APIs are often viewed as potential solutions for traditional financial institutions, particularly small and midsize banks, to partner with upstart financial technology companies (fintechs) to offer innovate products, especially to low-income customers. In practice, however, d<span data-contrast="auto">ue to the maturity of the fintech market, </span><span data-contrast="auto">fear of losing competitive advantage, and a variety of strategic errors in planning for and developing APIs, smaller banks and </span><span data-contrast="auto">fintechs</span><span data-contrast="auto"> do not often succeed in deploying API solutions for inclusive finance. </span><span data-ccp-props="{&quot;134233279&quot;:true,&quot;335551550&quot;:6,&quot;335551620&quot;:6}"> </span>

In this report, based on<span class="TextRun BCX2 SCXW4216040" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="NormalTextRun BCX2 SCXW4216040"> nearly two dozen interviews with leaders at fintech companies, small and midsize banks, and large financial institutions,</span></span> CFI Fellow <a href="/bio/dan-kleinbaum">Dan Kleinbaum</a>, <span class="TextRun BCX2 SCXW71634487" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="NormalTextRun BCX2 SCXW71634487">examines the extent to which APIs are meeting their potential to facilitate bank and fintech partnerships that advance financial inclusion</span></span>. Dan breaks down what API integrations between banks and fintechs look like and how typical deployments work. Finally, he offers four recommendations for how to improve <span class="TextRun BCX2 SCXW235310262" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="NormalTextRun BCX2 SCXW235310262">API deployments between banks and </span></span><span class="TextRun BCX2 SCXW235310262" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="SpellingError BCX2 SCXW235310262">fintechs</span></span><span class="TextRun BCX2 SCXW235310262" lang="EN-US" xml:lang="EN-US" data-contrast="auto"><span class="NormalTextRun BCX2 SCXW235310262"> to deliver financial services to underserved communities.</span></span>
<h2>A Typology of APIs</h2>
It is useful for leaders at financial institutions to understand the types of APIs common in financial services. For examples, in API aggregator and platform models shown below, a third-party provides APIs on behalf of financial institutions to institutional customers (e.g., fintechs) in its network. The aggregator or platform may also provide sales, marketing, onboarding and other services. We also explore open and private API models in the report.
<h3>API Aggregator and Platform Models</h3>
<img class="size-large wp-image-37835" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/03/CFI55_API_deployments_FINAL-fig05_graphic-LOGO-1024x596.jpg" alt="API Aggregator and Platform Models" width="1024" height="596" />

API Deployments in Inclusive Finance

CFI Research Fellows Program

Banks

Data Analytics

Delivery Channels

Digital Financial Services

Financial Service Providers

Financial Technology

Fintechs

Partnerships

Report

While Sub-Saharan Africa has long been the epicenter of mobile money, Asia has experienced exponential levels of growth in the past few years. Since December 2014, the number of registered mobile money accounts has grown from 74 million to over 382 million. Today, 44 percent of the world’s registered mobile money accounts are in Asia.

More customers are using mobile money as part of their daily activities across Asia. Activity rates across the region have reached 31 percent. As of December 2018, South Asia had 13 deployments with over a million active customers and East Asia Pacific had nine, up from zero in December 2014. This growth has rapidly increased the proportion of adults with a mobile money account to a total of 22 percent in South Asia and 19 per cent in East Asia Pacific (EAP).

Despite this remarkable growth in registered accounts, Asia’s unbanked population remains high. According to the World Bank’s 2017 Global <a href="https://content.centerforfinancialinclusion.org/new-global-findex-sixty-nine-percent-of-global-population-is-banked/">Findex</a>, over 200 million people are financially excluded in East Asia Pacific. This figure is even higher in South Asia, where more than 360 million are unbanked.

Growth in the Asian market has been fueled by the rise of fintechs such as Alipay and tech giants such as Tencent. Ride-hailing companies, such as Grab and Go-Jek, have also entered the financial services space. These players have raised significant capital in the last few years, enabling them to connect with a wide variety of partners and develop many customer-centric use cases, including transportation and food, medical and financial services.

However, the use of fintech <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/06/27/Fintech-The-Experience-So-Far-47056">has not been equal</a>, and marginalized populations like women and the underserved are disproportionately disadvantaged. The biggest question today is how the mobile industry will help to address the barriers to reaching the financially excluded across Asia.

For mobile operators and other financial services providers across Asia, this is a significant opportunity. It will be important to focus on three main areas:
<h2><strong>Identity</strong></h2>
The 2017 Global Findex found that lack of documentation was a critical barrier to accessing financial services, cited by 26 per cent of unbanked people in low-income countries. This also remains a challenge in some South Asia and EAP countries, where unlocking digital identity initiatives could help provide access to financial services to over 85 million individuals in South Asia and over 70 million in EAP.
<h2><strong>Creating more relevant products</strong></h2>
A variety of innovative products are emerging in Asia, from new stockbroking services to credit facilities to post-paid payments that facilitate the growth of e-commerce. These products are typically targeted at emerging tech-savvy consumers, but other customer segments need attention, too. With smartphone penetration predicted to reach 82 percent of the population by 2025 and the USSD channel becoming less relevant, there is an opportunity to offer products targeted to the underserved by leveraging the enhanced user experience and customer education capabilities of smartphones.
<h2><strong>Bridging the gap between offline customers and online merchants</strong></h2>
More and more customers are coming online. In South Asia alone, another 470 million users are expected to come online by 2025. In 2018, e-commerce transactions facilitated by mobile money grew 79 percent in value. However, while consumer spending has risen sharply, there are still gaps in payments, logistics and infrastructure. For countries to reap the benefit of e-commerce, the right strategies need to be implemented to bring the offline transaction to the online worlds. Large and widespread agent distribution networks allow mobile money providers to become valuable logistics partners and support the timely delivery of goods, as the “order and pick up” model can be used to order, pay, pick up and return goods at agent outlets. Agents can also help with on-boarding and educating customers about e-commerce products and carrying out transactions.
<blockquote>Large and widespread agent distribution networks allow mobile money providers to become valuable logistics partners.</blockquote>
To learn more about mobile money in Asia and discuss how it is shaping the digital inclusion landscape, learn about our <a href="https://www.mobile360series.com/digital-societies/">Mobile 360 – Digital Societies</a> event that took place this September in Kuala Lumpur, Malaysia. This year’s focus was “Digital Platforms Enabling New and Innovative Services.” If you’re interested in learning more, check out <a href="https://www.gsma.com/mobilefordevelopment/">GSMA Mobile for Development</a>.

3 Focus Areas for Unlocking Financial Inclusion in Asia

East Asia and Pacific

South Asia

Mobile Banking

Payments

Blog Post

Digital credit has emerged as a new and profitable service offering that has great potential to increase financial inclusion. Yet, if not carefully managed, digital credit also runs the risk of excluding, over-charging, and over-extending customers.

Seven years since the first digital credit product launched, the market in Kenya has grown exponentially and hosts a diverse ecosystem with more than 50 supply-side actors. The phenomenal expansion of digital credit in Kenya serves as a test-bed for the product and offers lessons for digital credit suppliers and regulators around the world.

SPTF and the <a href="/about/what-we-do/the-smart-campaign">Smart Campaign</a> commissioned MicroSave Consulting (MSC) to study the dynamics of the digital credit sector on both demand and supply sides. The output of the study was a comprehensive report on the current state of digital credit in Kenya. It looked at the evolving challenges in digital credit and made recommendations for a more responsible and customer-centric delivery of the product.

With participation from Smart Campaign Senior Director <a href="/bio/alexandra-rizzi">Alexandra Rizzi</a>, this webinar will:
<ul>
 	<li>Help participants understand the digital credit landscape in Kenya</li>
 	<li>Assess the progress and challenges around making digital credit responsible and inclusive</li>
 	<li>Recommend steps towards a more responsible delivery of digital credit</li>
</ul>
We hope you can join us!

<img class="alignnone size-large wp-image-36766" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/09/MSC_Webinar-1-1024x683.jpg" alt="Infographic describing webinar schedule" width="1024" height="683" />

Webinar: Making Digital Credit Truly Responsible

SPTF

The Smart Campaign

Kenya

Sub-Saharan Africa

Consumer Protection

Credit

Digital Credit

Over-indebtedness

Responsible Digital Finance

Telcos

Event

When I reflect on the future of financial inclusion, I find myself returning over and over to a basic question. What is the purpose of financial inclusion? Why are so many people around the world working towards it, and why do they believe that financial inclusion will contribute to a better world? What purpose have I been pursuing as leader of the Center for Financial Inclusion for the past decade?

This year, in choosing a theme for our 5th annual <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-week-2019">Financial Inclusion Week</a>, CFI reflected this question attitude by selecting Financial Inclusion for What? as the theme. But we are not about to let that important question go unanswered. So, after posing it, the CFI staff came up with <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-for-what">four answers</a> that will be explored during Financial Inclusion Week: financial inclusion for financial health, financial inclusion for equity, financial inclusion for sustainable development, and financial inclusion for the bottom line.

While each of these ideas is important and worthy of exploration, I’d like to talk here about just one of them: sustainable development. In my view, the time is right for the financial inclusion sector to focus smartly on this set of goals. Even more emphatically, if the financial inclusion sector does not embrace sustainable development, it will soon find that it has worked itself out of a job. That’s because the more basic financial inclusion challenges are well on their way to being solved.

In the last decade an amazing transformation has taken place in the ability of most people to move money around quickly and efficiently. Millions and millions have opened bank or mobile money accounts and gained the ability to receive income straight into an account and then use electronic means to buy things. Yes, there are gender gaps, poor country gaps and rural areas gaps. But these are rapidly closing.

When we can presume that basic financial infrastructure is available to everyone for routine payments and banking, the financial inclusion job will be done. Right? This is an accomplishment that everyone in the financial inclusion sector can be very proud of. Even if we are not quite there in 2019, the finish line is well in view. Put an enormous celebration emoji right here, and look for the next challenge.

With financial access infrastructure as a foundation, we can turn to assisting people to do what they care most about: to apply financial services toward problems in the real sector – the real world, where people earn a living, get educated, build a home, go to the doctor and much more. The Sustainable Development Goals offer a widely-accepted list of real sector challenges that financial services can help address, but I’d like to focus on a slightly narrower list that highlights the activities where financial services are critical: agriculture, small business, health, education, shelter, and environment. The financial inclusion world needs to begin developing solutions that contribute directly to these sectors.

Back in the 1970s, the World Bank, USAID and other global development organizations were highly real-sector oriented when they talked about financial services. They provided enormous lines of credit to agriculture, fisheries, small business, and the like. These lines of credit were channeled through government development banks, who pushed them out at subsidized interest rates. Because they were seen as cheap handouts from the government, they were diverted to elites, with dismal repayment records. The development banks required constant cash infusions, either from abroad or from government budgets. And meanwhile, regular banks could not develop profitable businesses in these sectors, being out-competed by the subsidized loans. Development organizations treated banks much like communist countries treated them: as the distribution arms of central planning. Their solvency wasn’t important – they were just an administrative function. This was a disaster – for the banks, for the low-income people who were intended beneficiaries, for the market economy and for the achievement of development objectives.

Fortunately, a band of rural finance enthusiasts at Ohio State University (and others with similar views) convinced the World Bank and USAID to turn off the money hydrants. How they did that is a saga unto itself. For our story, the important thing is that once the subsidized credit spigot was turned off, it left open space in the financial sector for the growth, first, of microfinance and then of financial inclusion. Starting in the 1980s, these movements focused their attention in the right place: building sound financial institutions that knew how to serve the poor and excluded. That institution- and model-building focus was exactly what was needed at the time, and, with a boost from technology innovation, the sector has been on an unbroken path for three decades that is taking us to full realization of basic financial inclusion goals.

But this focus has also meant a three-decade detour away from deep engagement with real sector challenges. We’re working on payments, not mortgages. We’re working on credit algorithms, not pensions. All are important, but our emphasis has been selective.

Now it’s time to come back to the real sector and see how individuals, with their newly acquired access to financial services, can better use those services to accomplish tasks like building a business, using clean energy, getting an education and staying healthy. We’re in a much better position do tackle these challenges today than in the 1970s, because inclusive financial systems exist. And, hopefully, because we won’t make the old mistakes.
<blockquote>It’s time to come back to the real sector and see how individuals can better use financial services to accomplish tasks like building a business, using clean energy, getting an education and staying healthy.</blockquote>
To take one example, financing for shelter is a potentially pathbreaking field of endeavor for those concerned with financial services for the poor. Everyone needs a safe and comfortable place to live. But with a few exceptions, shelter has not played a role in the financial inclusion conversation for the past decade. To seriously support the acquisition or upgrading of housing, we need innovations. We already know that the thirty-year mortgage is not the answer for most low-income people around the world, but how can we promote the spread of the two-year home improvement loan that has shown promise in many areas? What models combine new financial products with new forms of construction, or land titling?

To develop innovations that work, financial inclusion and housing experts will have to join together in a multi-disciplinary way, and they will have to draw on the advances available through technology. A handful of organizations do combine housing and financial expertise to solve shelter problems, but many more are needed. Financial inclusion experts need to learn about construction, while shelter experts need to be open to financing methods other than scaled back mortgages. Partnerships are needed to solve barriers such as out-of-date building codes and access to water and sanitation. These challenges are often far beyond the usual concerns of banks and financial institutions, and unsolved, they can impede the development of financing solutions by making it hard to lend or by making housing unaffordable.

Similarly, in order to offer financial services that support health care, financial inclusion experts must learn more about how health care works and what it costs, while the health care experts must be willing to explore models other than public sector hospitals and clinics. And I could say the same about agriculture, energy, environment and education.

Why haven’t financial inclusion specialists already moved into sustainable development in a big way? I can think of three very good reasons.

The Next CFI Challenge: Financial Inclusion for Sustainable Development

Financial Inclusion Week 2019

From Beth's Desk

Rural Populations

Underserved Groups

We are convening a select group of social enterprise leaders at the <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> (BLI) inaugural workshop taking place October 27-29, 2019, at the Fairview Hotel in Nairobi, Kenya.

BLI is dedicated to empowering corporate leaders in the social enterprise sector to achieve business growth and social impact. By focusing exclusively on executive leadership and reframing board effectiveness as a strategic imperative, BLI strengthens leadership and management to ensure these companies sustain business growth and drive social impact.

BLI is offered as a two-day interactive workshop where participants gather with faculty and facilitators for role play, simulations, discussions, and more. Workshops are augmented with a robust virtual portal where participants can access resources and videos, participate in discussions, and stay connected with hundreds of leaders in our global network. At this inaugural workshop, attendees will have the opportunity to engage with peers on issues critical to social enterprise growth and impact, including digital strategy and culture, data, partnerships and financial inclusion in the digital age.

Board Leadership for Impact Program Launch Workshop

Citi Foundation

Board Leadership for Impact Program

Agricultural and Rural Finance

Consumer Credit

Education Finance

Energy Finance

Governance

Housing Finance

Human Touch

Microfinance

Microfinance Institutions

Nano Loans

Neobanks

Risk Management

<strong>WASHINGTON, DC, August 27, 2019</strong> – The Center for Financial Inclusion at Accion (CFI) has launched an executive education program for financial service providers serving low-income communities in emerging markets. Through peer learning and exchange, the <a href="/about/what-we-do/board-leadership-for-impact-program">Board Leadership for Impact Program</a> will empower executives and board members to foster client centricity, lead digital transformation, sustain business growth and drive social impact. In partnership with the <a href="https://www.citigroup.com/citi/foundation/">Citi Foundation</a> and <a href="https://www.fmo.nl/">FMO</a>, the Dutch development bank, supporting program implementation and participant scholarships, the Board Leadership for Impact Program will offer multiple in-person workshops per year coupled with a robust virtual portal.

Derived from CFI’s five-year <a href="https://content.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a>, which fostered the growth and development of more than 300 executives and board members of financial service providers serving more than 10 million clients in Africa, the Board Leadership for Impact Program will now expand to include early stage to mature companies offering financial services to underserved customers that operate in emerging markets around the world.

“Our experience with leadership development through peer exchange will inform our efforts through this new program to cultivate a community of leaders who have the skills and the network to help their organizations thrive,“ said <a href="/bio/deborah-drake">Deborah Drake</a>, Vice President, Center for Financial Inclusion at Accion. “Tackling challenges like achieving sustainable growth or pursuing digital transformation, particularly as a mission-driven organization, takes strategic leadership at the board level.”

Through role play, simulations and facilitated discussion, participants will gain new perspectives, skills, and knowledge on topics critical to social enterprise growth and impact, including risk management, board dynamics, digital transformation and inclusive digital finance. They will join an active community of alumni of the Center for Financial Inclusion at Accion’s <a href="https://www.centerforfinancialinclusion.org/get-involved#fellow-exec-ed">executive education programs</a>.

“By developing and strengthening leadership skills that drive business growth and social impact, our partnership with the Center for Financial Inclusion at Accion will help accelerate financial inclusion and economic progress around the world,” said Florencia Spangaro, Director of Programs, Citi Foundation.

“FMO is a proud partner of Accion for over a decade and we realize that creating a lasting impact starts in the board room. Strengthening the management of financial service providers and enterprises will help ensure business longevity and commitment to underserved customers,” said Gerbrich Salverda, Capacity Development Officer at FMO.
<p style="text-align: center;"><strong>###</strong></p>
<strong>About the Center for Financial Inclusion at Accion</strong>

The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank that engages and challenges the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion. We are dedicated to enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.
<a href="http://www.centerforfinancialinclusion.org/">www.centerforfinancialinclusion.org</a>
<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>
<p style="text-align: center;"><strong>###</strong></p>
MEDIA CONTACT

Center for Financial Inclusion at Accion
<a href="/bio/virginia-moore">Virginia Moore</a>
<a href="mailto:vmoore@accion.org">vmoore@accion.org</a>
+1 202.393.5113

The Center for Financial Inclusion at Accion Launches Executive Education Program for Financial Service Providers to Enable Business Growth and Social Impact

Customer Centricity

Informal Credit

Insurance Companies

Press Release

Fifty million years ago, in the Cambrian Era, the diversity of life on earth exploded, thanks to a perfect storm of microbial enablers and geologic conditions. Today, some observers think the world is witnessing a digital “<a href="https://www.economist.com/special-report/2014/01/16/a-cambrian-moment">Cambrian Moment</a>” because of a combination of highly connected people and easily accessible building blocks for digital services. The financial inclusion sector is poised to share in this Cambrian Moment, thanks to widespread mobile phones, mobile money adoption and other enablers of innovations that promote access for the underserved.

In this post, we look at one of those building blocks – a potential enabler for financial inclusion: application programming interfaces (APIs). We also discuss the different types of APIs and how financial institutions should think about their API strategies.

Building Innovation: APIs, Fintechs and Financial Institutions

Innovation Spotlight

As a means of reaching underserved customers at low cost, financial institutions have designated authority and responsibility to banking agents to deliver financial products and services. Agent banking is a model for delivering financial services whereby an institution — be it a financial service provider or a mobile network operator — partners with a retail agent to extend services in remote or hard-to-reach areas.
<blockquote>Innovative financial institutions are streamlining and digitizing their processes, and utilizing real-time data and analytics to increase both the efficiency and effectiveness of agent networks.</blockquote>
Despite the growing volume of agents, the agent network model is rife with utilization and operational challenges. The good news is that technology offers financial institutions an opportunity to make agent models more efficient and productive for themselves and their customers. Based on in-depth interviews with industry experts and senior bank officers, and supplemented by a review of the literature, this brief examines the role of technological innovation as a potential driver for improving the quality and maximizing the productivity of agent models.

We found it useful to study this topic across two time-horizons: the short-and long-term; and from the perspectives of the main stakeholders in the agent network triad: the financial institution, the agent, and the customer. This structure allows us to account for two key trends: 1) the diminishing role of cash as a payment form, and 2) an increasing readiness of institutions to embrace digital transformation. It also allows us to explore commonly-cited challenges with agent networks through an illustrative, hypothetical narrative lens, giving voice to each stakeholder group. The narratives are accompanied by real-world examples of how technological integration and innovation has helped to improve and streamline processes within agent networks. Finally, we anticipate that in a future financial services ecosystem that is digital and cashless or cash-lite, we will see the role of the agent evolving from transaction processors to solution providers.

Leveraging Technologies to Improve the Quality and Maximize the Productivity of Agent Models

Institute of International Finance

MetLife Foundation

Mainstreaming Financial Inclusion: Best Practices

Agent Banking

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

This session will explore the dynamic relationship between fintech and financial institutions, and how to strike the right balance between competition and collaboration to best serve the needs of the market. What are incentives, challenges and learnings from other markets? <a href="https://www.centerforfinancialinclusion.org/bio/tess-johnson">Tess</a> will be joined by guests Shailesh Grover, Chief Digital and Innovation Officer at the <a href="https://www.hlb.com.my/en/personal-banking/about-us.html">Hong Leong Bank Group</a>, and Adrian Yap, the Founder and CEO of <a href="https://transfer.moneymatch.co/">Moneymatch</a>.

Visit <a href="https://www.myfintechweek.my/">MyFintech Week</a> for more information.

&nbsp;

A Tale of Two: Partnerships Between Fintechs and Financial Institutions

Malaysia

Alexandra Rizzi

Allyse McGrath

Amin Khairy

Constantin Albot

Dan Kleinbaum

Dennis Ferenzy

Elisabeth Rhyne

Eric Noggle

Ethan Loufield

Francesco  Pasti

Hannah Sherman

Jacqueline Foelster

Nina Nieuwoudt

Pablo Anton-Diaz

Sonja Kelly

Tess Johnson

Vitas Argimon

Europe and Central Asia

Latin America and The Caribbean

Middle East and North Africa

South Africa

Alternative Data

Challenges and Crises

Enabling Environment

Saving

Trends

Webinar

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

<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

<span class="ms-rteFontSize-3">Jointly organized by the Asian Development Bank Institute (ADBI) and the World Savings and Retail Banking Institute (WSBI), the </span><a href="https://www.wsbi-esbg.org/Events/WSBITokyo2019">ADBI-WSBI Conference on G20 and Locally Focused Banks</a> is centered on the theme <em>getting the policy right and unleashing the role of inclusion-o​rient​ed banks.</em>

CFI's senior director of research, Eric Noggle, will be speaking on a panel on June 5th entitled "Embracing Responsible Innovation and Empowering Consumers in the Digital Age." He will also be sharing results from CFI's <a href="/about/what-we-do/mainstreaming-financial-inclusion-best-practices/">Mainstreaming Financial Inclusion: Best Practices</a> project.

<span class="ms-rteFontSize-3"> </span>

ADBI-WSBI Conference on G20 and Locally-Focused Banks

A market trader in Ghana hands over part of her day’s earnings to a susu collector every day. In Tanzania, villagers hold weekly Vicoba gatherings to pool savings, receive loans and catch up with the other members of the group. Informal savings mechanisms (ISMs), such as savings groups and daily savings collection, have long been of interest to the financial inclusion community because they demonstrate high quality savings and borrowing behavior and they work for people who do not normally consider themselves "bankable." The digital services revolution offers a prospect of closing the gap between formal and informal alternatives, combining a richer and more robust service offering with a greater understanding of savers’ needs and preferences.

Documented challenges on proximity, cost of acquisition and practical delivery make the provision of a service that benefits both formal and informal actors difficult to achieve. But <a href="https://www.opml.co.uk/projects/savings-frontier">Savings at the Frontier</a> (SatF), a partnership between <a href="https://mastercardfdn.org/">Mastercard Foundation</a> and <a href="https://www.opml.co.uk/">Oxford Policy Management (OPM)</a>, has set its sights on this goal, and is working directly with FSPs to achieve it.

During the early stages of the program, we selected a set of partner FSPs with promising concepts and provided them with up to $100,000 in business plan development funding to flesh out their ideas using whatever mix of technical assistance, customer research, piloting, systems work or prototyping required.

Full proposals underwent a second selection round, with the approved finalists eligible for conditional funding of up to $1 million to implement their business models. To date, SatF has partnered with three institutions in Ghana (Access Bank, DSS and Interpay), four in Tanzania (Equity Bank, Maxcom, NMB and TPB Bank) and one in Zambia (M-Finance).
<h3>What We’ve Learned So Far</h3>
Contrary to some stereotypes about the willingness and ability of FSPs to meet the needs of customers, particularly those of low income savers or people outside their traditional customer base, we have been surprised and pleased at how far our partners’ thinking has already gone, in understanding what it takes to make products relevant to this customer segment, how that can translate into a long-term relationship with internal savings mechanisms and their members, and how much institutional buy-in the SatF partnership has enabled. For example:
<ul>
 	<li><strong>The funding incentive has allowed middle-level managers to promote linkage up the institutions’ corporate agendas.</strong> Operational managers feel able to use SatF’s support to further internal discussions with senior management and other stakeholders, potentially including regulators, government, mobile network operators, etc.</li>
 	<li><strong>Customer centricity has become a central feature of the FSPs’ approach.</strong> Our partners understand that sustainable business means understanding and responding to genuine need. FSPs that conducted research and pilots and ultimately developed a full proposal were able to understand the ‘pain points’ and needs of their customers and reflect those in their product offerings.</li>
 	<li><strong> Early piloting has allowed our partners to foresee and address operational constraints.</strong> From systems changes inhibiting take-up, to ensuring regular contact with customers to maintaining sufficient liquidity through the agent network, FSPs have been quick to pick up on issues that may hinder implementation and have either already identified workable solutions or are in the process of doing so.</li>
 	<li><strong>Their reaction to challenges highlights the FSPs’ commitment, creativity and capacity to innovatively develop and deliver solutions.</strong> With the flexibility offered by their role as lead institutions, our partners have been able to consider a range of consortium options (working with facilitators, creating and facilitating their own informal savings mechanisms, identifying niche technical and delivery partners) and develop effective route-to-market strategies. FSPs have negotiated channel strategies to keep fees and charges affordable, reached out to specialist solution providers, and iteratively developed customer friendly interfaces or engagement strategies to make their products appealing and drive take-up.</li>
 	<li><strong>FSPs appreciate that attracting clients and offering relevant services are key to achieving long term sustainability.</strong> Our partners acknowledge that working with informal savers is not about extracting margins. The viability of their business case will be determined by the FSPs’ capacity to attract and retain customers and develop products that address customer needs and expectations. In looking to offer customer friendly, convenient and affordable services, and creating improved outreach and communication channels, our partners are signaling they are taking sustainability seriously.</li>
</ul>
<h3>What Next?</h3>
Some upcoming challenges are already visible, such as bringing pricing more in line with customer expectations. Why, for example, should anyone pay to use a financial service when cash transactions are free? Other challenges include financial education, closing the proximity gap, agent availability and float management.

The ability of our partners to overcome these challenges will depend on how well they have learned from similar previous challenges. We as a project will also need to be flexible and create space for the FSPs to identify and implement solutions specific to their operating environment. To this end, we have developed a disbursement mechanism that allows us to assess progress and consider course corrections at various points in the process by releasing funding in tranches based on individually negotiated ‘promise cards’, which incentivise design work in the early stages and delivery in later stages. Each tranche has its own delivery milestones built as much around the emerging value proposition being offered to informal savings mechanisms and their users as on the usual kinds of activity/output milestones. These milestones create a continuous dialogue with FSP partners, which allow us to react to needs as they emerge, provide tailored support, and work together to identify elements of the business case that will support the sustainable delivery of their linkage products beyond the lifetime of our project.

As we head into the fourth year of the program, it is encouraging that both the SatF team and our FSP partners are as optimistic about the prospect of successful delivery as we were when we first started. Nurturing the interest and capacity shown by our partners, and taking a flexible and adaptive approach to fund disbursement, we stand a good chance of turning our optimism into success.

Change Management Inside Financial Service Providers: Takeaways from a Funder Partnering with African FSPs

The Smart Campaign is participating in the 2018 Microfinance Centre European Microfinance Week Annual Conference 2018 in Bilbao, Spain. Check out Leah Wardle, accreditation manager, The Smart Campaign, is speaking on the panel below:

<strong>Maintaining the Social Promise of Financial Inclusion in a Competitive Marketplace</strong>

<strong>October 4th, 4:15pm</strong>

Speakers:
<ul>
 	<li>Leah Wardle, <a href="https://content.centerforfinancialinclusion.org/about/what-we-do/the-smart-campaign/">The Smart Campaign</a></li>
 	<li>Cameron Goldie-Scot, Musoni Systems</li>
 	<li style="text-align: left;">Joris Crisa, MicroFinanza Rating</li>
</ul>
Description: How can existing microfinance providers best compete in the digital era? How will the social promise of microfinance continue to thrive as the industry digitizes? This workshop will explore the important roles for traditional players in the digital area—namely, to stay relevant by reaching financially excluded people with a mix of “tech and touch.” Participants will discuss how to blend customer-centricity with technology in order to reach excluded clients and maintain a strong market position.

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MCF-EMN Annual Conference

<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

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.

This webinar will explore 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 will share insights from a recent report from the Center for Financial Inclusion and the Institute of International Finance.

The report incorporates 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.

Webinar: How Financial Institutions and Fintechs Are Partnering for Inclusion

<div class="reader-article-content">

Posted by Nina Nieuwoudt, Global Product Development, New Consumers, Mastercard

Around the world this week, governments, multilaterals, and companies are coming together to celebrate <a href="http://financialinclusionweek.org/" target="_blank" rel="nofollow noopener"><u>Financial Inclusion Week</u></a>. It’s an opportunity to reflect on the progress that we’ve made in extending financial access to un-banked and underbanked communities, and also a time to take honest stock of how far we still have to go. As Mastercard’s Chief Product Officer Michael Miebach <a href="https://www.linkedin.com/pulse/time-money-fast-track-financial-inclusion-now-michael-miebach/" target="_blank" rel="noopener"><u>noted</u></a> following his speech at Money 20/20 last week – we’re making progress, but at our current pace we won’t achieve full financial inclusion for another 200 years. Needless to say, we’ve got work to do.

The theme of this year’s Financial Inclusion Week is how new products and partnerships can enable financial inclusion. At Mastercard, this topic is close to our hearts. We believe that cross-sector partnerships are key to extending access to consumers at the base of the pyramid and building products that truly improve their lives.

To be clear, promoting inclusion is not corporate social responsibility for us. Not only is pushing for a world where everyone has access to the security, transparency, and control of digital payments the right thing to do, but it’s also critical to the future of business.

We’re proud that this commitment to new partnership models can be found at all levels of our company. Several of these partnerships have been highlighted in a joint report by Center for Financial Inclusion at Accion and the Institute for International Finance, entitled <a href="http://www.centerforfinancialinclusion.org/storage/CFI_IIF_FI_Fintech_Partnerships_Report_2017.07.pdf" target="_blank" rel="nofollow noopener"><u>“How Financial Institutions and Fintechs are Partnering for Inclusion: Lessons from the Frontlines”</u></a>. The report recognizes our collaboration with <a href="https://newsroom.mastercard.com/mea/press-releases/250000-african-merchants-will-be-financially-empowered-by-masterpass-qr/" target="_blank" rel="nofollow noopener"><u>Kopo Kopo</u></a>, a fintech start-up, and <a href="https://newsroom.mastercard.com/mea/press-releases/dtb-and-mastercard-partner-to-enhance-digital-payments-in-kenya/" target="_blank" rel="nofollow noopener"><u>Diamond Trust Bank</u></a> to create a QR-payment ecosystem in Kenya that allows customers to pay with their phones, by simply taking a photo of a QR code and manually entering the transaction amount.

Later this week, I’ll be speaking about ways financial institutions and fintechs can partner during a <a href="https://register.gotowebinar.com/register/845125705152860161" target="_blank" rel="nofollow noopener"><u>webinar</u></a> hosted by the Center for Financial Inclusion at Accion.

Beyond our partnerships, we’ve done our own on-the-ground research. For example, we recently released a report that offer insights into <a href="https://newsroom.mastercard.com/documents/report-building-electronic-payment-acceptance-at-the-base-of-the-pyramid-to-advance-financial-inclusion/" target="_blank" rel="nofollow noopener"><u>how to build a digital payments ecosystem</u></a> for small and micro businesses. To learn more about how we’re supporting financial inclusion across the company, watch this <a href="https://www.youtube.com/watch?feature=youtu.be&amp;v=sVSsrfQ9iB0&amp;__prclt=xpyp1Vmf" target="_blank" rel="noopener"><u>video</u></a>.

Despite these gains, we still face a host of challenges in reaching the two billion people who are locked out of the formal financial system. At Mastercard, we know that the only way we will ever transform this equation is by creating partnerships that leverage relevant sector expertise, and that offer in-depth knowledge of base-of-the-pyramid needs – from health and education, to payments and digital finance.

It is perhaps the biggest ecosystem we have tried to build yet, but it is incumbent on all of us to do so. 200 years is too long to wait.

<em>This post originally appeared on <a href="https://www.linkedin.com/pulse/how-financial-inclusion-can-move-people-from-poverty-nina-nieuwoudt/">Nina Nieuwoudt's LinkedIn profile</a> and is republished with permission. </em>

</div>
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How Financial Inclusion Can Move People Out of Poverty

Mastercard

Financial Inclusion Week

The volume of data in the digital universe doubles in size roughly every two years, <a href="https://insidebigdata.com/2017/02/16/the-exponential-growth-of-data/">estimates indicate</a>. The phrase “data rich” has become common business parlance. In the financial inclusion sector, big data is revolutionizing credit underwriting, product development, client segmentation, financial capability-building, and more. But how is this revolution actually happening? For many banks, it’s through partnerships with fintechs. Ujjivan, one of the largest microfinance institutions in India, recently chartered as a small finance bank, had until recently a limited portfolio at the SME level, which was hindered by high operating costs. This changed thanks to a partnership with the Bangalore-based fintech Artoo.

This partnership is described in CFI’s new joint-report with the Institute of International Finance (IIF), <a href="http://bit.ly/2uWXvFQ"><em>How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines</em></a>. We discovered dozens of partnerships between mainstream financial institutions and fintechs in emerging markets, and we detailed the workings of 14 of them. The partnership between Ujjivan and Artoo is just one example among many of how financial institutions are increasingly turning to fintechs to improve how they effectively collect, use, and manage data.
<h1><strong>The Value of Better Data Management</strong></h1>
Traditionally, banks collected a great deal of information on loan applicants, but much of it remained in paper form, in loan folders stacked high in offices. With the advent of core banking systems, banks spent a great deal of time transferring data from paper to computer. And once on the computer, much of the richness of the data has gone unused. Largely the data has not been leveraged effectively due to siloed digital infrastructure, inefficient legacy systems, and restrictive or uncertain regulatory requirements. More useful data management relies on the ability to efficiently obtain, store, retrieve, structure, clean, and analyze large bodies of data. This is a monumental task, and best practices and requirements are rapidly changing. Therefore, partnerships with fintechs to help improve data management across an organization can be of tremendous value, helping financial institutions lower costs, identify customer potential, reduce fraud, increase cross-selling opportunities, and expand their customer base.
<h1><strong>The Partnership Between Ujjivan and Artoo</strong></h1>
Beginning in 2012, the partnership with Artoo provides Ujjiva with a digital field application, which is a cloud-based platform that digitizes the entire credit process, including loan generation and underwriting so that field officers enter customer data directly into the system via phones or tablets. As part of this work, Artoo supports Ujjivan’s data management. The platform deepens Ujjivan’s ability to track sales and portfolio performance. Artoo allows agents to capture more data points and consequentially creates more quality data for the bank to use in credit decisions. Data is captured on the Artoo platform, but is still owned by the bank.

<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/09/ujjivan-and-artoo.jpg"><img class="wp-image-24076 aligncenter" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/09/ujjivan-and-artoo.jpg" alt="" width="620" height="560" /></a>

Artoo’s platform has led to a 40 percent decrease in loan-processing time and a 50 percent rise in the number of loans processed per agent. The boost in efficiency resulting from the partnership with Artoo has enabled Ujjivan to expand its SME customer base from 60,000 to 200,000 clients in three to four years, an increase of over 230 percent. Following a pilot where the companies split costs, Ujjivan now pays Artoo a subscription fee for the functions it uses.
<h1><strong>Regulatory Challenges for Data Management</strong></h1>
All the financial institutions we spoke with that were creating partnerships in this area faced regulatory challenges surrounding the movement and use of data. For Ujjivan, regulations required that all customer data be stored on servers in India. Artoo had to switch its system from Amazon Cloud Services, with servers housed in the U.S., to a local Microsoft-based cloud service provider.

Meanwhile, in the case of partnerships between banks and fintechs that provide alternative credit scoring capabilities, we saw regulation limiting the flow of data from the banking institution to the alternative risk modeler, and vice versa. This is indeed a point of much contention in many markets and creates some tension in partnerships. Banks seek to maintain control over customer financial data, fearing that fintechs that gain access to data will use it for their own business purposes.

<em>For more on bank-fintech partnerships, including other standout examples, read the report:</em> <a href="http://bit.ly/2uWXvFQ"><em>How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines</em><em>.</em></a>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/07/31/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines/">How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines</a>

<a href="https://cfi-blog.org/2016/07/21/new-cfi-and-iif-report-reveals-banks-are-leading-financial-inclusion/">New CFI and IIF Report Reveals Banks Are Leading on Financial Inclusion</a>

<a href="https://cfi-blog.org/2017/08/23/juntos-harnesses-artificial-intelligence-to-improve-customer-engagement-for-bbva-bancomer-and-bancolombia/">Juntos Harnesses Artificial Intelligence to Improve Customer Engagement for BBVA Bancomer and Bancolombia</a>

How Artoo Helped Ujjivan Unlock the Power of Data