As part of Accion Global Advisory Solutions, Iain Brougham is the Senior Director, Digital Transformation responsible for working closely with its partners to define and implement digital transformation initiatives. Iain has a broad range of experience consulting for commercial banks, fintechs, microfinance institutions, and startups across Europe, Africa, and Asia. Prior to Accion, he was part of a team that set up and operated a shared agent network scheme – now called Interswitch Financial Inclusion Services Limited – in Nigeria. Iain holds a B.S. in architectural engineering and design management from Loughborough University.

Senior Director, Digital Transformation

Iain Brougham

<h2>Keeping the solution simple</h2>
<img class="alignleft size-full wp-image-16478" src="https://content.accion.org/wp-content/uploads/2018/12/maye_app.png" alt="" width="391" height="704" srcset="https://content.accion.org/wp-content/uploads/2018/12/maye_app.png 391w, https://content.accion.org/wp-content/uploads/2018/12/maye_app-167x300.png 167w" sizes="(max-width: 391px) 100vw, 391px" />
Aye discovered that the overwhelming majority of their target market owned and actively used smartphone applications for a range of different purposes, so they decided to create a mobile app. The business management app, named <a href="https://www.business-standard.com/article/news-ani/aye-finance-introduces-android-based-app-to-expedite-msme-lending-118062700677_1.html">mAye</a>, addresses all five of the merchant needs uncovered in user research. Microentrepreneurs would be able to record and consolidate their business records, gain instant access to the latest balance on their loan, plan and track inventory purchases and staff attendance, and set up on-the-go reminders for making and receiving payments — all within the app.
Rather than overwhelm users with the full range of app capabilities during the pilot, Aye targeted individual segments with the specific functionality that research indicated would be most useful. For example, the need for a more convenient means of consolidating and recording income and expenses was a primary pain point for customers in the manufacturing industry. As such, marketing materials, education, and outreach to manufacturers centered on the app’s ability to record transactions. This curated approach for each customer group enabled people to quickly derive value from the app. End users had a simple way to access the functionality that was most likely to drive their individual adoption of the tool.
<h2>A dedicated team for execution</h2>
In the process of developing the app, Aye recognized that they would need to make some changes to their internal capacity to get the tool operational. Piloting and scaling new digitally enabled initiatives required dedicated management and resourcing.
To focus internal efforts on the app, Aye set up a specific team within its strategy unit to focus exclusively on driving adoption of the mobile app. The new team was responsible for familiarizing and coaching Aye’s customers as they used the tool.
By championing these core principles of customer centricity, simplicity, and a dedicated team, Aye was able to drive a significant response from its customers. Over a three month period, the app was downloaded more than 1000 times, despite the pilot operating across only 4 branches. Over 30 percent of these downloads were from individuals that are not customers of Aye — demonstrating the value of the tool for customer acquisition.
<blockquote>End users had a simple way to access the functionality that was most likely to drive their individual adoption of the tool.</blockquote>
Although the size of the pilot is not significant enough to draw definitive conclusions on the uptake of Aye’s mobile app at scale, these figures are promising. Aye is now looking to consolidate its learnings from the exercise so that it can prepare to scale the initiative from its testing environment to its wider branch network.
Beyond acting as a differentiator from competition and allowing the institution to offer value on top of their loan operations, the long-term plan for the application is to eventually use the data it collects to provide customers with faster underwriting on loans and to strengthen small businesses’ <a href="https://www.centerforfinancialinclusion.org/from-idea-into-action-on-global-financial-health/">financial health</a> by informing better business decisions.
Perhaps the most valuable learning from the pilot came from the experience Aye gained in testing and proving the core principles in their approach. A customer-centric approach, keeping the solution simple, and dedicating a team to execution lay a strong foundation for launching new digital financial services tools.

Aye Finance’s customer-centric approach to driving adoption of digital financial services among Indian microentrepreneurs

Article

It’s not easy for small businesses to go digital. This market has always relied heavily on cash and paper receipts, and despite a multitude of available solutions to complete and record transactions digitally, adoption levels remain low.

This is because these solutions often fail to fully account for customer needs and behavior in their design. Many institutions believe that if they build digital products, customers will want to use them. In reality, the likelihood of digital usage at the merchant-level is driven by a range of factors, including  convenience, the merchants’ digital readiness, and the aspirations and pain points they experience in everyday practices.

When <a href="http://www.ayefin.com/">Aye Finance</a>, a <a href="https://www.accion.org/aye-finance-tackles-msme-credit-gap-in-india">microfinance lending institution based in Delhi</a>, decided to venture into the world of <a href="https://www.accion.org/aye-finance-tackles-msme-credit-gap-in-india/">digital financial services for micro, small, and medium enterprises (MSMEs</a>), they were determined to address customer pain points and provide added benefits that would drive usage. <a href="https://www.accion.org/mastercard-and-accion-partnering-for-inclusive-growth">The Mastercard Center for Inclusive Growth</a> helped fund Accion’s advisory team’s work with Aye to develop digital solutions for its clients.

Aye lends to <a href="https://www.accion.org/for-anjaneyalu-in-bengaluru-family-and-business-go-hand-in-hand">small-scale manufacturing, trading, and service businesses</a> that cannot easily access capital from mainstream financial institutions in India. The average loan to these businesses is about US$2,100. The company wanted to allow its customers to build a digital transaction history, which would give clients more control and oversight over their businesses and more convenient and frictionless access to Aye’s financial services. Aye adopted three core principles in their approach to driving adoption: a customer-centric methodology, a simple solution, and a dedicated team responsible for execution.
<h2>A customer-centric approach</h2>
Rather than entering the project with a predefined idea of how they were going to deliver value to the target market, the organization conducted one-on-one interviews with customers to better understand the pain points that they face in running and growing their businesses. The team asked merchants about their business cycles, recordkeeping habits, existing relationships with financial service providers, and day-to-day transactions. Through understanding their customers’ everyday lives better, Aye was able to identify a value proposition they believed had the potential to drive mass adoption. The results pointed to five prioritized areas where Aye could deliver client value. These were focused on the need for a business management tool that could provide:
<ul>
 	<li>A convenient means of recording and consolidating income and expenses</li>
 	<li>Instant access to information on loan balance and status</li>
 	<li>Automated reminders and simple tracking of outstanding payables and receivables</li>
 	<li>A simplified way to manage inventory</li>
 	<li>A less cumbersome method of keeping track of staff attendance and productivity</li>
</ul>

How can a mobile app support small businesses in India?

Andrea Horak

Lack of credit and cash-based transactions are major pain points for small merchants

Small merchants, such as “mom-and-pop” retailers, restaurants, and micro-grocers, are an important part of society — bringing life’s essentials within easy access for families and employing <a class="markup--anchor markup--p-anchor" href="https://www.ifc.org/wps/wcm/connect/9ae1dd80495860d6a482b519583b6d16/MSME-CI-AnalysisNote.pdf?MOD=AJPERES" target="_blank" rel="noopener noreferrer">more than a third</a> of the world’s labor force.
However, these merchants can’t currently realize their full potential to support themselves and their communities. This is because they often lack access to the core resources or services they need to buy stock, sell goods, and run their businesses effectively. A lack of access to credit for buying stock is a key example of this. According to the IFC, approximately <a class="markup--anchor markup--p-anchor" href="http://www.worldbank.org/en/topic/smefinance" target="_blank" rel="noopener noreferrer">70 percent of the 365–445 million micro, small, and medium enterprises (MSMEs</a>) in emerging markets lack access to credit, resulting in a financing gap <a class="markup--anchor markup--p-anchor" href="https://www.smefinanceforum.org/sites/default/files/Data%20Sites%20downloads/MSME%20Report.pdf" target="_blank" rel="noopener noreferrer">of $5.2 trillion</a>.
The need for credit is difficult for merchants to predict and often requires funding to be available at the point of purchase. Historically, this type of lending, known as “just-in-time” credit, has been difficult for formal financial service providers to offer due to the lack of accessible data that can be used to assess creditworthiness quickly. This dearth of data is primarily driven by merchants’ reliance on manual operational processes and cash-based transactions, which are often not recorded and difficult to verify.

<h4 class="graf graf--h4">Time to scale up supply chain finance solutions for small merchants</h4>
Supply chain finance is not new — big banks have long offered it to large corporations to support cross-border trade, and informal mechanisms have existed for centuries. However, as markets evolve, the variety of available technologies capable of digitizing business operations today mean that now more than ever this type of financing can benefit small merchants.
<a class="markup--anchor markup--p-anchor" href="http://www.accaglobal.com/ab111" target="_blank" rel="noopener noreferrer">Supply chain finance</a> (SCF) is the use of financial mechanisms and technologies for optimizing the management of liquidity tied up in supply chain processes. It enables merchants and other supply chain participants to apply and gain approval for credit to fund purchases at the point of sale. Merchants can purchase goods as needed, as opposed to only when they have cash.

<h4 class="graf graf--h4">Merchant-centric services can alleviate critical pain points for merchants and ecosystem</h4>
The lack of credit for small businesses has an impact on the merchant themselves, the local communities where they operate, and nationwide trade and fast moving consumer goods (FMCG) distributors, such as Unilever and Coca-Cola. For merchants, the lack of credit means their ability to restock is limited by the amount of cash they have on hand, which has been generated from previous sales. This lessens their efficiency and ability to scale. As a result, communities miss the chance to have the job growth and convenience that thriving local businesses bring. FMCG distributors have to deal with a lack of consistent demand and low visibility in a supply chain where they are trying to operate as efficiently as possible.
As merchants buy and sell, this creates transaction and behavior patterns that can be used to provide finance. Traditionally, financial service providers’ (FSP) ability to leverage those patterns and behaviors was limited by the lack of a digital footprint. Today, as with innovations in consumer credit, new technologies can also help small merchants develop a digital data ‘<a class="markup--anchor markup--p-anchor" href="https://www.youtube.com/watch?v=yhdTyqjUMEI&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">footprint</a>’ to show their creditworthiness. Organizations such as <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/dan-cohen-of-tienda-pago-d57c77c53fe8" target="_blank" rel="noopener noreferrer">Tienda Pago in Mexico and Peru</a> and <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/using-fintech-to-support-small-businesses-in-nigeria-f7dff3d6ff23" target="_blank" rel="noopener noreferrer">Lydia in Nigeria</a> have already begun tapping into the data streams of small merchants by offering them business services that encourage digital transactions. One way Lydia helps businesses build a digital footprint is through enabling access to invoice management tools. These provide a more convenient and efficient method for merchants to track debtors and allows for the capture of invoice data to be used to assess creditworthiness. But innovations in supply chain finance have not yet reached small merchants at scale.

<h4 class="graf graf--h4">How can we help merchants buy better, sell better, and run better?</h4>
Enabling merchants to buy better, sell better, and run better through the use of technology is the first step to implementing a merchant-centric supply chain finance solution at scale. These solutions could include access to marketplaces for better pricing on purchases, the use of digital channels to drive customer engagement, and digital means of tracking and managing inventory, payables, and receivables to allow greater visibility of cash flows.<img class="graf-image" src="https://cdn-images-1.medium.com/max/1080/1*ek-ocLutQGYiy673lPDCMw.png" />
We at Accion believe supply chain finance can be a useful tool to drive significant adoption and usage of financial services and therefore meaningful financial inclusion, but to implement successfully at scale, we first need to understand the market thoroughly, to ‘get the equation right’ between the merchant and others along the supply chain. Each merchant has unique needs within their market context, and comprehending these needs is essential for the design, launch, and optimization of merchant-centric services. A full understanding of each market can reveal where pain points are and help identify which digital mechanisms will be most conducive to driving change. With a growing focus on digital payments and merchant acceptance, the time to develop scalable merchant-centric solutions is now.

Small businesses play a huge role in communities, but they need help

What we can learn from the EU’s General Data Protection Regulation (GDPR)

Advances in how we can collect and analyze data have disrupted the financial services industry. Organizations are now able to learn more about customer behavior and preferences than ever before, and they’re applying these insights to improve the customer experience. However, as this capacity continues to grow, so do concerns about identity, privacy, and data protection. In the <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/what-is-identity-and-why-does-it-matter-3febb558785f" target="_blank" rel="noopener noreferrer">previous blog</a> in our digital identity series, we looked at the definition of identity. Now, we’re investigating the implications of digital identity from a privacy perspective and analyzing the impact of the EU’s General Data Protection Regulation (GDPR) as a demonstration model for emerging markets.
If the recent congressional hearing into <a class="markup--anchor markup--p-anchor" href="https://www.theguardian.com/technology/2018/apr/11/mark-zuckerbergs-testimony-to-congress-the-key-moments" target="_blank" rel="nofollow noopener noreferrer">Facebook’s data</a> practices wasn’t enough to make you wonder about the privacy of your online identity, the barrage of emails from companies chasing GDPR compliance likely was. While the scope of the legislation is only applicable for organizations dealing with the personal data of EU residents, it is likely to influence privacy protection principles worldwide.
Despite the fact that GDPR addresses<a class="markup--anchor markup--p-anchor" href="https://iapp.org/news/a/top-10-operational-responses-to-the-gdpr-part-2-lawful-bases-for-processing/" target="_blank" rel="nofollow noopener noreferrer"> 6 different legal grounds</a> for processing customer data, media coverage of its introduction has honed in on two key themes: 1) consent for access to data, and 2) transparency in communicating precisely how that data will be used. The focus on customer consent has sparked analysis of the effectiveness of enhancing privacy through increasing consumer rights to control their identity information.
Although, in theory, the right to consent will allow consumers to prevent access to their information in certain circumstances, in practice it may fall short of driving data protection. Consumers often do not read lengthy communications on legal terms and conditions, and when they do, many may still be unclear about the implications of permitting access to their data. This issue is exacerbated in emerging markets where consumers are typically less literate, less familiar with technology, and as a result, are potentially more vulnerable to exploitation.
With this in mind, it’s uncertain whether the right to consent inherently enhances consumer privacy or whether it simply provides a privacy-enabling structure that can be leveraged only by the highly informed. Given this context, we need to take the discussion beyond consent when considering how to protect user privacy in developing economies.
To explore this topic further, we hosted a webinar on <a class="markup--anchor markup--p-anchor" href="https://www.youtube.com/watch?v=yhdTyqjUMEI" target="_blank" rel="nofollow noopener noreferrer">Digital Identity for Financial Inclusion (click here to watch).</a> During the session, we took a look at some of the solutions being utilized to manage personal information and the impact they are having on financial inclusion, privacy, and commercial viability for financial service providers.

Is data privacy in emerging markets feasible?

Mona Kapoor

How to move forward after a data breach affects India’s biometric ID system

Reports of data security breaches have become increasingly prevalent in recent years. As various countries across the globe establish national identity databases and centralized credit bureaus, such as DNI in Peru, NADRA in Pakistan, Aadhaar in India, and CNIC in Thailand, media coverage of incidents is amplified. In 2016, <a class="markup--anchor markup--p-anchor" href="https://www.riskbasedsecurity.com/2017/01/2016-reported-data-breaches-expose-over-4-billion-records/">over 4.2 billion data records</a> were exposed globally. These attacks are not limited to emerging markets, as proven by the recent breach of US-based credit bureau service Equifax, which exposed several hundred million <a class="markup--anchor markup--p-anchor" href="https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do">consumers’ information </a>— including names, Social Security numbers, birth dates, and addresses. Late last year, researchers discovered <a class="markup--anchor markup--p-anchor" href="https://www.wired.com/story/macos-high-sierra-hack-root/">a flaw in Apple’s macOS</a> that enabled super-user access to any Apple device, enabling malicious software to be installed easily and remotely. Now, India’s Aadhaar database has joined the long list of data breaches, as <a class="markup--anchor markup--p-anchor" href="https://www.cnbc.com/2018/01/04/aadhaar-database-breach-investigation-opened-in-india-on-tribune-report.html">recent reports</a> indicate that access was purchased through a WhatsApp group to the Aadhaar portal and the private data of over 1.2 billion Indians, all for a paltry sum of 500 rupees — about US$ 8.00.
When you see news of a crack in data security, you may picture savvy hackers exposing cryptographic vulnerabilities to access your banking information, but this isn’t always the case. Human error, process failures, and policy violations are overwhelmingly the most significant causes of such breaches and leaks of sensitive personal information.
In addition, while it is true that the majority of data attacks are executed outside the targeted organization, more often than not, the exposed weakness that enabled them was initiated — unwittingly — by internal staff. According to a <a class="markup--anchor markup--p-anchor" href="https://www.recode.net/2016/5/24/11756584/cyber-attack-data-breach-insider-threat-steve-durbin">survey from the Information Security Forum</a>, in most cases, employees were doing ordinary tasks, like taking files home to work in the evening, with no malicious intention of harming employers or their customers.
In other words, the human-driven processes that compliment secure technologies are equally as important as the technologies themselves. These processes can be easily overlooked or become out-of-date, leaving even the most robust of digital security systems useless for preventing criminal access.
The Aadhaar security breach is a prime example of this type of internal process failure. <a class="markup--anchor markup--p-anchor" href="http://indianexpress.com/article/opinion/columns/all-is-not-well-with-aadhaar-leak-aadhaar-details-5013305/">Analysis indicates</a> that this is a case of mismanagement and poor administration within the government bureau that manages Aadhaar, <a class="markup--anchor markup--p-anchor" href="https://uidai.gov.in/">UIDAI</a>, where UIDAI’s operations team failed to block (or delete) defunct legitimately issued access rights.
To meet the government’s ambition of registering hundreds of millions of Indians with Aadhaar identity cards, approximately 300,000 Village Level Enterprises (VLEs) were initially employed under the government’s Common Services Centres Scheme (CSCS). Once the targets were met (or the initiative had reached a logical conclusion), these jobs went away. But the access rights were not disabled by UIDAI staff, enabling malicious individuals to abuse the privilege.
From a financial inclusion point of view, robust identification is a fundamental requirement for micro-entrepreneurs to access the financial tools that provide growth and stability. Centralized identity databases enable customers to access their accounts remotely, and they limit leakages by preventing multiple enrollments by the same individual. Without a clear identity that can be proven, it is nearly impossible for any individual or business to obtain the necessary financing to grow. As Makhtar Diop, the World Bank Vice President for Africa, stated in the Identification for Development annual report, “Identification provides a foundation for other rights and gives a voice to the voiceless.”
However, any system is only useful if people trust it. Trust is instilled if the system is easy to use and understand, if issues are resolved immediately, and if people believe their transactions are safe.
In India, trust in the central identity database has been shaken. This trust needs to be re-instated and amply demonstrated through better policies, governance, controls, and operational processes. These improvements should be backed by unscheduled internal and external audits to test the core system, internal operations, and the extended distributed network, which is more susceptible to such breaches. Interestingly, the Aadhaar team has now come with Virtual ID to replace the Aadhaar number for third-party verification purposes. Let’s hope this is not a knee-jerk reaction but a well-considered solution that can earn the trust of the more than 1.2 billion people of India who look to Aadhaar for their unique IDs.

Is India better off without Aadhaar?

Customization of products and services took center stage at European Microfinance Week 2017

A refugee settling in a new land, a family buying a home, a farmer nurturing her crops — every person has different financial needs — and loans, savings, and payment services should help them solve the challenges in their everyday lives. This year, <a class="markup--anchor markup--p-anchor" href="http://www.e-mfp.eu/microfinance-week" target="_blank" rel="nofollow noopener noreferrer">European Microfinance Week</a> focused on the heart of inclusive finance — understanding and interpreting customer needs. I joined hundreds of attendees from dozens of countries in Luxembourg for the three-day event, and took advantage of the opportunity to attend a wide selection of talks and panels on topics from financial inclusion for refugees, to managing political risk in developing economies, to <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/bridging-the-financial-services-gap-rural-agricultural-customers/" target="_blank" rel="noopener noreferrer">bringing financial services to farmers</a>.
Financial services providers often make decisions to use a specific technology or product feature, without sufficiently verifying whether it is suitable for its target customers. To pursue financial inclusion, the products and services we design must align with the specific dynamics of the target market they are intended for. Loan services for rural crop farmers, for example, are only useful when repayment terms are specific to growth and output cycles.
During a presentation on microfinance for housing, Frank van der Poll, CEO of <a class="markup--anchor markup--p-anchor" href="http://fmfb.com.af/" target="_blank" rel="nofollow noopener noreferrer">First Microfinance Bank Afghanistan</a>, emphasized the importance of using a customer-centric approach to help people fund their housing needs. He underscored that not all customers are the same — everyone has unique needs. We have to take time to understand those needs by dividing customers into segments with similar dynamics, and then we can tailor products and services accordingly.
There’s no one-size-fits-all approach to segmentation, but financial services providers can start by looking for natural separations between different lifestyles, personalities, occupations, and behaviors within a target market. Within the financially underserved population, for example, the needs of urban retailers of consumable goods may be grouped separately from those operating within the service industry. This is because the differences in the way they live their lives may constitute different financial needs.
This customer-centric approach isn’t just key when designing new solutions — it’s also imperative for refining existing products and services. During a session on using digital and consumer-centric solutions to improve digital financial services, Etienne Mottet of <a class="markup--anchor markup--p-anchor" href="http://bfconsulting.com/" target="_blank" rel="nofollow noopener noreferrer">Business and Finance Consulting</a> stated that “Pilot projects must be flexible and the teams operating them willing to pivot on the back of new insights learned during the course of their implementation.” Even when institutions conduct thorough initial research, they still need to perform periodic reviews to measure performance accurately. Projects should be able to alter from their original trajectory based on these evaluations. In doing so, financial services providers can confirm or invalidate assumptions made during planning and development and continue delivering value to their intended market.
The overarching message from the week was clear: a detailed and accurate understanding of customer requirements must be at the forefront of all products and services if we hope to achieve financial inclusion.

Iain Brougham

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