David Saunders catches up with Herman Smit after the MasterCard Foundation SoFI2016

I caught up with Herman Smit, technical director at Cenfri and founder of i2i facility, after the 4th Annual MasterCard Foundation Symposium on Financial Inclusion to get his reflections on the event and how he thinks the discussion will evolve going forward. 

Herman participated in a televised panel on Deploying Data to Understand Clients Better with Rose Goslinga from Pula Advisors and Paul Kweheria from the Kenya Commercial Bank. He was also one of the judges for the MasterCard Foundation Client at the Centre award which highlights best practices in financial services where client satisfaction is a priority. View Video

So, Herman, this is the second MasterCard Foundation Symposium on Financial Inclusion that you have attended? What sets this event apart and why do you keep coming back?

Well, firstly, last year we launched the insight2impact facility. So this year was slightly less demanding in that regard and gave me an opportunity to really engage with the content and participants. What really struck with me was how quickly the discussions deepened to arrive at the core challenges we currently face in delivering welfare enhancing financial services.

I think this is largely due to two factors: the first is the geographic focus in sub-Saharan Africa. There are many differences between the countries, but when it comes to financial inclusion many of the challenges are shared, and participants can relate and learn from each other.

The second, is the group of providers that the MasterCard Foundation Symposium are able to convene. There are few convening platforms in financial inclusion that are able to mobilise the private sector to the same degree as the Symposium. The diversity of providers from major Commercial Banks such as KCB (Kenya Commercial Bank) and CBA (Commercial Bank of Africa) to MNOs (mobile network operators) to emerging Fintech providers and traditional MFIs means that all the roads for financial services (as my colleague Hennie often refers to them) are covered. The debates between them really show how committed they are to building these new markets for financial services and also leads to some great television. My favourite line from the event was an exchange between Jean Claude (Gaga) from RSwitch and Patrick (Buchana) from AC Group (a Fintech provider) where Jean Claude told him “Fintech is the feeder road that brings clients to the [RSwitch] highway”. I’m excited to see how these roads evolve and the interchanges that connect them to each other.

Lastly, the MasterCard Foundation is always challenging our understanding of client centricity, and this year was no exception. By bringing in Dr. Shafir and Saugatoo (ideas42) they were able to bridge the new advances in behavioural science to the challenges that financial service providers face in designing valuable financial services for low-income individuals. This is a major contribution to the financial inclusion landscape and I hope we will see more organisations, particularly providers, integrating behavioural science into their operations.

Can you tell us a bit more about what you mean and, for a laymen like me, what behavioural science is?

Behavioural science seeks to understand the underlying factors that influence judgements and decision-making. These can relate to the individual or to the contextual environment. For example, Dr. Shafir, the keynote speaker and Princeton University professor, highlighted that the stress poverty places on people makes it more difficult to make long-term decisions around savings or accessing credit. Poverty makes them focus on the immediate more than one might under less constrained circumstances. If a higher-income individual gets a parking ticket, it may ruin their day, but it will unlikely ruin their week or month as it would for someone living in poverty. For the person in poverty these small events can have a significant impact on their cash flow and preoccupies their mind to respond to those small immediate impacts rather than orientate themselves to long-term opportunities. A good example of this is when low-income adults borrow from informal providers at very high-rates for consumption.

Integrating behavioural insights into our data collection and analysis strategies can advance our understanding and predictions of financial behaviour and guide us to design financial services that really help adults achieve their goals. With current innovations in survey design and data collection, we can test these insights quicker and learn faster. This was one of my main takeaways from the panel that I participated on with Paul and Rose.

Another important insight from this conversation was the need to “de-bias” our own thinking as the financial services community, to not overweight short-term gain but to rather take a long-term view that considers total customer lifetime value rather than revenue from a single product or customer interaction. This includes the need to revisit our assumptions around how our clients think and make decisions and to make sense of the constant signals adults are sending us on how they behave. Whether it is who owns the cattle vs. the milk in Kenya or the need for face-to-face communication from “Mr. Satellite”; we need to make sure we are responsive to this information (view video).

So how do we take this forward?

What we need is to showcase these practical examples of how data can be used to better understand customers’ financial needs and decisions. Dr. Shafir highlights that big data is going to help us get a more nuanced and segmented understanding of how consumers behave, but we are still at the early stages of this. Paul from KCB highlighted the work that they are doing with Pula Advisors to segment a list of farmers from their current database of accounts and transactions to identify who they should target with their KCB Mobigro product. We need to learn from these examples so we can understand the challenges and opportunities associated with becoming a more data-driven organisation.

We (i2i) have done some work on the barriers and opportunities for integrating new sources of data (e.g. social media), but we are only scratching the surface. There are different types of providers that have different processes and need different data. Figuring out the different levers that need to be pulled to change their existing ways of doing business is no easy task. This was nicely captured in the session on Becoming client centric: the challenges of change management which highlighted that it is not only with our consumers where behavioural science can help, but also for providers where time is scarce and results are expected quickly.

So for me, I see a lot of areas where behavioural insights and data science can be applied to making financial services work for low-income groups and individuals. 

Any specific area you like to get involved in?

Another area where i2i is making great progress is in forging new data sharing and analysis partnerships. For example, in Rwanda we are collaborating with AFR Rwanda and ICT Chambers for a data competition to link emerging data scientists with financial service providers.

These partnerships have already started bearing fruit in other countries and we’re seeing tangible examples of where data can improve our understanding of the context and behaviour of the low-income sector. I am excited to build on the work that the i2i is doing in this regard to see where we can advance our understanding of behavioural science as it relates to the financial decision-making.

Herman Smit is a technical director at Cenfri and a founder and advisor to the i2i facility.