The rapid growth of fintech, which has broadly advanced financial inclusion around the world, has also been met with rising concern. As excited as investors are about the financial potential of this sector, regulators are wary of exploitation of low-income customers with aggressive offerings.
The question is: which story is right? Are fintechs a boon for financial inclusion, or do they need to be reined in quickly lest they drive hundreds of millions of vulnerable consumers to the brink of financial ruin?
The real answer is: we don’t know. Companies, investors, and regulators do not have access to data that allows them to answer this essential question. Global, company-specific, customer-level data on the impact of fintechs on consumers simply does not exist.
To address this data gap, the sector needs detailed, comparable, customer-based information on who they are reaching, how products are being used, consumer protection practices, and the impacts (both positive and negative) of these products on lives.
The good news is, the same mobile technology fueling fintech growth is also making it possible to fill this data gap. Today, we can listen directly to the lowest-income customers around the world, at scale, at a low cost.
In 2022 for example, the global microfinance (MFI) industry gained new insights into their collective impact through a Microfinance Index created by 60 Decibels. The index data was collected via voice-based phone surveys of 18,000 microfinance customers across 41 countries. These respondents represent 25 million of the world’s 140 million MFI clients. Many leading microfinance investors have since used these data to defend the industry against ongoing negative attacks, and are acting on the insights to expand and deepen their impact.
While microfinance has always put impact front and center, listening to customers’ experience is relevant for all financial products — doubly so for fintechs facing increasing regulatory scrutiny. Gathering these data will be an essential risk management tool for fintechs. With this data, the sector faces a systemic valuation risk, one that current financial models don’t fully take into account. A large-scale backlash against supposed predatory practices would erase billions of dollars in financial value in the blink of an eye. Without comparable customer data, fintechs, investors and regulators are flying blind, unable to know whether the products — or the rules — they’re creating help or hurt customers.
Accion, a global nonprofit that invests in and supports inclusive financial service providers around the world, had some of their microfinance companies participate in the 2022 and 2023 MFI Index. They are now gathering customer social impact data across more of their global portfolio: to understand the impact of their four-year partnership with Mastercard across Africa, Asia and Latin America, Accion conducted a study with 2,179 small businesses, going beyond reporting how many customers were served, to understand what is working and what risks were present in their approach. They are also supporting fintechs in their Accion Venture Lab portfolio to gather rigorous, representative customer voice data.
“At Accion, measuring and understanding our impact is critical to our mission. While systematically collecting data from smaller fintech companies and their underserved clients can be challenging, we need to see what’s working — and what isn’t — to scale the solutions that are providing the most value: helping them grow businesses, save for the future, and build their financial resilience,” explains Amee Parbhoo, Managing Partner of Accion Venture Lab.
These remote phone surveys have allowed access to learn much more about who (rich or poor) is being served; the impact of products on quality of life; whether they are reaching first-time customers; and areas for improvement.
Quona, a global venture firm focused on inclusive fintech, also engages with their portfolio to gather direct customer voices.
Kristin Sadler, Manager of Platform & Impact at Quona Capital, says that “having outcome-level impact results directly from stakeholders has been instrumental in supporting Quona’s impact measurement strategy. And what’s truly exciting is that, through these projects, our portfolio companies not only gain valuable insights on their customers, but are already using these insights to drive strategic decision-making and ultimately deliver greater impact.”
Over the past two years, eight of Quona’s portfolio companies in Africa, Latin America, Southeast Asia have participated in studies to listen to their customers. Many were already doing customer research using market data or standard feedback surveys, but as the regulatory context and…
Read More: Future of Fintech: Smart Customer Data Race