


Discovery [Stage One]

<p>The discovery stage begins when customers identify a need for a financial service. Broadly, it incorporates three steps by the customer: developing an awareness of potential options, evaluating those options, and selecting the most appropriate product. Companies compete for customers’ attention in this stage in an attempt to build brand awareness and communicate value.</p>
<p>One of the pre-digital era challenges banks faced targeting lower income segments in emerging markets was the relative ineffectiveness of conventional marketing techniques on those segments. The target clients of financial inclusion efforts are generally less literate than the overall population. Moreover, they often lack the confidence to approach financial institutions, fear that the institution does not want them as a customer, and discount marketing messages. They often think, “That’s not for people like me.”</p>
<p>One of the obstacles hindering financial inclusion is the fact that underserved customers have traditionally distrusted financial service providers. According to the Global Findex Database 2017, 16 percent of adults without an account at a financial institution cited <a href="http://documents.worldbank.org/curated/en/332881525873182837/The-Global-Findex-Database-2017-Measuring-Financial-Inclusion-and-the-Fintech-Revolution">distrust as their main barrier to opening an account</a>. Digital awareness and marketing campaigns may reach a big audience at low costs compared to traditional methods. However, to create trust among underserved segments, financial institutions need to make concerted efforts to improve how they are perceived by the unbanked.</p>
<p>With digitization, messages can be delivered directly to clients’ phones and tablets in simple terms or with images. For customers in the digital ecosystem, much of this happens through targeted advertising: companies compete to deliver targeted ads to specific handsets at critical moments as customers browse the internet or use social media.</p>
<blockquote><p>Underserved customers don&#8217;t believe products are for them, but targeted digital messages can overcome this.</p></blockquote>
<p>These channels overcome an access to information challenge and may make it less costly to raise awareness. As underserved clients connect to the internet and develop digital footprints, companies will be increasingly able to reach them with these methods.</p>
<h2>That Human Touch</h2>
<p>However, our interviews suggest that, to be effective, digital models must be combined with elements of human touch that customers still prefer or find more comforting. This is especially true for customers new to digital experiences. While targeted advertising is useful, it cannot address many of the concerns clients have when evaluating and selecting products.</p>
<p>As described in CFI&#8217;s <em>Uniting Tech and Touch: Why Centaur Products Are Better for Consumers and Providers</em>, consumers with limited exposure to digital financial services find it especially important to <a href="https://www.centerforfinancialinclusion.org/uniting-tech-and-touch-why-centaur-products-are-better-for-consumers-and-providers-evidence-from-kenya">speak to a person when they are first learning about a product</a>. Rather than scrolling through FAQs, customers can ask questions in their own words, which builds confidence. A guiding hand may be especially helpful for underserved clients who are <a href="https://content.accion.org/wp-content/uploads/2018/10/1122_TechTouch-RO6-Singles.pdf.">unaware of the range of available products, lack the digital savviness to evaluate products, or mistrust financial institutions</a>. Many customers interviewed for our <em>Tech and Touch</em> study said that their very first question is whether a new brand or service is legitimate. To be convinced, they want to speak to a person they can look in the eye.</p>
<p>Many of the financial institutions we interviewed for this paper use tech and touch during the discovery stage. Several institutions reported that offering a human touch to prospective customers is critical to boosting adoption, and some of the products with the highest rates of adoption add human elements to primarily digital experiences.</p>


<p>Consider SimSim, a mobile wallet application developed by FINCA Microfinance Bank Limited in Pakistan and the fintech Finja. Customers can download the free application to their mobile devices. If they have a national identification card, they can <a href="http://www.finca.pk/news/pakistans-first-free-mobile-wallet-simsim-received-regulatory-approval">sign up for a branchless banking account in less than a minute</a>. Users can use SimSim to send and receive money, pay bills, and receive discounts at their favorite retailers. The challenge FINCA Pakistan faced was how to move people from hearing about the product to downloading it.</p>
<p>FINCA promotes SimSim using digital marketing techniques like targeted ads and optimizing their webpages for search engines, but to break through the inactivity barrier, their most successful client acquisition strategy is the flash mob.</p>
<p>FINCA stages flash mobs to focus excitement on one specific merchant who accepts payments using SimSim. On a given morning or afternoon, they tell everyone in their system and on social media that FINCA and SimSim are going to be at a particular shop, and that everyone who comes to make a purchase before a certain time will receive a discount or a free item. FINCA’s staff help customers sign up during the flash mob, accompanied by music, dancers, banners, and giveaways. In addition to those arriving after hearing about the flash mob from social media notifications, the energy around the shop also draws walk-ins.</p>
<p>This approach has helped FINCA build awareness and expand the product. “We try to create this exciting moment to draw business to the merchant who is using our system and sign up as many potential clients to our platform as possible. [We want to] show them how to use it and try to get them actively transacting”, said Keith Sandbloom, vice president and regional director for Latin America and the Caribbean at FINCA. The flash mobs have “really helped client uptake of the SimSim wallet. You can very clearly see the impact of these flash mobs on the client uptake graphs. New client signups go through the roof. When you don’t have any [flash mobs], uptakes are just a flat line.”</p>


<p>The relationship between the fintech EarnUp and the non-profit organization GreenPath, both in the United States, provides another example of the potential of integrating human touch into digital customer journeys. Customers who sign up for the service sync their various loan accounts to the platform, and the application works to set money aside and optimize loan payments so customers can get out of debt faster. About two years ago, EarnUp was facing a challenge. They knew they “had the technology to provide meaningful long-term engagement but lacked a <a href="https://www.earnup.com/earnup-greenpath-learned-nonprofit-partnership">channel to reach the low-income customers that needed it the most</a>.”</p>
<p>It turned to GreenPath, a financial counseling organization. GreenPath offers individualized, phone-based financial counseling, working closely with customers to build their knowledge of the financial tools and strategies available to help better manage their money. GreenPath reaches its clients both through its website, but more importantly, through partnerships with banks and credit unions. GreenPath recognized that EarnUp would be a perfect tool for many of the clients it advises. In a report on their partnership, GreenPath said, “We immediately sensed the potential for a partnership that could address strategic challenges on both sides. At GreenPath, we were grappling with how to serve more of the customers who came through our doors. EarnUp was trying to <a href="https://www.greenpathpartner.org/Docs/Successful_Partnerships.pdf">broaden its customer base</a>, particularly among the types of people we were aiming to serve better.” Their partnership is leveraging GreenPath’s direct relationship with clients to build awareness of EarnUp’s offerings, launching customers on a digital customer journey. The initial deployment the institutions conducted together showed promising financial outcomes for users of the EarnUp platform.</p>


Discovery Case Studies

Onboarding [Stage Two]

<p>Once a person decides to apply for a product, the provider initiates a series of activities to establish the customer’s credentials and eligibility and set up the account. This stage also involves underwriting decisions for credit products, providing detailed information about product terms and conditions, and signing contracts. Most of this process used to involve paperwork, for the obvious reason that it traditionally required customers to sit with staff to fill out paper forms and check documents.</p>
<p>In its traditional form, the onboarding stage can be especially difficult for underserved clients. The prospect of opening an account the same day was often low due to insufficient documentation, such as lack of proof of income (especially hard to obtain for people working in the informal sector). According to the 2017 Global Findex survey, nearly <a href="http://documents.worldbank.org/curated/en/332881525873182837/The-Global-Findex-Database-2017-Measuring-Financial-Inclusion-and-the-Fintech-Revolution">one quarter of adults without an account at a financial institution cited a lack of documentation as a reason</a>. When documentation is completed on paper, a customer may have to travel to and from a financial institution several times, which is time consuming even in urban environments. Approximately one-fifth of the Findex respondents without accounts also cited distance to a financial institution as a barrier. For loan products, this stage is even more difficult for customers: the approval process can often take days or weeks, and understanding contract terms and conditions can be daunting, even for the well-educated.</p>
<p>Over time, onboarding processes have gone digital, as staff members were given tools to enter information directly into a computer rather than first writing it down in paper. Today, a fully digital onboarding process—in which customers can sign up for a product on their phones or computers from any location, often within a few minutes—is spreading. With fully digital onboarding, the customer gains convenience and speed, while the provider reduces personnel costs.</p>
<p>In response to these barriers, financial service providers are working to make the onboarding process easier for clients wherever possible by creating tools that allow customers to complete portions or entire onboarding processes digitally. In our interviews, we found that financial institutions are moving toward digital onboarding, though not all have fully reached that destination. There are a number of examples where the process occurs entirely from a smartphone, and others that still require some face-to-face element.</p>
<blockquote><p>In countries with digitized national identification systems, know your customer (KYC) can be fully digitized.</p></blockquote>
<p>One of the most helpful advances in this stage concerns processes. In countries with digitized national identification systems, KYC can be fully digitized through provider links to the national identification database. However, in a number of instances, the national identification system has not been fully implemented or streamlined sufficiently to allow for onboarding to take place remotely. The role of government in establishing an enabling environment to promote financial inclusion and digital financial service adoption was a major theme in many of the interviews conducted.</p>


<p><img class="aligncenter size-full wp-image-35257" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/05/IIF-Customer-Journey-BTPN-Digital-Onboarding.png" alt="" width="738" height="397" srcset="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/05/IIF-Customer-Journey-BTPN-Digital-Onboarding.png 738w, https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/05/IIF-Customer-Journey-BTPN-Digital-Onboarding-300x161.png 300w" sizes="(max-width: 738px) 100vw, 738px" /></p>
<p>BTPN in Indonesia, for example, relies on agents. The bank is working to ease the barriers of client on-boarding for its basic savings account—BTPN Wow!—designed for the financially excluded. The product operates primarily through agents rather than branches, giving customers many more points of access. The agent takes a photo of a client’s identification and records his or her phone number. Clients provide an e-signature and verify their account opening by utilizing a onetime password. The entire process takes from five to ten minutes.</p>
<p>One of the factors driving the success of BTPN Wow! is the <a href="https://www.ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pages/Press-Release-OJK-Promotes-Branchless-Banking-Program-to-Boost-Financial-Inclusion-in-West-Sumatra.aspx">Indonesian government’s desire to promote branch-less banking</a> as part of the country’s national financial education strategy.</p>


<p>The fourth-largest mobile bank in Poland, mBank is digitizing its customer onboarding process by partnering with the fintech LiveBank. LiveBank uses video chats, optical character recognition (OCR), biometrics, and digital signatures to capture and verify customer information. As part of this process, mBank and LiveBank connect with Poland’s eGovernment portal, where they can link to the national identification system to verify identities.</p>


<p>Al Rajhi bank in Saudi Arabia relies on a similar system to enable digital onboarding. The government integrated the national ID system with the Saudi Credit Bureau (SIMAH). The IDs are a simple and secure way to verify customers in KYC processes, enabling digital onboarding. When customers want to open a bank account, they call the bank and provide their national ID number. The bank provides an initial username and password and verifies the account opening using a one-time password sent to customers’ phones. After signing up, customers can pick up their debit card from any designated Al Rajhi location. At the kiosk, the bank uses biometric finger scanning to complete the account opening process. For clients wishing to obtain a credit line, Al Rajhii can easily look up a borrower’s credit history and debt burden ratio through his or her ID number to assess credit worthiness, a process that usually takes a few minutes.</p>


<p>In Mexico, BBVA has been working for years to digitize the onboarding process in an effort to reach low-income customers without easy access to a branch. BBVA redesigned its application to make it easier for low-income customers to sign up for basic accounts remotely. However, at first, regulations in Mexico meant that a customer would still need to visit a bank branch to complete the onboarding process. That was until the government enacted new regulations that allowed for the opening of simple, balance-limited accounts with less complex KYC requirements. With the new regulations in place, BBVA was able to fully digitize its onboarding process for new clients.</p>


Onboarding Case Studies

Continuing Use [Stage Three]

<p>The continuing use phase includes product use, customer engagement, cross-selling and responding to inquiries or complaints, as providers work to build extended relationships with clients. Financial institutions hope that this will be the longest stage in the customer journey, and it is certainly the stage in which initial investments in discovery and onboarding pay off. However, as low account usage rates—particularly for mobile money accounts—suggest, it is also one of the most difficult for financial institutions to get right. According to the latest Global Findex, 20 percent of account owners worldwide reported having an inactive account, that is, no deposit or withdrawal—digital or otherwise—in the past 12 months.</p>
<p>Many FSPs that are just starting to cater to clients at the base of the pyramid struggle to build a relationship with clients. Learning about their financial lives and habits in order to continue improving and innovating their service offerings is challenging because they are thin-file customers, so records about their financial lives are scarce. Additionally, many clients of this market segment are interested only in a particular feature of the product that they have identified is beneficial for them and thus are thought to be less open to exploring other beneficial features. Because of this, FSPs face many challenges when trying to engage their clients in this segment.</p>
<p>In a traditional financial institution, contact with customers is limited to times when customers visit branches for transactions or inquiries, or to expensive phone or mail outreach. Digital systems allow for ongoing contact at a much lower cost, giving institutions the opportunity to develop a different kind of relationship with their customers. The digital footprints that customers leave allow companies to conduct a range of analytics, so that messages sent by SMS or other means can be highly targeted. Our interviewees reported using machine learning to cross-sell products at certain moments for the customer and using chatbots to provide customer service assistance. The digital relationship can also incorporate nudges, tools and reminders based on behavioral insights to encourage clients to save more, manage better their debts, keep closer track of their expenses, and build more accurate personal budgets. In this way, a bank can contribute to customer financial health.</p>
<p>Banks can also offer enhanced, tailored financial services to emerging customers through digital means. mBank is using machine learning to identify what managing director Jakub Fast calls “natural scenarios,” during which they can offer tailored financial services. For example, if their system detects that a customer is using his or her mBank card to pay for transportation to the airport, the customer might receive an offer for a travel insurance product. Or an additional line of credit might be offered to a customer with a good credit score who has maxed out his or her credit card during a transaction. Similarly, Bancolombia uses machine learning to analyze the savings behavior of its Ahorro a la Mano (“Savings on Hand”) customers to identify an approval limit for their Credito a la Mano (“Loan on Hand”) product. The customer can go through the complete customer journey for these products—from signing up for Ahorro a la Mano, to applying for and repaying credit from Credito a la Mano—digitally.</p>
<p>At financial institutions with digital offerings, examples like these are not particularly unique. The majority of institutions we spoke with mentioned the importance and use of some exciting new technology or the application of analytical tools to their data.</p>
<p>One area where human touch may still be needed is complaint resolution. Institutions are using email, chatbots, live chat and call centers to handle inquiries and complaints, and these mechanisms may take care of the great majority of inquiries. However, our research with customers in Kenya suggests that while they are comfortable with digital transactions, when something goes wrong they want to know that they can have <a href="https://www.centerforfinancialinclusion.org/uniting-tech-and-touch-why-centaur-products-are-better-for-consumers-and-providers-evidence-from-kenya">ultimate recourse through a person</a>. If most inquiries can be answered through automated means—inexpensively—the FSP may still be able to provide a human response for more difficult cases, while saving money overall on the complaints function.</p>
<p>What was most interesting in the examples we identified related to this phase was the degree to which innovative bank offerings relied on partnerships with technology companies to reimagine the customer journey. Such partnerships allow for rapid experimentation, take advantage of the technology know how of other companies, which may be more attractive than in-house development. BBVA, for example, runs an Open Innovation program, which supports its business verticals to find and integrate cutting-edge technology start-ups. The bank uses a variety of methods to identify partners, such as competitions where start-ups pitch their ideas to senior executives. The winners of those competitions are then put on a fast track to deploy their solutions as quickly as possible.</p>


<p>In 2016, DBS Bank launched digibank, an application it bills as “an entire bank squeezed into your smartphone,” according to its website. The company launched in India first because of its unique enabling environment. The country’s eKYC system, unified payments interface, and consent system for sharing client data enabled DBS Bank to launch a completely mobile banking experience.</p>
<p>DBS uses a conversational artificial intelligence platform to enhance customers’ experience after they open an account. DBS Bank is partnering with Kasisto, an AI platform, to interact with clients for everything from managing frequently asked questions to assisting with balance transfers and providing customers with insights into their own spending patterns. The platform can handle 82 percent of inquiries, allowing customers to get the answers they need quickly while minimizing operational costs for the company. The platform has roughly one million users in India, and DBS recently launched it in Indonesia. In Singapore, DBS Bank has deployed <a href="https://kasisto.com/wp-content/uploads/2018/08/Kasisto_DBS-digibank_Case-Study.pdf">Kasisto’s platform through Facebook Messenger</a>.</p>


<p>Emirates NBD in the United Arab Emirates has a range of digital offerings for a variety of client segments. Through their Facebanking service, customers can open accounts, video chat with bank staff, and view analysis of their earning and spending behavior.</p>
<p>One noteworthy feature is Emirates NBD’s commitment to including clients with disabilities. For example, to serve deaf customers, they have partnered with the technology company KinTrans. KinTrans uses motion-recognition technology to facilitate real-time sign language translation between a customer and frontline service staff. The aim is to equip 60 percent of its branches to serve deaf customers by 2020.</p>


Continuing Use Case Studies

Takeaways

<p>The case studies presented throughout this report offer important lessons about how mainstream financial institutions can create a successful customer journey in the digital age.</p>
<p>One important message is that it will likely be necessary to maintain some portion of touch even as the majority of transactions shift to tech. As the case studies in the discovery stage show, this is especially important in early stages of the customer journey, and to assist with complaint resolution. Quite possibly, as clients interact in a digital environment, they will become more comfortable locating and deciphering digital information and will rely less on the human touch to usher them along at key stages in their journey. However, as long as trepidation about new products and services still exists, the availability of a human touch element is needed. As Keith Sandbloom of FINCA International put it: “We want to maintain the [human] touch with our clients, but we [also] want to implement tech to offer new products through new channels that add convenience to our clients’ lives. When we talk about how our business model is evolving, we use a phrase we call ‘touchtech.’”</p>
<blockquote><p>Maintaining some portion of human touch might be necessary even as the majority of transactions shift to tech.</p></blockquote>
<p>Our case studies also show how policymakers and regulators play important roles, particularly in setting up the framework for smooth digital onboarding. The advent of national identification systems and changes in KYC regulation have allowed banks to launch fully digital customer journeys. Scans of photo IDs and/or biometrics, verified with uplinks to national databases, have replaced trips to branches and photocopies of national registration cards.</p>
<p>We have also seen that partnerships between financial institutions and fintech and other technology companies are important in facilitating the customer journey. Companies that have largely digitized their operations make use of predictive analytics to segment their clients and offer products and services in a targeted way. They are also using artificial intelligence chatbots to serve customers. Partnering with fintech and technology companies provides institutions with capabilities that are otherwise difficult to acquire. In our case studies, we highlighted a partnership that allows for communication between deaf customers and frontline staff and a conversational AI tool to that supports a digital bank. Developing even one of these solutions in-house is a time-consuming and costly process, and collaborations represent an efficient way for mainstream financial institutions to adapt to the digital environment and improve the customer journey.</p>
<p>Transformation from traditional to digital models is not easy. It requires deep rethinking of business models, rather than simply automating existing ones. The challenge is both internal (such as major changes in staff roles and upgrading in-house data analytic capabilities) and external (such as adapting to new regulations or forging new partnerships).</p>
<blockquote><p>Transformation from traditional to digital models requires deep rethinking of business models, rather than simply automating existing ones.</p></blockquote>
<p>Digital transformation takes time, upfront investment and ingenuity. However, the potential benefits make digital transformation models worthwhile, as mainstream financial institutions gain new customers and while reducing operating costs, and emerging customers enjoy faster, more convenient and more tailored financial products and services.</p>


Acknowledgements, Interview List and Endnotes

<p>We thank all those who participated in our research—particularly the representatives from the nine financial institutions, fintechs and other entities featured in this paper who generously shared their experiences and insights with us. We also gratefully acknowledge the following organizations for their invaluable time and support: FINCA Microfinance Bank Limited (Pakistan), BTPN, GreenPath, Bancolombia, BBVA Bancomer, Emirates NBD, mbank, Al Rajhi Bank and DBS Bank. Please see the full list of interviewees below.</p>


<table style="height: 657px" width="755">
<tbody>
<tr>
<td width="162">
<h4><strong>INSTITUTION<br />
</strong></h4>
</td>
<td width="125">
<h4><strong>INTERVIEWEE</strong></h4>
</td>
<td width="304">
<h4><strong>TITLE</strong></h4>
</td>
</tr>
<tr>
<td rowspan="3" width="162">Al Rajhi Bank*</td>
<td width="125">James Galloway</td>
<td width="304">Advisor to the CEO</td>
</tr>
<tr>
<td width="125">Turki AlDhfayan</td>
<td width="304">Senior Director, Digital E-Channels</td>
</tr>
<tr>
<td width="125">Anil Pathak</td>
<td width="304">Senior Director, Marketing</td>
</tr>
<tr>
<td width="162"><strong>BBVA Bancomer*</strong></td>
<td width="125"><strong>Carlos Lopez-Moctezuma</strong></td>
<td width="304"><strong>Head, New Digital Business &amp; Global Director for Financial Inclusion</strong></td>
</tr>
<tr>
<td rowspan="5" width="162">Bancolombia*</td>
<td width="125">Pilar Cabrera Portilla</td>
<td width="304">Director, Regulatory &amp; Public Affairs</td>
</tr>
<tr>
<td width="125">Juan David Correa</td>
<td width="304">Analyst, Financial Inclusion</td>
</tr>
<tr>
<td width="125">Pilar Otero</td>
<td width="304">Director, Regulatory &amp; Public Affairs</td>
</tr>
<tr>
<td width="125">Myriam Botero Wickmann</td>
<td width="304">Head, Financial Inclusion</td>
</tr>
<tr>
<td width="125">Carlos Ochoa</td>
<td width="304">Investment Manager</td>
</tr>
<tr>
<td width="162"><strong>BTPN</strong></td>
<td width="125"><strong>Vita Sabrina</strong></td>
<td width="304"><strong>Customer Experience Lead</strong></td>
</tr>
<tr>
<td width="162">DBS Bank*</td>
<td width="125">Neil Cross</td>
<td width="304">Chief Innovation Officer</td>
</tr>
<tr>
<td width="162"><strong>Emirates NBD*</strong></td>
<td width="125"><strong>Vikran Krishna</strong></td>
<td width="304"><strong>Head of Marketing &amp; Customer Experience</strong></td>
</tr>
<tr>
<td width="162">FINCA International</td>
<td width="125">Keith Sandbloom</td>
<td width="304">Vice President &amp; Regional Director For Latin America and The Caribbean</td>
</tr>
<tr>
<td width="162"><strong>JP Morgan/ Financial Solutions Lab*</strong></td>
<td width="125"><strong>Anne Romatowski</strong></td>
<td width="304"><strong>Vice President, Global Philanthropy</strong></td>
</tr>
<tr>
<td width="162">mBank S.A.*</td>
<td width="125">Jakub Fast</td>
<td width="304">Managing Director</td>
</tr>
</tbody>
</table>


<p>The works cited below are in order of appearance, as hyperlinked text or image caption, from Introduction to Takeaways.</p>
<ul>
<li>“World’s Best Digital Bank 2018: DBS,” <em>Euromoney</em>, July 11, 2018, https://www.euromoney.com/article/b18k8wtzv7v23d/world39s-best-digital-bank-2018-dbs.</li>
<li>“How Digitization Is Paying for DBS,” <em>The Economist</em>, March 8, 2018, https://www.economist.com/finance-and-economics/2018/03/08/how-digitisation-is-paying-for-dbs.</li>
<li>&#8220;2017 State of the Industry Report on Mobile Money,&#8221; GSMA, https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2018/05/GSMA_2017_State_of_the_Industry_Report_on_Mobile_Money_Full_Report.pdf</li>
<li>Katherine N. Lemon and Peter C. Verhoef, “Understanding Customer Experience Throughout the Customer Journey,” <em>Journal of Marketing</em> 30, no. 6 (November 2016): 69-96, https://journals.sagepub.com/doi/pdf/10.1509/jm.15.0420.</li>
<li>Asli Demirgüç-Kunt, Leora Klapper, Dorothe Singer, Saniya Ansar and Jake R. Hess, “The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution,” World Bank, April 2018, http://documents.worldbank.org/curated/en/332881525873182837/The-Global-Findex-Database-2017-Measuring-Financial-Inclusion-and-the-Fintech-Revolution.</li>
<li>Alexis Beggs-Olsen, “Uniting Tech and Touch: Why Centaur Products Are Better for Consumers and Providers,” Center for Financial Inclusion at Accion, November 2017, https://www.centerforfinancialinclusion.org/uniting-tech-and-touch-why-centaur-products-are-better-for-consumers-and-providers-evidence-from-kenya.</li>
<li>Amee Parbhoo and Coryell Stout, “The Tech Touch Balance,” Accion Insights, October 2018, https://content.accion.org/wp-content/uploads/2018/10/1122_TechTouch-RO6-Singles.pdf.</li>
<li>“Pakistan’s First Free Mobile Wallet, SimSim, Received Regulatory Approval,” FINCA Microfinance Bank, May 30, 2017, http://www.finca.pk/news/pakistans-first-free-mobile-wallet-simsim-received-regulatory-approval.</li>
<li>“EarnUp &amp; GreenPath: What We Learned from a Nonprofit Partnership,” Earnup, March 19, 2018, https://www.earnup.com/earnup-greenpath-learned-nonprofit-partnership.</li>
<li>“Building Successful Nonprofit-Fintech Partnerships,” GreenPath, 2018. https://www.greenpathpartner.org/Docs/Successful_Partnerships.pdf.</li>
<li>Demirgüç-Kunt et al., The Global Findex Database 2017.</li>
<li>“OJK Promotes Branchless Banking Program to Boost Financial Inclusion in West Sumatra,” Otoritas Jasa Keuangan, December 3, 2016, https://www.ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pages/Press-Release-OJK-Promotes-Branchless-Banking-Program-to-Boost-Financial-Inclusion-in-West-Sumatra.aspx.</li>
<li>Beggs-Olsen, <em>Uniting Tech and Touch: Why Centaur Products Are Better for Consumers and Providers.</em></li>
<li>“KAI Banking &amp; DBS digibank,” June 2017, https://kasisto.com/wp-content/uploads/2018/08/Kasisto_DBS-digibank_Case-Study.pdf.</li>
</ul>


Partners

This report is part of a two-year initiative, Mainstreaming Financial Inclusion: Best Practices, which aims to help advance efforts of financial institutions to reach customers at the base of the economic pyramid. This initiative and this report were made possible with support from MetLife Foundation, and in collaboration with the Institute of International Finance. The views and opinions expressed in this report are those of the authors and do not necessarily represent the views of the MetLife Foundation or the interviewees. All errors are our own.

MetLife Foundation

Institute of International Finance

More Mainstreaming Financial Inclusion Reports

How are mainstream financial institutions creating effective digital customer journeys for underserved clients? We explore the three primary stages involved in digital transformation and provide examples of how innovative financial institutions are addressing its challenges with creative solutions for emerging customers.  

Report

<h1>Introduction</h1>
Financial services are going digital. Digitization will change the way financial institutions organize themselves to relate to their customers, and it will dramatically change how customers experience financial services. These changes will be especially profound for traditionally underserved customers who are the targets of financial inclusion efforts.

The good news is that digital delivery models make it possible—and profitable—for banks to serve many people who were previously excluded because their incomes were too low or their locations too remote to reach through high-touch models. The high operational costs associated with physical buildings and staffing only makes sense if the branches break even and provide a satisfactory return within an acceptable timeframe. Low-income customers with thin credit histories borrowing small amounts of money have long presented a challenge to the analog way of doing business. Thus, serving the underbanked customer segment through digital channels presents an opportunity—by lowering operational costs and increasing customer engagement—to transform financial inclusion into a sustainable business. Additionally, digitization allows thin-file customers to have their creditworthiness assessed through alternative scoring models that incorporate other types of behavioral records.

When done effectively, the returns to digital transformation can be significant. For example, DBS Bank, a financial services group in Asia named <a href="https://www.euromoney.com/article/b18k8wtzv7v23d/world39s-best-digital-bank-2018-dbs">“world’s best digital bank” by Euromoney in 2018</a>, has seen digitization contribute to rising shareholder value. DBS customers who process more than half their transactions remotely bring in more revenue than traditional customers. <a href="https://www.economist.com/finance-and-economics/2018/03/08/how-digitisation-is-paying-for-dbs">Two-thirds of DBS’s gross profit currently comes from digital customers</a>. A DBS staff member told us, “The cost-to-income ratio for digital customers is just 34 percent, compared to 55 percent for traditional customers. The return on equity from digital customers is, impressively, at 27 percent.” Numbers such as these make it attractive to reach new customer segments. But if the transition from face-to-face to digital is to succeed, financial institutions will need to understand and address the special characteristics of these segments and get the digital customer journey right—for both their own operations and the customers’ experience.
<h2>Walking vs. Flying</h2>
For customers, the difference between a traditional and a digitized customer journey can be as dramatic as the difference between walking and flying in an airplane. The traditional customer journey includes traveling to branches to talk with a customer service representative, assembling pages of paper documents to meet KYC requirements, and then waiting for days to receive decisions. With digitization, customers can discover and apply for products on their phones and receive funds into mobile wallets, all in a matter of minutes.
<blockquote>The difference between a traditional and digitized customer journey can be as dramatic as the difference between walking and flying in an airplane.</blockquote>
In order to produce such a streamlined journey, financial institutions must address technical and operational challenges and regulatory issues. And, as we discuss in this report, the journey they construct needs to work well for customers—especially when those customers are new to their services. Digitization can bring enormous gains in speed and convenience to customers, but it can also create gaps as it shifts from familiar, person-to-person interactions to interactions that take place on a digital device.

Charting the Customer Journey in the Digital Age

Yanina Seltzer

Expanding financial capability benefits financial service providers and customers.

<em>This post originally appeared on the <a href="https://www.accion.org/four-reasons-focusing-on-financial-capability-is-good-business">Accion</a> website.</em>

If you’ve never used financial services in the past, you’re going to encounter a significant learning curve when you finally get access. That’s why more institutions are rolling out products to support first-time clients and equip them with actionable tips and tools to simplify their experience. These new services aren’t just good for customers, they’re good for business. By helping consumers attain the <a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-catalogue-of-innovations-in-financial-capability">knowledge, skills, attitudes, and behaviors</a> necessary to make sound financial decisions — what we call financial capability — customers can become more informed and engaged. In other words, they become better customers.

For any financial institution interested in increasing customer loyalty, building better financial capability is crucial.

<a href="https://www.centerforfinancialinclusion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion">As we work with MetLife Foundation</a> to expand financial capability through customer-centered innovations, we’re excited about the potential benefits for both customers and institutions. Here are four reasons why helping clients build their financial capability is a win-win:
<h2>1. Financial Capability Drives Active Use of Financial Products</h2>
Products that help increase financial capability, <a href="https://www.centerforfinancialinclusion.org/financial-capability-building-practices-in-mexico">drawing insight from behavioral science</a>, can encourage customers to use products more often, which translates to higher profitability for providers and greater usefulness to customers.

Take the case of <a href="https://www.grupobancolombia.com/wps/portal/personas/productos-servicios/cuentas/ahorro/transaccional/ahorro-a-la-mano">Ahorro a la Mano</a>, a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">nudges</a> to remind users to put money into their savings.

Bancolombia worked with <a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3">Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named “<a href="https://www.centerforfinancialinclusion.org/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines-2">Emilia</a>,” that could point out opportunities to use the product and makes special offers to encourage transactions within the first month. Because they provide individually tailored messages in a friendly, personal voice, Emilia’s nudges and reminders build trust with clients, and they become more likely to act on her suggestions.
<h2>2. Customer Loyalty Increases</h2>
As customers use their products more frequently, they are likely to become more loyal. Most financial service providers’ balance sheets and product viability calculations do not figure long-term customer loyalty into their calculations, but customers that stick with a provider over time are important to business success.

In September 2017, BBVA launched <a href="https://www.bbva.com/en/bbva-opens-its-banking-app-in-spain-to-accounts-and-products-from-other-providers/">Bconomy</a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month</a>.
<h2>3. Capable Customers Use More Products</h2>
Part of the accepted definition of financial capability is a person’s confidence in using a wide range of products to meet their financial needs. Savvy institutions that promote financial capability also build appropriate follow-on products for customers. Institutions that ignore this strategy may see their first-time customers move on to other providers as they become more comfortable with formal finance.

<a href="https://acreimex.com.mx/">Acreimex</a>, a savings and credit cooperative in Mexico, has incorporated savings into payroll loan repayments so that customers who opt in can save painlessly while they repay their loans. Savings discipline is a key attribute of financially capable people, and automated savings is a tool that assists people to stick to their best intentions. Acreimex built this option by combining its two most popular products. It merged its payroll loan and savings services by rounding up repayment installment amounts and automatically depositing the excess amount into clients’ savings.

The combination of products resulted in significant increases in savings activity and balances. An evaluation showed that participants made about <a href="https://optixproject.org/acreimex/">twice as many deposits and saved 30 percent more</a> than those who didn’t participate. Additionally, <a href="https://nextbillion.net/stealthy-saving-building-on-payroll-credit-to-automate-savings/">96 percent of savers chose not to withdraw the balances</a> from their accounts throughout a 12-month pilot.
<h2>4. Investing in Financial Capability is More Effective — and Less Expensive</h2>
Traditional, classroom-based financial instruction is costly. Features that build financial capability are often cheaper and more effective because they generate direct and longer lasting behavior change.

When researchers analyzed more than 200 individual impact studies on financial education, they found that <a href="https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/CU%20Final%20Report.pdf">only 0.1 percent of the observed positive changes</a> in people that had attended classroom-based financial education programs could be attributed to the programs themselves.

On the other hand, impact evaluations of financial products that incorporate behavioral insights to nudge client behavior consistently find statistically significant positive impacts. For example, in a study with <a href="http://www.bancoadopem.com.do/app/do/frontpage.aspx">Banco ADOPEM</a>, researchers tracked customers who attended either a traditional accounting-based financial education class or a class that, in keeping with behavioral insights, offered simple rules of thumb in accounting. Both classes aimed to assist customers to separate business and personal accounts. In the end, the <a href="https://www.povertyactionlab.org/sites/default/files/publications/124_303%20Rules%20of%20Thumb%20AEJ%20Apr2014.pdf">customers who received the simplified rules of thumb displayed more positive business outcomes</a> — they saw a 30 percent increase on average in the level of sales during weeks with typically low sales and saved an average of 6 percent more in personal savings.

More and more institutions are thoughtfully designing products and experiences that not only match their customers’ experiences and lives, but also consider their attitudes, skills, and behaviors. Financial institutions that invest in building up financial capability are likely ensuring they will have customers that are more active users of their products, that are loyal for longer, and that will use a wider variety of products.

<em>We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.</em>

Four Reasons Focusing on Financial Capability Is Good Business

Webinar

<span lang="ES-MX">Este webinar, presentado en conjunto por el CAF - Banco de Desarrollo de América Latina y el Centro para La Inclusión Financiera de Acción, expone los resultados del proyecto conjunto realizado por ambas instituciones (el primero de su tipo en la región) que buscó introducir a los actores que lideran el tema de educación financiera en Colombia, tanto de los sectores público, privado y no gubernamental, a metodologías de diseño de intervenciones más efectivas que incorporan conocimientos de la ciencia del comportamiento humano, y buscan no sólo transferir información financiera útil a las personas si no también mejorar sus comportamientos y hábitos financieros. Durante esta sesión virtual, Gabriela Zapata, Experta en temas de Inclusión Financiera, Diana Mejía, Especialista Senior en Desarrollo Productivo y Financiero de CAF (Banco de Desarrollo de América Latina) y Pablo Antón-Díaz, Gerente de Investigación del Centro Para la Inclusión Financiera de Acción, presentaron el reporte final de este proyecto que incluyó los resultados obtenidos y los principales obstáculos enfrentados. El panel concluyó con una presentación de recomendaciones y lecciones aprendidas para esfuerzos futuros de este tipo en Colombia, al igual que para otros países de la región interesados en realizar trabajos similares.</span>

Webinar: Expandiendo Capacidades Financieras en Colombia

Expanding Financial Capability in Colombia

Expandiendo capacidades financieras en Colombia

This report was made possible with support from the Development Bank of Latin America (CAF). We also wish to thank our partners in Colombia, Banca de las Oportunidades and the URF (Unidad de Proyección Normativa y Estudios de Regulación Financiera) of the Colombian government, which were instrumental in helping us organize logistics for the workshops.

Development Bank of Latin America

An analysis of how to embed behavioral insights into financial educational programming

In July 2017, Colombia launched its National Economic and Financial Education Strategy, which established an action plan for promoting financial education in the country. The Intersectoral Commission for Economic and Financial Education, in charge of implementing the strategy, partnered with the Latin American Development Bank (CAF) and the Center for Financial Inclusion at Accion (CFI) to develop a training program to impart the latest financial education programming insights and best practices to those who would be implementing the national strategy.

This report describes our efforts to communicate behavioral economics best practices to policymakers and practitioners in Colombia, including case studies from Fundación Capital and Banco de la República. We also evaluate the success of our efforts, and make recommendations for further embedding behavioral insights into financial education programming.
<h1>Major Findings</h1>
<h5>WHAT DOES IT TAKE TO BUILD FINANCIA CAPABILITY?</h5>
<h2>Shifting the financial education paradigm in Colombia begins with understanding how to design behaviorally-focused interventions.</h2>
Financial education programs are delivered by financial service providers, government agencies, public schools and universities, research institutions, institutional donors and non-profit organizations throughout Colombia. The majority of these programs are delivered in classroom-based settings, town hall-style lectures, seminars or workshops and employ printed materials and videos to communicate information. These kinds of traditional financial education models are difficult to scale, expensive to implement and often struggle with low attendance and participation.
<blockquote>Traditional financial education models are difficult to scale, expensive to implement and often struggle with low engagement.</blockquote>
Information transfer alone does not adequately engage people in the type of active learning and practice that prompts
behavior change. There is a growing body of evidence showing that financial education interventions that incorporate behavioral economics principles are more likely to improve client’s money management skills than traditional interventions.
By hosting six two-day workshops between for a mix of stakeholders from the public, private, and non-profit sectors in Bogotá, we gave practitioners a holistic understanding of what is necessary to design behaviorally focused interventions. We also asked participants to think deeply about cognitive biases that impact the success of behavior change programs, including procrastination, social norms, limited attention span, predisposition to the present, loss aversion, and default options. We asked participants to identify how these biases affect their lives, underscoring the fact that cognitive biases are present in all of us, not just beneficiaries of social programs or financial product users.

This project gave us a valuable opportunity to put our own behaviorally-informed principles into practice in the development of the workshops. We aimed to make the workshops fun, social and customized to the target audience. We developed simple, memorable rules of thumb for making financial education workshops more effective. Additionally, we were able to leverage what seemed to be somewhat of a national "teachable moment" right at the start of the implementation phase of the National Financial Education Strategy of Colombia. Overall, we are satisfied with the high level of information retention that we found in our follow-up surveys, and we are convinced that this constitutes a very important step in the right direction.

Tune In

Want to learn more? Check out the report that inspired this podcast episode.

Patrick Traynor

"The Finance Frontier" host Eric Hathaway interviews CFI Research Fellow Patrick Traynor and Research Manager Pablo Anton-Diaz about the findings of the 2018 CFI report, "Digital Finance and Data Security." 

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In this 20-minute episode, Traynor and Anton-Diaz discuss the sobering findings of "Digital Finance and Data Security," and what happens when the systems that are focused on expanding financial inclusion are poorly designed and executed. They also talk through what new companies need to take into account as they break into the market.

Listen and read Hathaway's accompanying post on the <a href="https://www.centerforfinancialinclusion.org/good-intentions-bad-security-podcast-episode-delves-into-cfi-research-on-data-security-in-digital-finance">CFI Blog</a>.  Below, download the CFI research that inspired this episode.

Pablo Anton-Diaz

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