Positive Friction: Better Borrower Understanding, Better Portfolio Outcomes

This report presents findings on an experiment with positive friction — which refers to intentionally creating friction with questions about loan terms to slow down digital credit loans — to determine the impact on repayment by borrowers.

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AUTHORS

Colin Rice, Jayshree Venkatesan, Rafe Mazer

Topics

Region

Kenya

In designing digital consumer journeys, friction experienced by the user is often considered a negative attribute — causing unwanted delays, difficulties, or complexity. However, frictionless experiences, such as those often embedded in digital credit, can result in consumers accepting terms and conditions without considering them thoroughly or applying for products that may be unsuitable for their individual and life needs.

The Center for Financial Inclusion (CFI) posited that friction can have a positive impact and add value when it is intentionally introduced in a consumer’s journey. CFI partnered with Pezesha, a digital MSE lender in Kenya, to test the real-world impact of introducing positive friction in the digital credit journey. Together, we developed a brief quiz, comprising three questions that were introduced during the loan application journey, causing consumers to pause and consider the terms of their loan, their obligations, and the potential consequences of delayed repayment.

The results showed positive indications of the impact positive friction can have on both consumers and providers.

Authors

Colin Rice

Senior Research Specialist

Colin joins CFI as a research specialist with a background in project design, monitoring and evaluation, and social performance management. He supports research projects as well as the implementation of data collection, management, review, and presentation; drafting blog posts and reports; planning events and workshops, among other things.

Colin previously worked as the social performance manager at Small Enterprise Foundation, the largest MFI in South Africa, where he led a team responsible for gathering and analyzing insights on client progress, satisfaction, and challenges. He also reviewed and developed the organization’s social performance practices, in addition to working on the design, monitoring, and evaluation of financial education and savings projects.

Prior to that, Colin spent time developing M&E tools for BancoSol in Bolivia, consulted with nonprofits and family philanthropic foundations in the DC area to strengthen internal operations, and was an intern on the Bankers without Borders team at Grameen Foundation.

Colin has a master’s degree in social enterprise from American University: School of International Service and a bachelor’s degree in anthropology from Sewanee.

Jayshree Venkatesan

Senior Director, Consumer Protection & Strategic Industry Engagement

As Senior Director, Consumer Protection & Strategic Industry Engagement, Jayshree leads the development and execution of the consumer protection research and influence strategy, contributing to CFI’s global portfolio. She also oversees the Responsible Finance Forum’s convening and influence model, building a community dedicated to addressing industry challenges in consumer protection and advancing the responsible finance agenda.

With two decades of experience spanning structured finance, innovative business models, consumer research, and policy influence, Jayshree has worked to advance financial inclusion and economic development globally. Before joining CFI, she spent nearly a decade as an independent consultant with institutions like CGAP, the World Bank, JICA, and ITAD, focusing on customer-centric business models and challenges faced by low-income consumers in accessing and using formal financial services. From 2009-2013, she was part of the founding team at IFMR (now Dvara Trust) in India where she led India’s first mezzanine fund for microfinance, which evolved into an alternate investment fund. Jayshree is also a senior policy fellow at the Leir Institute within the Fletcher School of Law and Diplomacy and has served as adjunct faculty at the Fletcher School of Law and Diplomacy, teaching decision analysis for business.

Jayshree is a recipient of the Chevening fellowship for leadership from the Foreign and Commonwealth Office, UK and completed the program at Kings College, London. She earned an MA in international relations from the Fletcher School of Law and Diplomacy, an MBA from Management Development Institute in Gurgaon, and an undergraduate degree in mathematics from Mumbai University.

Rafe Mazer

Director, Fair Finance Consulting

Rafe Mazer is a leading global voice on consumer protection and competition policy in digital financial services and the digital economy. For 15 years, Rafe has brought the consumer’s perspective to product design and policymaking with governments and financial service providers in countries across Africa, Asia, and Latin America. As the first Director of IPA’s Consumer Protection Research Initiative from 2019-2022, Rafe developed a portfolio of more than 20 consumer protection research projects addressing digital consumer credit, pricing transparency, fraud in digital app stores, and other emerging risks in digital economies. Prior to his time at IPA, Rafe was the director of a Kenyan consulting firm specializing in consumer protection policy, and before that led CGAP’s work on consumer protection and behavioral research for 7+ years.

A talented researcher and writer, Rafe has designed and executed field research including surveys, mystery shopping, behavioral experiments, and randomized impact evaluations, as well as policy analysis and regulatory reforms. Rafe’s current work includes supporting the expansion of open finance models in emerging markets and the development of continental competition policy for digital markets in Africa. Rafe is currently Director of Fair Finance Consulting, which provides consumer protection and competition policy expertise to a wide range of clients and partners globally.