Report finds tremendous potential for financial service providers (FSPs) to leverage data-driven innovations to improve business operations and successfully reach the world's three billion financially underserved.
Despite this, many FSPs do not adequately use data to its full potential.
Early adopters often start by using alternative sources – such as mobile call records, utility payments, social media activity – to extend credit to "thin-file" or "credit-invisible" customers.
Benefits of alternative data extend beyond alternative credit underwriting.
Data can drive innovation in business activities as diverse and far-reaching as: verifying customer identity, digitizing workflows for automated business processes, analyzing customer behavior to develop personalized products, and using real-time messaging services to improve customer service.
Accion released a report that charts a path for FSPs to use data to accelerate financial inclusion and improve their business operations. This report, developed by Accion with the support of the Citi Foundation, details the steps providers can take to lay the groundwork for big data and advanced analytics by improving their ability to generate, analyze, and respond to data of any size – starting with the information and data they already have – to help extend high-quality financial services to the underserved.
"New sources of data are growing exponentially and there are many ways a financial service provider can harness this value. Often, providers already have great, but underutilized, data on hand," said Michael Schlein, President and CEO of Accion. "By changing their organization's approach to generating and using data, financial service providers can pave the way for increased innovation, and ultimately, greater financial inclusion."
Successfully introducing data-driven innovations can present various challenges for any FSP, requiring thorough coordination and change management across the organization. FSPs must consider technical challenges, legal regulations, staffing, and other issues. Accion's research walks practitioners through each of these and demonstrates that, despite the challenges, these innovations can provide significant value for both FSPs and their clients.
"Today, the amount of available data has increased, data sources have proliferated, and the analytical tools for making sense of this information have become more sophisticated, but organizations still struggle with how to capitalize on those opportunities," said Kathleen Yaworsky, co-author of the report and Global Manager for Digital Solutions at Accion. "By following the recommendations laid out in this report, a provider can go from analyzing where they stand to implementing a plan of action."
This report was written by Accion's Global Advisory Solutions team, which provides experienced operational and management support to strengthen and maximize a financial services provider's impact on financial inclusion. The team leverages innovations to increase the quality and lower the cost of financial services, and thus help to build sustainable and scalable institutions focused on serving the financial needs of underserved individuals and small businesses.
Accion is a global nonprofit dedicated to building a financially inclusive world with economic opportunity for all, by giving people the financial tools they need to improve their lives. We are building the next generation of top-tier microfinance institutions, and over more than 50 years have helped build 65 such institutions in 32 countries on four continents that today reach millions of clients. Our impact investing initiatives are pushing beyond microfinance to catalyze more than 30 innovative start-ups dedicated to improving the efficiency, reach, and scope of financial services for the poor. And our Center for Financial Inclusion is helping to build a stronger industry with high standards and broad engagement. Currently, our work spans nearly two dozen countries, including the U.S., where we are the nation's largest nonprofit microfinance network. For further information, visit http://www.accion.org.