MICROFINANCE PAPER WRAP-UP: Center for Financial Inclusion, Institute of International Finance: “Accelerating Financial Inclusion with New Data;” by Ethan Loufield, Dennis Ferenzy, Tess Johnson

This is a summary of a paper published by the Center for Financial Inclusion (CFI) and the Institute of International Finance (IIF), May 2018, 30 pages, available at: http://www.centerforfinancialinclusion.org/storage/Accelerating_Financial_Inclusion_With_Data_2018.05_Final.pdf.

This report presents the following cases of financial service providers using emerging data analysis techniques to reach underserved markets:

1.WeBank, an online Chinese bank, uses social media data to evaluate loan applicants. Its majority shareholder, China-based Tencent, provides the technology for WeBank to create “social graphs” – visual representations of the relationships in a social network – to assess creditworthiness as well as “whether certain profiles have been fabricated or are associated with organized crime…” In addition to reducing fraud, this method allows WeBank to lend to people who lack traditional credit histories.

2. Banco Bilbao Vizcaya Argentaria (BBVA) Bancomer, a Mexican banking subsidiary of Spain-based BBVA Group, is piloting multiple initiatives with financial technology (fintech) startups to incorporate new analytics into its business operations. For instance, the bank has partnered with: (1) Chile-based Destacame to develop new ways to calculate credit scores for existing customers; and (2) US-based Juntos to utilize short message service (SMS), also known as text messaging, to increase customer engagement.

3. Grameen America, a US-based nonprofit, utilizes data collected from its users’ mobile phones to help it improve its products, recommend additional products to users, analyze usage of its digital repayment channels and evaluate geographical areas for potential expansion. The microfinance institution also has partnered with Common Cents Lab at US-based Duke University to study “how to use data to help customers shift toward the use of digital channels.”

4. Siam Commercial Bank (SCB), which is based in Thailand, created a subsidiary called SCB Abacus in 2017 to merge its own data with that of outside data-analytics firms to target prospective customers. It also has created My Deals, a rewards feature within SCB’s banking app that leverages machine learning and artificial intelligence to offer tailored promotions and discounted products. Another tool developed by the firm, Keb Hom, uses artificial intelligence to assist individuals in reaching their savings goals.

By Nicholas Galimberti, Research Associate

Sources and Additional Resources

Accelerating Financial Inclusion with New Data
http://www.centerforfinancialinclusion.org/storage/Accelerating_Financial_Inclusion_With_Data_2018.05_Final.pdf

CFI homepage
http://www.centerforfinancialinclusion.org

IIF homepage
https://www.iif.com

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