Digital Financial Services: Challenges and Opportunities for Emerging Market Banks

25 Sep 2017

The digital transformation that has upended industries from retail and media to transport and business-to-business commerce is now sweeping the financial services industry, through the wide dissemination of digital financial services. This was inevitable, as ubiquitous computing power, pervasive connectivity, mass data storage, and advanced analytical tools can easily and efficiently be applied to financial services. After all, money was already extensively (though not exclusively) created, used, stored, processed, and delivered electronically.

Immediacy and personalization have become the norm for consumer goods and services. Consumers have rapidly become accustomed to making purchases with a touch of their finger wherever they may be, receiving tailored recommendations, choosing customized products, and enjoying delivery of almost any item directly to their front door. Businesses failing to adapt quickly to these technological developments can fail dramatically, and many have already done so, including Tower Records, Borders Books, Blockbuster Video, and countless travel agents and brick-and-mortar retailers. Consumers’ new
expectations apply to digital financial services as well.

Technology has transformed business-to-business and within business interactions, too, enabling reconfiguration of design, production, marketing, delivery, and service functions through distributed supply chains, freelance design, outsourced manufacturing, and contract warehousing and delivery. These reconfigurations are mediated by online marketplaces and distributors, and assisted by back-end support operations and data analysis that together drive better risk assessment, faster fulfillment and more efficient customer service.

The same types of disruptive market innovations and reconstituted value chains are now emerging in the form of digital financial services. This poses distinct challenges for incumbent providers such as banks, finance companies, microfinance institutions, and insurance companies, as financial technology—or FinTech—innovators enter their markets. Incumbents, too, can benefit from these developments, which will enable them to broaden financial access, introduce new products and services, and serve customers more efficiently by deploying new technologies internally or in partnership with external innovators.

Building a Secure and Inclusive Global Financial Ecosystem

08 Sep 2017

The 2017 Brookings Financial and Digital Inclusion Project (FDIP) report evaluates access to and usage of affordable financial services by underserved people across 26 geographically, politically, and economically diverse countries. The report assesses these countries’ financial inclusion ecosystems based on four dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of selected traditional and digital financial services.  The report further examines key developments in the global financial inclusion landscape, highlights selected financial inclusion initiatives within the 26 FDIP countries over the previous year, and provides targeted recommendations aimed at advancing financial inclusion.

Swadhaar, ACCION & AirTel Money: Mobile Money Training for Female Customers in India

20 Jun 2016

Customer marketing and education are always important to driving the adoption of mobile money, but they are absolutely crucial for female customers, who generally take more time than men to trust and start using mobile money services. In India, where uptake of mobile money has been slow—only 3% of women have heard of it and 0.1% have used it — customer education must be a key part of any successful mobile money initiative. This snapshot looks at how Swadhaar identified the needs of its urban and resource-poor female customers and then used these insights to create tailored training materials for a mobile money loan repayment pilot with Airtel Money in Mumbai, India.

Customer Experience Playbook

16 Jun 2016

CGAP partnered with Janalakshmi, the largest urban microfinance institution in India serving 3 million poor Indian women, and global development advisory, Dalberg, to understand the Janalakshmi customers’ journey and design and test customer experience improvements for them. One of the outputs from this work is this Customer Experience (CX) Playbook, which aims to help FSP staff serving poor customers, to implement customer experience improvements, and ultimately influence their organizations to build a culture of customer-centric innovation.

The CX Playbook is divided into the following eight sections detailing different stages of embedding customercentricity within the organization. Each section contains operating principles and useful tools for each stage. The Playbook also describes typical challenges faced in implementing such projects along with suggested solutions. Use the CX Playbook for either end-to-end CX projects or specific aspects such as user research or CX ideation.

  1. Introduction
  2. Customer Experience (CX) 101
  3.  Managing CX Projects
  4. Customer Research
  5.  Develop CX Ideas
  6. Prototyping
  7. Measuring & Sharing Results
  8. Scaling Up
  9. Adopting a CX Culture

The Status of Financial Inclusion, Regulation, and Education in India

29 Apr 2016

India’s financial inclusion agenda has witnessed a paradigm shift over the last decade, away from an emphasis on credit to a more comprehensive approach toward financial services (e.g., opening bank accounts and offering basic financial products, such as insurance). This paper describes the structure of banking and microfinance institutions in India relevant to the developing model of financial inclusion, as well as relevant regulatory structure and modes of delivery. It explains the current state of financial inclusion, as well as regulatory changes necessary to make the new architecture for inclusion viable, including a critique of some of the recommendations of the Mor Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households. The paper then reviews modes of delivery and the regulatory structure being contemplated or recently introduced. It assesses the suitability objective envisaged as critical for inclusion, associated challenge of revamping consumer protection laws, and imperative of improving financial literacy. The paper also discusses the case of micro, small, and medium-sized enterprises in the given context

“Never Waste a Good Crisis”

Jeffrey Reicke
02 Mar 2016

This post originally appeared on the CFI website.

India has received much fanfare for its financial inclusion efforts in recent years. A few weeks ago we thumb_c5b035a6756147e597764f8b518f2c53declared it our Financial Inclusion Country of the Year for 2015 in recognition of the major steps it took, which resulted in achieving the greatest improvement in its Global Microscope score between 2014 and 2015. It recently granted new bank licenses that dramatically diversify and grow the country’s services landscape, widely applied new cost-saving technologies like biometric identification, and rolled-out historically ambitious public programs like PMJDY that dramatically reduce the portion of the population that is unbanked.

“Never waste a good crisis” said Royston Braganza, CEO of Grameen Capital India, at the Inclusive Finance Summit in Delhi last month, referring to the Andhra Pradesh crisis of 2010. The recently-released Responsible Finance India 2015 analyses the current state of practice on responsible finance and social performance management in India. In light of that report, Braganza questioned, “Have we learned from our mistakes?”

Responsible finance centers on client protection and market conduct, and has been extended in recent years to include many other good corporate citizenship issues such as employee management, governance, and social performance monitoring.

By way of context, here are a few numbers on the present-day BoP Indian finance landscape:

  • Across MFIs in India’s MFIN network, which represent roughly 90 percent of MFIs in the country, loan books grew by 64 percent in the last fiscal year, compared with 43 percent in the year prior and 4 percent in the year before that.
  • In total, MFI outreach in the country accounts for about 100 million clients.
  • Reportedly, through PMJDY 180 million new bank accounts have been opened over the past year, and adjacent schemes covering insurance, pensions, and credit have been implemented, as well.
  • For the first time in a decade, the RBI granted new bank licenses last year – to Bandhan Bank and IDFC. Bandhan now has 500 branches and over 2,000 service centers across 24 states. Sixty-five percent of IDFC’s first 23 branches are located in rural areas of Madhya Pradesh.
  • Under the RBI’s newly created categories of payment banks and small finance banks, 11 and 10 providers, respectively, have received new licenses, further expanding the network of providers serving the poor.

In short, given India’s rapidly changing and expanding financial services landscape, it’s more important than ever that these new players, and the quickly-growing older ones, are treating these first-time clients, and everyone else, with adequate care.

Defining and Monitoring Social Goals

Aside from a few MFIs, social goals are not clearly defined, and those that have defined goals might not have them integrated into their business plan, and/or might not be monitoring them, relayed Alok Misra, author of theResponsible Finance India report. The Code of Conduct assessment report by MicroSave covered 50 assessments including 32 NBFC-MFIs and revealed that only 37 percent of MFIs have a documented social performance management policy in place. Without this, much pertaining to an institution’s social mission goes untracked, which widens the possibility for mission drift.

Social Performance in Governance

Social performance management needs to be embedded at institutions’ top levels. “How could your board be expected to make critical decisions about things related to operations if they don’t know about client centricity and social missions?” asked Leah Wardle of the Social Performance Task Force.

Given that most MFIs in India don’t have well-defined social goals, it’s not surprising that much work remains in mainstreaming social performance in governance. Regulations and the industry Code of Conduct have significantly improved governance, yet only 17 percent of MFIs have SPM board subcommittees. The focus of governance has been on traditional compliance-related areas.

Client Protection

Addressing client protection has seen tremendous progress since the 2010 crisis, thanks in part to regulatory guidelines, the industry Code of Conduct, and the Smart Campaign. Great strides have been made in disclosure, with a focus on client understanding, for example. Most MFIs in the country strive to conduct compulsory group trainings using plain-speak for all new clients on product features, terms, and conditions.

Hema Bansal, India Director of the Smart Campaign, pointed to two other areas in need of serious attention: consistent and informed payment rescheduling policies and stronger research and application of cash flow analysis to assess repayment capacity.

Responsibility to Staff

Institutions have responsibilities to their staff, as well. Staff turnover and gender imbalance remain areas of concern among MFIs in India. Only roughly 20 percent of MFI staff are women. The industry Code of Conduct centers on labor law compliance, including minimum wage and mandatory leave. Although such requirements are largely being met, high staff turnover warrants closer examination of wages, staff satisfaction, and intensity of field work – especially given recent industry growth.

These 60 percent growth numbers might seem dramatic, and they are, but the additional outreach is indeed welcomed. During the conference session it was shared that just five states in India account for 58 percent of the country’s MFI loan portfolio. One-hundred-twenty districts in the country don’t have an MFI! Manoj Nambiar, president of MFIN, remarking on the dramatically changing services landscape said, “If financial inclusion is a priority of the government and the country, we need more institutions. It’s not a question of me versus them. It’s a question of what we can do together.” However, it’s essential to remember what’s come before and not repeat the horrible crisis that begun this decade. In order for inclusion to be sustainable, responsible finance is critical.

Note: These remarks were made during a panel discussion at the Inclusive Finance India Summit in December, entitled, “Moving from No Harm to Doing Good: Double Bottom-Line Microfinance”.

The ABCs of Financial Education: Experimental Evidence on Attitudes, Behavior, and Cognitive Biases

12 Nov 2015

Lessons on financial education from a field experiment in India

This paper uses a large scale field experiment in India to study attitudinal, behavioral, and cognitive constraints that stymie the link between financial education and financial outcomes. The study complements financial education with (i) participant classroom motivation with pay for performance on a knowledge test, (ii) intensity of treatment with personalized financial counseling, and (iii) behavioral nudges with financial goal setting. The analysis finds no impact of pay for performance but significant effects of both counseling and goal setting on real financial outcomes. These results identify important complements to financial education that can bridge the gap between financial knowledge and financial behavior change.

This paper is a product of the Finance and Private Sector Development Team, Development Research Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at The corresponding author may be contacted at

Voice of the Client: An analysis of client satisfaction and consumer protection across four microfinance institutions in India

01 Nov 2015

This report presents the findings of the Voice of the Client project in India, a ground-breaking initiative in the microfinance industry developed by Hivos and MIX to leverage mobile technologies as a means to analyze the level of satisfaction of clients with the suite of products and services offered by their MFIs. The analysis is based on data related to client protection principles which were collected from nearly 6,000 clients across four MFIs in India, namely Cashpor, Satin, Sonata, and Ujjivan.

The analysis represents a novel attempt to create benchmarks based on client-level data in the Indian market with the aim of providing MFIs and funders with actionable data sourced directly from clients that can be leveraged to address areas of weakness and improve operations accordingly. By regularly tracking how clients perceive the customer service they receive, microfinance stakeholders can design programs that can better meet client needs and preferences and, more broadly, improve their impact on the population they aim to serve.


Read more: