What counts as financial inclusion? Reporting the number of active accounts in a country is a common way to measure progress in financial inclusion. But as access to, and uptake of, accounts increases, we need more powerful indicators to help us understand the dynamics of how people use financial services, and digital financial services in particular.

At <a href="https://i2ifacility.org/">insight2impact</a>, we’ve spent the last four years exploring these questions and have tested our measurement frameworks and emergent indicators on both demand-side survey data and transactional data in Mexico and Nigeria. We also went further by linking the data sets for the same person to analyze a more complete picture of people’s financial lives, both within and outside of formal financial services. What we found was both curious and transformative for our thinking on how we measure financial inclusion.
<h2>Frequency as a Means to Track Digitization</h2>
The first step to financial inclusion is <a href="http://www.worldbank.org/en/topic/financialinclusion/overview">having access to a transactional account</a>. If I choose to take up an account, I’m able to store money or send and receive payments, but if I use my account very rarely, am I still financially included? Maybe I receive a payment and immediately withdraw it all at an ATM. What if all the transactions I need to do can only be done in cash?

Analyzing frequency of usage gives us an indication of how populations are (or aren’t) switching to digital channels for transacting. We analyzed bank transaction data in Mexico to better understand financial service usage patterns. Debit-card usage by customers was relatively high, with 78 percent using their cards weekly, but 60 percent of monthly card usage occurred at ATMs to withdraw cash, not for purchases via POS or online. The frequency of ATM vs non-ATM card usage paints a more realistic picture of digitization in Mexico. It’s a picture of incomplete digitization, with cash remaining central for most people.

Secondly, we linked the transaction data to survey responses to compare people’s online vs offline transaction behavior. This revealed that most people still use cash for their regular expenses, even if they have a bank account. The graph below shows both banked and unbanked people’s cash usage for regular expenses such as rent and bills, and daily expenses such as groceries and transport. Cash was ubiquitous, regardless of gender, socio-economic segment or account ownership. By only counting the accounts, we would miss the scale of non-digital financial lives.

Counting More than Accounts: What Can Frequency of Transactions Tell Us About Financial Inclusion?

Latin America and The Caribbean

Mexico

Nigeria

Sub-Saharan Africa

Access Usage Gap

Data Analytics

Enabling Environment

Financial Capability

Financial Technology

Payments

Personal Financial Management

Blog Post

The current focus on client outcomes – as demonstrated by the proliferation of frameworks describing financial health, well-being, or similar all-encompassing concepts – has renewed attention on how we achieve positive impact for clients. Currently, the behaviorists – those who believe an understanding of cognitive biases and deft application of behavioral insights in intervention design can lead to superior outcomes – rule the day. Meanwhile, financial education, traditionally seen as an enabler of better client outcomes, has become debatable, as research has shown that traditionally delivered education programs provide mixed results at best. Collectively, these trends are giving way to the narratives that client outcomes are achievable through behavioral interventions and that financial education is an ineffective relic of the past.
<blockquote>Current trends are giving way to narratives that client outcomes are achievable through behavioral interventions, and that financial education is an ineffective relic of the past.</blockquote>
This is a dangerous story. It positions the concept of education as an antagonist to behavioral insights rather than as a collaborator, and it presumes that behavioral interventions are superior to educational ones. This post aims to re-balance that narrative.

A quick point of order: financial education and financial literacy are often used interchangeably – in colloquial conversation this makes sense (“educated” and “literate” are synonyms, after all) but using them interchangeably confuses the delivery of education with its intended outcome (literate clients). I use the term financial education to refer to the process of teaching knowledge and skills and financial literacy as the state in which one possesses financial knowledge and skills.

A Fourth Era: Balancing Behavioral Interventions with Quality Education

Behavioral Insights

Financial Health

After months studying the drivers of financial health and mobile and internet usage in Eastern Europe, I was excited when our team finally landed in Serbia. During the hour-long taxi ride from Belgrade’s Nikola Tesla Airport to Novi Sad, we finalized our work plan for the coming days while catching glimpses of the countryside.

We came to Serbia to join our colleagues at the <a href="http://mfc.org.pl/">Microfinance Centre</a> (MFC) in conducting in-depth interviews with current and prospective customers of <a href="http://www.obs.rs/eng/">Opportunity Bank Serbia</a> and <a href="http://fiiw.pl/">Fundacja Innowacja i Wiedza</a> (Foundation for Innovation and Knowledge). We wanted to learn everything we could about the interviewees’ ambitions, challenges, attitudes, and technology use, so we can use these insights to design and develop a digital tool that will help clients understand and improve their financial health. This research is part of the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities &amp; Strengthening Institutions through Customer-Centered Innovations</a> project, supported by <a href="https://www.metlife.com/corporate-responsibility/metlife-foundation/">MetLife Foundation</a>.
<h2>Observations on Currency Usage</h2>
[caption id="attachment_35062" align="alignright" width="300"]<img class="size-medium wp-image-35062" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/05/novi-sad-taxi-300x218.jpg" alt="" width="300" height="218" /> <em>Taxis in Novi Sad, Serbia, often quote cab fares in euros.</em>[/caption]

As we pulled up to the hotel, I was perplexed when our driver, Božidar, quoted the cab fare in euros. Last time I checked, the dinar was the currency of Serbia, since it remains an EU candidate country. Yet Božidar wished to be paid in euros, as did many other local vendors. We discovered that our interviewees commonly use euros alongside dinars. One farmer said that she quickly deposits any payments made in euros, but she tends to use her dinars for everyday purchases or stash them at home for emergencies. A shop owner said the majority of her suppliers pay her in euros while she accepts payments from customers in both currencies.

The trend of “euroization” or “dollarization” — a foreign currency substituting or complementing the domestic one — is well studied. The graph below, from the Austrian central bank’s Euro Survey, shows that among its neighbors in central, eastern, and southeastern Europe, Serbia is the most euroized, with the highest proportion of all its cash and deposits held in the form of euros.

&nbsp;

Dinars vs. Euros: Financial Health and the Multiple Currency Dynamic

MetLife Foundation

Building Financial Capabilities and Strengthening Institutions Through Customer-Centered Innovations

Europe and Central Asia

Serbia

<em>This post originally appeared on the <a href="https://www.accion.org/four-reasons-focusing-on-financial-capability-is-good-business">Accion</a> website.</em>

If you’ve never used financial services in the past, you’re going to encounter a significant learning curve when you finally get access. That’s why more institutions are rolling out products to support first-time clients and equip them with actionable tips and tools to simplify their experience. These new services aren’t just good for customers, they’re good for business. By helping consumers attain the <a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-catalogue-of-innovations-in-financial-capability">knowledge, skills, attitudes, and behaviors</a> necessary to make sound financial decisions — what we call financial capability — customers can become more informed and engaged. In other words, they become better customers.

For any financial institution interested in increasing customer loyalty, building better financial capability is crucial.

<a href="https://www.centerforfinancialinclusion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion">As we work with MetLife Foundation</a> to expand financial capability through customer-centered innovations, we’re excited about the potential benefits for both customers and institutions. Here are four reasons why helping clients build their financial capability is a win-win:
<h2>1. Financial Capability Drives Active Use of Financial Products</h2>
Products that help increase financial capability, <a href="https://www.centerforfinancialinclusion.org/financial-capability-building-practices-in-mexico">drawing insight from behavioral science</a>, can encourage customers to use products more often, which translates to higher profitability for providers and greater usefulness to customers.

Take the case of <a href="https://www.grupobancolombia.com/wps/portal/personas/productos-servicios/cuentas/ahorro/transaccional/ahorro-a-la-mano">Ahorro a la Mano</a>, a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">nudges</a> to remind users to put money into their savings.

Bancolombia worked with <a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3">Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named “<a href="https://www.centerforfinancialinclusion.org/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines-2">Emilia</a>,” that could point out opportunities to use the product and makes special offers to encourage transactions within the first month. Because they provide individually tailored messages in a friendly, personal voice, Emilia’s nudges and reminders build trust with clients, and they become more likely to act on her suggestions.
<h2>2. Customer Loyalty Increases</h2>
As customers use their products more frequently, they are likely to become more loyal. Most financial service providers’ balance sheets and product viability calculations do not figure long-term customer loyalty into their calculations, but customers that stick with a provider over time are important to business success.

In September 2017, BBVA launched <a href="https://www.bbva.com/en/bbva-opens-its-banking-app-in-spain-to-accounts-and-products-from-other-providers/">Bconomy</a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month</a>.
<h2>3. Capable Customers Use More Products</h2>
Part of the accepted definition of financial capability is a person’s confidence in using a wide range of products to meet their financial needs. Savvy institutions that promote financial capability also build appropriate follow-on products for customers. Institutions that ignore this strategy may see their first-time customers move on to other providers as they become more comfortable with formal finance.

<a href="https://acreimex.com.mx/">Acreimex</a>, a savings and credit cooperative in Mexico, has incorporated savings into payroll loan repayments so that customers who opt in can save painlessly while they repay their loans. Savings discipline is a key attribute of financially capable people, and automated savings is a tool that assists people to stick to their best intentions. Acreimex built this option by combining its two most popular products. It merged its payroll loan and savings services by rounding up repayment installment amounts and automatically depositing the excess amount into clients’ savings.

The combination of products resulted in significant increases in savings activity and balances. An evaluation showed that participants made about <a href="https://optixproject.org/acreimex/">twice as many deposits and saved 30 percent more</a> than those who didn’t participate. Additionally, <a href="https://nextbillion.net/stealthy-saving-building-on-payroll-credit-to-automate-savings/">96 percent of savers chose not to withdraw the balances</a> from their accounts throughout a 12-month pilot.
<h2>4. Investing in Financial Capability is More Effective — and Less Expensive</h2>
Traditional, classroom-based financial instruction is costly. Features that build financial capability are often cheaper and more effective because they generate direct and longer lasting behavior change.

When researchers analyzed more than 200 individual impact studies on financial education, they found that <a href="https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/CU%20Final%20Report.pdf">only 0.1 percent of the observed positive changes</a> in people that had attended classroom-based financial education programs could be attributed to the programs themselves.

On the other hand, impact evaluations of financial products that incorporate behavioral insights to nudge client behavior consistently find statistically significant positive impacts. For example, in a study with <a href="http://www.bancoadopem.com.do/app/do/frontpage.aspx">Banco ADOPEM</a>, researchers tracked customers who attended either a traditional accounting-based financial education class or a class that, in keeping with behavioral insights, offered simple rules of thumb in accounting. Both classes aimed to assist customers to separate business and personal accounts. In the end, the <a href="https://www.povertyactionlab.org/sites/default/files/publications/124_303%20Rules%20of%20Thumb%20AEJ%20Apr2014.pdf">customers who received the simplified rules of thumb displayed more positive business outcomes</a> — they saw a 30 percent increase on average in the level of sales during weeks with typically low sales and saved an average of 6 percent more in personal savings.

More and more institutions are thoughtfully designing products and experiences that not only match their customers’ experiences and lives, but also consider their attitudes, skills, and behaviors. Financial institutions that invest in building up financial capability are likely ensuring they will have customers that are more active users of their products, that are loyal for longer, and that will use a wider variety of products.

<em>We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.</em>

Four Reasons Focusing on Financial Capability Is Good Business

Chile

Colombia

Dominican Republic

Spain

What would you do with an extra $500 a month?

Mayor Michael Tubbs of Stockton, California, posed this question to his constituents last year. In February, the city began its 18-month universal basic income (UBI) pilot. Through a privately-funded program, Stockton’s government will distribute <a href="https://www.huffpost.com/entry/stockton-california-universal-basic-income_n_5c697700e4b05c889d20203a">$500 on a monthly basis</a> (the first $500, pre-paid debit cards have been sent), no strings attached, to 130 of its low-income residents. <a href="https://www.ycombinator.com/about/">Y Combinator</a>, a California-based startup accelerator, plans to launch a similar trial this year in Oakland.

Tubbs knew there would be obstacles in getting this pilot off the ground; he would have to convince people across the political spectrum that it was a good idea. However, there was one segment he did not expect push back from: the people the program intended to help.

“There were conversations I had with folks who are one paycheck away from deprivation saying, ‘We don’t deserve anything,’ so really the challenge has been reshaping the conversation. This is not a handout. This is part of what you get as a citizen of Stockton. You are eligible for this not because you need anything, but because you are a citizen of this city, ” Tubbs explained in an <a href="https://iop.harvard.edu/forum/stockton%E2%80%99s-economic-empowerment-demonstration-guaranteed-income-initiative">interview</a> last year. He hopes that this program will empower people to have more agency.
<h2>Differences Between Stockton's UBI Pilot and Others</h2>
A UBI pilot like this has never been done in the U.S. before, so it’s difficult to hypothesize how the Stockton trial will turn out. While most pilots focus on the quantitative data – how funds are spent, whether employment rates changed, and the like – the Stockton pilot aims to <a href="https://basicincomepodcast.com/podcast/updates-stockton-basic-income-trial-feat-mayor-michael-tubbs-lori-ospina/">humanize the results</a>. Through surveys, qualitative interviews, and local artists, the city intends to engage participants more deeply and stimulate discussion more broadly.
<blockquote>Humanizing the results: Stockton's universal basic income pilot participants will be engaged deeply and stimulated by discussion.</blockquote>
Finland recently ended a <a href="https://www.nytimes.com/2018/05/02/opinion/universal-basic-income-finland.html">two-year trial</a> that awarded 2,000 Finns roughly $630 per month, but that was targeted exclusively at the unemployed.

The fact that it targeted exclusively the unemployed is important for a couple of reasons. First, it didn’t teach us how people who have a source of income, especially on the low or irregular end, would treat this extra funding. Second, the Finnish government changed its unemployment laws concurrently with the pilot such that if you could not prove you were actively seeking a job, you lost your government benefits. In the first three months, <a href="https://yle.fi/uutiset/osasto/news/finlands_activation_model_brings_benefit_cuts_for_94000_people/10145894">94,000 Finns saw their benefits cut</a>.

UBI is not meant to be contingent, and cutting other benefits shifts the financial liability for things like health care back to the individual. In many ways it’s similar to Clinton’s <a href="https://aspe.hhs.gov/report/personal-responsibility-and-work-opportunity-reconciliation-act-1996">Personal Responsibility and Work Opportunity Reconciliation Act</a>: among other things, it forces the unemployed to accept gig work, and businesses can lower wages because people have to accept a job or risk losing benefits.

The closest thing we’ve seen to a large-scale UBI is the Alaska Permanent Fund, which has been active since 1982. The fund receives most of its capital from the revenue of oil companies operating within the state; each year, payments of equal amounts are distributed to all Alaskan residents (generally between $1,000 and $3,000). A 2018 report found that this cash transfer program <a href="https://www.nber.org/papers/w24312.pdf">did not significantly decrease employment</a>. However, as climate change issues surge, there are growing concerns regarding the source of revenue of the fund. While some board members <a href="https://www.juneauempire.com/news/what-does-the-alaska-permanent-fund-have-to-do-with-climate-change-this-group-will-tell-you/">attempt to downplay</a> the percent of the portfolio invested in fossil fuels, its former Chair William Moran <a href="https://www.adn.com/opinions/2018/05/24/how-alaska-permanent-fund-investment-policies-fail-to-consider-the-changing-world/">noted</a> last year that “every last cent of the $65 billion initiative is a financial derivative of fossil fuel interests. ” This sends a message that if the price is right, oil companies can buy their way into operation.

The United States already has an antipoverty cash distribution program called the Earned Income Tax Credit (EITC), which is designed to support low-income Americans. The program differs from the UBI concept in several important ways, however. It primarily supports people with children, rather than focusing on individuals. The disbursal amount varies each year, and it is only distributed once a year. This means that recipients never know how much they will receive, and often spend it on overdue expenses. <a href="https://www.nytimes.com/2012/04/17/us/antipoverty-tax-program-offers-relief-though-temporary.html?hp">Critics argue</a> the lump sum would be more effective if dispensed in installments.

Given that less than 10 percent of the EITC payout goes into savings account, this points to the critical problem that people still can't survive on working wages alone. Research by economist Alan Krueger shows that <a href="https://qz.com/851066/almost-all-the-10-million-jobs-created-since-2005-are-temporary/">nearly all jobs created since the recession have been contract, part time, or contingent</a>. These types of jobs don’t provide the same benefits as a 40-hour per week role, and it is increasingly <a href="https://scholar.harvard.edu/files/lkatz/files/katz_krueger_cws_v3.pdf">less likely that your job will provide the security</a> that it did 20 years ago. Some of the most successful companies in the past decade,<a href="https://slate.com/business/2018/12/google-walkout-protests-contract-workers.html"> including Google</a>, contract more than half of their staff. In combination with the rising concern of job loss to automation, UBI could be an insurance policy for future downturns that require workers to accept less stable short-term or gig positions, especially for those who have dependents, less varied skillsets, or otherwise require a degree of employment stability.
<h2>Beyond Income: Work Isn’t Just Monetarily Rewarding</h2>
Some scoff at the idea of UBI, deeming it welfare for those too lazy to work and believing it would lead to workforce gaps. However, according to the Economic Policy Institute, nearly <a href="https://www.epi.org/publication/poor-people-work-a-majority-of-poor-people-who-can-work-do/">63 percent of poor people in the U.S. who are eligible to work are currently employed</a> full or part time, and many of those who aren’t – about 3.3 million – are actively seeking employment. Furthermore, work is generally not just about a paycheck; unemployment is enormously traumatic, and studies have shown that people <a href="https://harris.uchicago.edu/news-events/news/universal-basic-income-policies-dont-cause-people-leave-workforce-study-finds">find purpose in work</a>. When it comes to poverty, a willingness to work is not the problem, but rather that work itself is no longer the solution. The next big economic idea will have to consider a myriad of factors – from increasing digitization to the ever-expanding wealth gap – to push for a more economically-inclusive society.

The idea of universal basic income isn't just about social justice – it's about stimulating economic growth. The United States <a href="http://inequalityforall.com/wp-content/uploads/2014/12/A_Visual_StoryPDF.pdf">prospers most</a> when it has a healthy middle class; in 1940, it was almost guaranteed that a child would grow up to have a higher income than his or her parents. By the mid-1980s, that probability was <a href="https://www.brookings.edu/blog/up-front/2018/07/25/fewer-americans-are-making-more-than-their-parents-did-especially-if-they-grew-up-in-the-middle-class/">down by about half</a>. When those who have less do better, <a href="https://www.americanprogressaction.org/issues/poverty/news/2011/12/06/10771/10-reasons-why-cutting-poverty-is-good-for-our-nation/">everyone benefits</a>: health costs go down, innovation goes up, and social mobility improves.
<blockquote>Universal basic income isn't just about social justice – it's about stimulating economic growth.</blockquote>
While UBI alone is not a panacea for economic inequality, its time has come as a force for serious and meaningful economic prosperity, and a counter to the ballooning inequality from which the U.S. suffers.

Work Isn’t Just About Money: Universal Basic Income and Potential Benefits for U.S. Working Poor

North America

United States

Financial Inclusion Strategy

In this session, we spoke with our incoming CFI Research Fellows, Dan Kleinbaum and Larry Reed, who will be exploring research questions over the coming months that we think are especially important to the financial inclusion space today.
<ul>
 	<li>How do financial institutions use mass APIs, open APIs, custom APIs and bespoke partnerships to partner effectively with fintechs to reach the underserved?</li>
 	<li>How can banks and other financial institutions provide a set of accounts and services for G2P recipients in a profitable way?</li>
</ul>

Webinar: Meet the 2019 CFI Research Fellows

CFI Research Fellows Program

Digital Financial Services

Financial Service Providers

Fintechs

P2P Lending

Telcos

Webinar

<em>This post originally appeared on the <a href="http://www.accion.org">Accion</a> website.</em>

Too often we hear questions from some of our financial service provider clients such as, “How can we gain market share and beat out our competition?” This isn’t inherently a bad question — it’s important to think strategically about competitors. But this question focuses only on the supply side. To get the full picture, an institution should also ask, “How can we better understand the challenges that our customers face, and how can we help them tackle these issues through our services?” While many financial service providers have made considerable strides in developing customer-centric products, most could be doing more to better understand their customers’ wants, needs, behaviors, and habits.

For these institutions that lag behind in customer centricity, it is not that they are unconcerned for their customers and only worried about the bottom line, but they often perceive this to be expensive and can be reluctant to invest in market research. Instead, they rely on anecdotal customer stories from their sales force. Unfortunately, this approach to the collection of customer information often leads these institutions to misunderstand the real problems their customers face. For instance, they may miss how technology is changing customers’ preferences for accessing information and the social groups they are part of.

[caption id="attachment_34130" align="alignright" width="550"]<img class="wp-image-34130 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/01/Screen-Shot-2019-01-17-at-11.39.01-AM.png" alt="" width="550" height="448" /> <strong>A workshop participant shares her prototype travel debit card with a potential user. This product would include a digital application geared to address millennials’ need for saving as well as financial and business coaching. </strong>[/caption]

Conventional market research methods rely on focus groups and expensive customer surveys, which don’t always deliver relevant insights. In contrast, a customer-centric design methodology focuses on listening to and observing people in their daily lives and works within market and technological constraints. One particular area of focus is product touch-points. A customer-centric approach regards each touch-point as an opportunity to surprise, delight, and deliver benefits to users. When done well, this approach provides experiences that resonate with the intended customers — driving their engagement and, ultimately, growth for the institution. With a customer-centric design methodology, rapid prototyping and real-world tests with customers are used to validate (or invalidate) early designs and improve the solution.

With the aim of teaching financial service providers how to apply Accion’s user-centric design methodology, we hosted a workshop in Queretaro, Mexico, with the support of MetLife Foundation. This 2-day workshop brought together ten financial institutions, including microfinance organizations, cooperatives, and fintechs, to learn our methodology for designing and developing user-centric products, based on a deep understanding of customers’ behavior, with a high potential for adoption. Participants learned how to reframe their business challenges from a customer-perspective, conduct efficient and useful user research, and use their understanding of their customers’ financial behaviors, capabilities, needs, and desires to conceive and prototype a new product.

After designing prototypes, the participants shared their ideas with potential users and engaged in a conversation about their lives, desires, and fears. By walking the users through each touch point in the proposed customer journey, the participants empathized with the customers’ thoughts, feelings and experiences at each moment. These conversations brought up questions about the usefulness and complexity of many of the products and forced participating institutions to adjust their concepts to make their prototype more customer-centric — ultimately promoting greater adoption and supporting the <a href="https://content.centerforfinancialinclusion.org/dollar-by-dollar-or-goat-by-goat-how-financial-health-translates-across-oceans/">financial health</a> of the customer. When financial service providers watched potential users struggle with digital tools or have trouble navigating through non-intuitive wireframe mock-ups, they gained insight in designing user-centered products. The providers told us this was the most influential part of the workshop.

[caption id="attachment_34131" align="alignleft" width="488"]<img class="size-full wp-image-34131" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/01/Screen-Shot-2019-01-17-at-11.39.21-AM.png" alt="" width="488" height="346" /> <strong>One bank conceptualized a flexible product that will address customer distress in paying their hospital bills. This bank visualizes the customer experience at every touch point with the bank. The visualized product allows the customer to customize their experience by choosing where to open their account, pick the date and portion of the bill they want to pay.</strong>[/caption]

Both traditional institutions and fintechs found the user-centric design methodology useful. While many fintechs claim to be more customer-centric than incumbent financial providers, several of the fintech participants admitted that they do not have a process to ensure that their existing products evolve to match the dynamic needs of their clients. Upon reflection, many found that their services were disconnected from client realities.

The workshop participants were eager to return to their institutions to share their new product prototypes. As one attendee put it, they were looking forward to using this methodology to, “not only help us to improve our products and services, but to create a more enriching experience for our customers.”

However, participants know that the path from prototyping customer-centric products to product deployment is not an easy one. Within an organization, a willingness to embrace change and focus on customers requires a shift in mindset. As one participant said, “it will be difficult to convince others to center their focus on our clients.”

Over the next two years, with the support of MetLife Foundation, Accion will continue working with select financial service providers to ensure that they are asking more strategic questions as they apply this user-centric design methodology to develop a product, service, or experience. And we will help the institutions tackle the challenge of internal alignment and cultural change, while ensuring that designs resonate with customers, use innovations in technology, and contribute to the financial health of the low-income population in Mexico.

To Help Customers, Ask the Right Questions

Customer Centricity

Human Centered Design

<em>This post originally appeared on the <a href="http://www.accion.org">Accion</a> website.</em>

Chilean banks have made critical advances to drive greater financial inclusion in recent years. From agent networks to payment platforms to the CuentaRUT account — a simplified deposit account with a debit card that the state-owned Banco Estado made available to anyone in Chile with an identity card, Chile has nearly reached universal access to financial services.

However, despite these advances, many small merchants in Chile still aren’t finding financial tools that meet their needs. Micro, small, and medium enterprises (MSMEs) make up <a href="http://www.smefinanceforum.org/data-sites/msme-country-indicators">98.5 percent</a> of enterprises in the country and are a significant driver of economic growth; however, <a href="http://www.smefinanceforum.org/data-sites/msme-finance-gap">more than a quarter</a> of these microenterprises have faced difficulty in accessing financing in times of need. Compounding this problem are high levels of financial insecurity among Chileans. <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">Nearly half of the population</a> feels unsure about how they would cover their basic needs if they lost their income. For merchants whose personal and business lives are closely intertwined, this lack of financial security in their day-to-day lives translates to lack of security in their businesses as well.

Accion's Customer Strategy team traveled to Santiago to talk to micro-entrepreneurs so we could better understand how they are currently using their financial services. MetLife Foundation supported this research as part of our <a href="https://www.accion.org/accion-metlife-foundation-improve-financial-inclusion-in-latam">joint effort to boost the financial capability of customers</a>. Just as <a href="https://www.centerforfinancialinclusion.org/why-arent-people-saving-money-in-mexico">CFI did in Mexico</a>, we conducted interviews with a wide variety of small merchants to understand their motivations, goals, and feelings toward financial services, and to hear about the strategies they use to stay financially healthy.

Here’s what we learned:
<h3>1. Significant barriers block entrepreneurs from using business accounts.</h3>
Every microentrepreneur we spoke with had a CuentaRUT card, but for many, that was the extent of their relationship with formal financial services. All of them cited high fees, interest rates, and long application processes to access business accounts and credit as barriers to usage. Margarita, the owner of a travel agency and a small bookstore, told us that the most challenging part of starting her business was opening a business bank account, which required numerous documents and costly fees. Therefore, many use their CuentaRUT account for both personal and business purposes, making it difficult to manage their business and personal financial lives separately.
<h3>2. Chileans perceive taking credit from banks as risky.</h3>
Gianfranco, the owner of a small restaurant, wants to expand his business, but he has no interest in taking out a loan. He fears losing everything he has worked for by putting his business up as collateral. He told us, “I don’t like the idea of being indebted or dependent on anyone.” Maritza, the owner of a mini-market, shared a similar sentiment: “I don’t have confidence in financial institutions; they don’t worry or care about their smaller clients.” Many of the merchants we spoke to prefer to borrow from friends and family.
<h3>3. Blacklisting deters participation in the formal financial system.</h3>
[caption id="attachment_34006" align="alignright" width="234"]<img class="wp-image-34006" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2019/01/Screen-Shot-2019-01-08-at-3.32.07-PM.png" alt="A Chilean restaurant owner sits at a table" width="234" height="204" /> <strong>Jamie, a restaurant owner in Santiago</strong>[/caption]

Dicom, the national credit agency, records negative credit information such as payment delays and defaults. However, the agency does not offer a clear path to resolve negative reports and as a result, many small businesses avoid deepening their relationship with lenders. Many major retail stores offer consumer credit cards, and in the past, they did so without proper credit assessment and did not inform customers of the <a href="https://www.nytimes.com/2011/07/24/business/global/abuses-by-credit-issuers-in-chile-and-brazil-snare-consumers.html">consequences of default</a>. As a result, many people, unable to pay or unaware of the lasting nature of default, were reported to Dicom, and remain on that blacklist. Today, nearly 900,000 people are recorded as delinquent.

Jaime, a restaurant owner in Santiago, is 74 and has been an entrepreneur all his life. He was reported to Dicom over 30 years ago and has no way to resolve the black mark on his account. In fact, he doesn’t know what caused him to be listed in the first place, despite his efforts to find out. He has upgraded his business several times, but always with his savings, as he has no access to credit. Today, he hopes to buy a car so that he can purchase supplies directly for his restaurant, without paying for transport. However, he cannot make such a large purchase until he builds up enough savings. Jaime needs information to help him better understand why he was blacklisted and concrete steps to help him improve his credit score.
<h3>4. Informal savings remain more comfortable and familiar for people.</h3>
Findex data tells us that only 21 percent of the population in Chile saves money at formal financial institutions. Many interviewees told us that they have difficulty putting money away, often finding it overwhelming just to meet their fixed expenses. When they do set money aside, they prefer to save informally, either in inventory or through investment in assets that will produce income later. Many told us that opening a savings account seems difficult, but everyone wanted to increase their resources so that they could take more time off and work less.
<h3>5. Merchants prefer to learn about financial products from people, not websites.</h3>
Several merchants mentioned that they are hesitant to make financial decisions based on digital information. Lorena de Diaz, the owner of a house cleaning business, told us that she prefers to learn about new products in person, as she can’t verify the accuracy of information provided through a website or mobile application. She likes to be able to ask questions at the branch and feels that she better understands financial products when a person can explain it.

The microentrepreneurs we spoke to need tools tailored to their needs, from working capital to finance their inventory to inexpensive business saving and checking accounts, delivered with transparent and trustworthy communication from their providers. As we continue working with fintechs and financial service providers of all sizes, we hope that better understanding customers’ pain points, aspirations, and desires will lead to better communication on how to use financial products, or even entirely new products that truly improve people’s financial health. Over the next two years, Accion will be working with financial service providers in Mexico and Chile to use customer research to design, test, and implement product innovations that will drive usage and improve financial health.

<em>This research was conducted by Accion as part of our part of our <a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.</em>

5 Reasons Small Merchants Aren’t Using Financial Services in Chile

Entrepreneurs of MSMEs

Remember back when taking photos was a little indulgence, before the camera was with you all the time, and before it became essentially free to take photos?

Our behaviors and ethics around photography have changed because of the smart phone. We used to look left and right for passersby before taking a photograph, but now few bother with that nicety; you´ll just take another one if someone walks in front. That´s a simple response to shifted incentives.

Another thing you'd expect to happen with the new ease of taking photos is that interest in them would tend to fade. We´d find it too easy, we'd have too many of them. But that didn't happen, in fact quite the opposite: the cheaper and more plentiful, the more photos people seemed to take. People now take selfies in suburban trains.

Scarcity principles do not seem to apply here. Why is that?

Personal photography has always been about manufacturing memories. When you take photographs on a trip, that´s what you are choosing to remember your holiday by. In the same way that the blockchain represents the construction of an indelible transaction history, with photos you are fixing an image-chain of memories.

But where does the image-chain reside?

Not in a hard drive or a memory stick. Memories are experiences you relive in the telling, not in the storing. Stretching the analogy a bit, your image-chain lives in your social network of friends, just as the blockchain lives in a peer network of computer nodes. Others must validate the history you are creating – with money and with memories.

And that is why the business of personal digital photography has exploded, despite the abolition of scarcity. At the same time as digital has allowed us to take pictures more easily, it has also allowed us to spread our social networks more broadly. And that’s what motivates us to take selfies.

The phenomenal success of digital photography is because it is connected with our other digital experiences, and in particular social networking.

Now let´s draw the analogy with digital money (of the traditional, non-crypto kind).

We want to lead people into a form of money that we tell them is better than cash. But it is often hard to make that case on a head-to-head <a href="https://www.centerforfinancialinclusion.org/making-payments-better">feature comparison</a>. From the perspective of someone who has always managed his business in cash, how do you trade off digital money´s benefits in terms of security, traceability, immediacy and distance invariance, against cash´s benefits in terms of familiarity, ease of use, cost, reliability, probability of acceptance, privacy, and electricity independence?

The answer is by linking digital money to broader benefits.

Think again about the runaway success of digital photography. Few got into selfies because digital cameras produce better pictures. In fact, the new digital cameras people took to so readily were often worse than the analog cameras they displaced. It was the ease of sharing photos through social networks that drove the interest in taking selfies anytime, anywhere, in a ready digital format.

It´s the same story with the Kindle e-book reader. I too prefer the printed book to the same book on a Kindle. But I prefer having instant access to any book on my Kindle, to having that one printed book. Oh, and by the way, there’s a reading light and an adjustable magnifying glass thrown in as well.

It will be the same thing with money. Few will get into digital money because they find it to be a better way to pay for half a kilo of rice at the corner shop. But they would get into digital money if you convinced them that it is a better way to, for instance, control their finances.

And by getting into digital money, I really mean into and not out. Wanting to keep money in digital form once you receive it, as opposed to the widespread current practice of cashing out upon receiving digital money, immediately and in full. In the same way that digital photos may once have been printed out, but no longer: they mostly remain in their pure digital state. So I´m talking about digitizing money, not just the odd remote payment.

Digital photography is powerful because it captures the stories you tell yourself and others about your past – your past holiday, for instance. It´s a tool to control your past. Saint Augustine referred to this as the present of the past: your <a href="https://www.psychologicalscience.org/observer/memory-vs-experience-happiness-is-relative">present idea of what the past</a> was.

Digital money ought to capture the stories you tell yourself and others about your future. In so doing, it would give you a sense of influence over your future. The immediate future of how you will get by the next round of bills, the further out future of how you will get out of your current economic strictures, and maybe also the longer-term future of how your children will have a better life that you did. It is the present of the future, in Saint Augustine´s terms: your present idea of what the future holds, and how much influence you will have in determining that.

You might find this esoteric and far afield from financial inclusion. It is not. Just put two thoughts together. First, people frequently manage their money by separating it out and ascribing a different story to each type of money depending on its source, destination, time horizon, moral import, savings vehicle, etc. Is that not what budgeting is all about? Second, digital technologies have a proven track record in creating not only virtual realities, but hyper-realities. Do people not feel that the hyperactive, hyper-happy, hyper-virtuous image they project on Facebook and Pinterest is more real than their real, limited self?

The question is of course how we build such a digital money system. Much research and experimentation will need to go in this direction.

Just to leave you with a kernel of a suggestion of how this might be at all possible, and to link back to the topic of digital photography where we began: how about if, within your mobile wallet application, you could set some money aside by taking a picture of your kids, or your house, or some friends, or whatever motivated your thought of creating a new type of money? Your money app is then a collection of pictures, which tug at emotions, which invite stories, which trigger actions, which pull money, which reinforce emotions… When you look at the app you should see reflected what is in your head, not what others think you should be doing with your money.

Reflections on Digital Photos and Digital Money (With a Little Blockchain Thrown In)

Delivery Channels

<span lang="ES-MX">Este webinar, presentado en conjunto por el CAF - Banco de Desarrollo de América Latina y el Centro para La Inclusión Financiera de Acción, expone los resultados del proyecto conjunto realizado por ambas instituciones (el primero de su tipo en la región) que buscó introducir a los actores que lideran el tema de educación financiera en Colombia, tanto de los sectores público, privado y no gubernamental, a metodologías de diseño de intervenciones más efectivas que incorporan conocimientos de la ciencia del comportamiento humano, y buscan no sólo transferir información financiera útil a las personas si no también mejorar sus comportamientos y hábitos financieros. Durante esta sesión virtual, Gabriela Zapata, Experta en temas de Inclusión Financiera, Diana Mejía, Especialista Senior en Desarrollo Productivo y Financiero de CAF (Banco de Desarrollo de América Latina) y Pablo Antón-Díaz, Gerente de Investigación del Centro Para la Inclusión Financiera de Acción, presentaron el reporte final de este proyecto que incluyó los resultados obtenidos y los principales obstáculos enfrentados. El panel concluyó con una presentación de recomendaciones y lecciones aprendidas para esfuerzos futuros de este tipo en Colombia, al igual que para otros países de la región interesados en realizar trabajos similares.</span>

Webinar: Expandiendo Capacidades Financieras en Colombia

Latin American Development Bank (CAF)

Banks

Microfinance Institutions

Abhishek Agrawal

Chief Regional Officer, India

Archana Kejriwal

Senior Specialist, India Program Management and Client Education

Elizabeth Stokely

Jessica Pires

Liza Guzman

Maria Camila Gomez	Silva

Michael Schlein

Pablo Anton-Diaz

Priya Punatar

Yanina Seltzer

China

India

Myanmar

Advisory Services

Agent Banking

Agricultural and Rural Finance

Appropriate Product Design and Delivery

Digital Credit

Human Touch

Insurtech

Microfinance

Mobile Banking

MSME/SME Finance

Persons With Disabilities

Policy, Regulation and Government Initiatives

Rural Populations

Saving

Trends

Underserved Groups

Women

Youth

Article

Brief

Case Study

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

<h2>The path to financial health</h2>
People around the world are continually aiming to improve their financial lives – they do so with whatever tools are available, whether formal or informal, and with whatever knowledge they have gathered. Every day, people work hard to grow their businesses, send their children to school, save, make ends meet, and troubleshoot during tough moments. Ultimately, they aspire for greater financial health and a better life for themselves and their families.
<p style="text-align: left;"><img class="aligncenter" src="http://accion-staging.flywheelsites.com/wp-content/uploads/2019/02/CFSI-1.png" /><em><a href="https://cfsinnovation.org/">The Financial Health Network</a>, the  <a href="https://www.centerforfinancialinclusion.org/">Center for Financial Inclusion at Accion</a> and <a href="http://www.dalbergdesign.com/">Dalberg's Design Impact Group</a> developed a <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/03/FinHealthGlobal-FINAL.2017.04.11.pdf">framework of six indicators</a> for financial health in the developing world.</em></p>
In order to help consumers improve their financial health, financial service providers (FSPs) can design products, tools and services that empower consumers to better understand and manage their finances and encourage them to improve financial habits. Focusing on financial health also has the potential to impact the FSP’s bottom-line: Gallup found that when customers feel that their bank <a href="https://news.gallup.com/opinion/gallup/176534/looking-customers-financial-table-stakes-banks.aspx">looks out for their financial well-being</a>, they are much more likely to be fully engaged with the bank.

However, in order for FSPs to successfully promote financial health, they first need to understand customers’ opportunities and obstacles to improving it.

Achieving financial health in Mexico and Chile

Financial Inclusion Practitioner

Financial Service Provider

Institutional Funder

Accion Global Advisory Solutions

Sandra Taborda owns a small catering business in Manizales, Colombia. Ten years ago, after the birth of her son, and with six members of her extended family living under one roof, she decided to try her hand at selling homemade empanadas. Her door-to-door baked goods were a hit, and her brand, <em>San-tehago</em> (“Sandra makes it for you”), was born.

Sandra is one of the participants in <a href="https://www.ovante.org/">Ovante</a>, an interactive digital platform with a vision to help microentrepreneurs build and enhance their business skills, grow their enterprises, and adopt healthy habits for using financial products and services. In 2016, <a href="https://fedexcares.com/article/fedex-sponsor-award-winning-accion-program-expand-business-training-access">Accion and FedEx launched an initiative</a> to digitize Accion’s award-winning classroom business education program, making the program less expensive to deliver, more flexible, and more easily accessible for a broader audience. Evolved from Accion’s decades of experience designing and delivering financial literacy and business skills programs, Ovante offers a new approach by influencing behavior so that microentrepreneurs use financial services to their benefit exactly when they need them. Acting as a kind of financial coach for business growth, Ovante empowers participants to improve their businesses in real time.

So far, Sandra is pleased with the results: “Ovante is great. I can say, ‘today I’m going to study [the module on] profit,’ and it’s going to help me.” While many microentrepreneurs may be unsure as to whether their business is profitable, Sandra could learn how her business was doing and how to increase profit through Ovante. This type of thinking also allows businesses to have more foresight. It’s often difficult for entrepreneurs to think beyond their present business needs, but with Ovante, Sandra has learned to think about her future profit when making decisions. Now she has a budget and analyzes her pricing strategy.

[caption id="attachment_18196" align="alignleft" width="500"]<img class=" wp-image-18196" src="https://content.accion.org/wp-content/uploads/2019/04/IMG_0681-1024x768.jpg" alt="Yolanda Cañón teaches daughter Alejandra techniques for sewing reusable shopping bags." width="500" height="375" /> <em>Yolanda Cañón teaches daughter Alejandra techniques for sewing reusable shopping bags.</em>[/caption]

Yolanda Cañón shares Sandra’s desire to manage her own learning. Yolanda, a seamstress who bought her first sewing machine with savings and her second with a microloan, is a single mother who raised three children on her own. Now, with her youngest daughter nearing the end of her Business Administration degree, Yolanda accesses Ovante at night after the busy workday. She is eager to apply learnings from the platform in her day-to-day work. “You can choose your area of study,” she explains. Yolanda highlighted how her learnings from Ovante led her to design her brand and think creatively about new distribution channels for her products.

Ovante helps women like Sandra and Yolanda build healthy financial behaviors, supporting the long-term sustainability and viability of their businesses. Participants learn about separating family and business expenses and apply tools such as social media marketing and branding to scale their enterprises.

So far, more than 3,000 small business owners like Sandra and Yolanda are already benefiting from Ovante, and more are joining the platform every day. Thanks to Accion’s partnership with FedEx, the platform is quickly expanding. We are excited to support countless deserving microentrepreneurs who could benefit from interactive and convenient business skills training, yet are constrained by time and physical distance.

<em>Ovante was designed and implemented by </em><a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions"><em>Accion Global Advisory Solutions</em></a><em> and made possible by support from FedEx. </em>

These women are growing their businesses — and their confidence

Ovante

FedEx

Social Good

The real impact of financial inclusion

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

Today, India is the center of innovation in the global effort to create a financially inclusive world. India’s government, fintech sector, investors, and financial service providers are making remarkable progress: the country’s pro-financial inclusion policies and the growing use of <a href="https://www.gsma.com/newsroom/press-release/china-and-india-to-account-for-half-of-all-new-mobile-subscribers-added-by-2020/">mobile phones</a> have connected more people to inclusive financial services than ever before. According to the World Bank’s Global Findex, only 35 percent of India’s adults had access to an account in 2011. In 2017, 80 percent did. Access alone is just a start. It’s an important first step toward a world where everyone has the broad array of basic financial tools they need to help themselves.

I recently met with Accion staff, partners, and the clients who we serve in India to see the difference that inclusive financial services make and the ways that we can help more families and businesses there. By prioritizing the following four issues in India and working with local partners throughout the country, we aim to create a financial sector that works for everyone:
<h2>Inclusive fintech helps India’s micro, small, and medium enterprises thrive</h2>
India’s micro, small, and medium enterprises (MSMEs) employ roughly 120 million people, making them the second largest ‘sector’ in India’s economy by employment, following agriculture. But despite their importance, these businesses often struggle to obtain the financing they need to hire, expand, or purchase inventory.

[caption id="attachment_18098" align="alignleft" width="500"]<img class=" wp-image-18098" src="https://content.accion.org/wp-content/uploads/2019/04/India-Trends-Aye-Finance-1024x768.jpg" alt="" width="500" height="375" /> <em>Visiting Accion partner Aye Finance in the Shadhara area of Delhi to see how Aye is creating opportunity for cluster-based clothing and shoemaker businesses.</em>[/caption]

The Indian government is addressing this issue through its <a href="http://www.makeinindia.com/about">Make in India</a> program and by offering <a href="https://www.mudra.org.in/">MUDRA loans</a> to small businesses. Accion’s local partners are also supporting India’s MSMEs: <a href="https://www.accion.org/clients/aye-finance">Aye Finance</a> studies small business clusters like brass works and garment weavers to understand how these businesses work and their typical financial performance. This information helps Aye acquire, vet, and lend to underserved customers quickly: Aye has grown from a startup to serve more than 60,000 clients, most of whom would not have received formal credit from any other lender.

Likewise, Accion partner <a href="https://www.accion.org/these-women-leaders-show-that-balance-is-better-part-two">Northern Arc</a> lends to nearly 200 microfinance institutions and inclusive fintech startups that, in turn, help more than 30 million clients send their children to school, launch businesses, and more.
<h2>Financial services should work everywhere — not just major cities</h2>
In 2018, India had the world’s largest rural population: <a href="https://www.un.org/development/desa/publications/2018-revision-of-world-urbanization-prospects.html">893 million</a> people. In the past, it has been very challenging to reach rural communities and provide them with savings, credit, insurance, and payments. But financial services should work everywhere — not just in major cities.

That’s why we’re working with financial service providers to find new ways to help rural areas. For instance, Accion partner <a href="https://www.accion.org/instead-sending-people-bank-sub-k-brings-banking-people">Sub-K</a> uses a banking correspondent model to reach the last mile for extremely remote customers: correspondents are small shop owners and other retailers who work where financial service providers typically don’t. They can transfer money, take deposits, and accept documentation on behalf of a bank, ensuring that customers can use financial services anywhere. Sub-K has used this network and its relationships with third-party banks to provide more than 2.2 million rural customers with credit, savings, payments, and other financial services.

We also work with Dvara KGFS, which provides a wide range of wealth management services to meet more than 320,000 rural clients’ needs. It uses a combination of back-end technology and <a href="https://www.accion.org/does-human-touch-still-have-a-place-in-a-high-tech-world/">human touch</a> to reach out to clients and provide them with individual advice and assistance, no matter where they live or work.
<h2>Financial advisory services help build financial health</h2>
[caption id="attachment_18102" align="alignright" width="375"]<img class=" wp-image-18102" src="https://content.accion.org/wp-content/uploads/2019/04/India-Trends-B-768x1024.jpg" alt="" width="375" height="500" /> <em>India is a global role model in digital innovation and inclusion.</em>[/caption]

Financial advisory services help families plan ahead and develop the skills needed to develop their <a href="https://www.accion.org/topics/financial-health">financial health</a>. But these services typically aren’t affordable for underserved customers: it can cost too much to provide low-income people with personalized financial advice.

But by using technology, we can provide everyone with individual financial insights that promote their long-term financial health. Accion portfolio partner Fisdom assesses users’ information to deliver unique tax, investing, and savings recommendations that help customers make informed financial decisions. Fisdom also offers insurance and pension products to help its clients prepare for the future. Fisdom is reaching clients who have never invested before with initial investment amounts of just a few rupees.

Likewise, Accion’s <a href="https://www.accion.org/classroom-phone-new-digital-training-program-entrepreneurs">Dialogue on Business</a> program with Standard Chartered UK has trained thousands of entrepreneurs on business management skills. We’ve also worked with Axis Bank to offer our Money Plan program to 30,000 people, helping families budget and use financial services to reach their goals.
<h2>Insurtech protects the world’s most vulnerable people</h2>
In the past, it cost insurance providers too much to sell, collect payments for, and administer policies to the underserved. But without insurance, many families live one illness, injury, or natural disaster away from financial ruin.

Accion’s <a href="https://www.accion.org/how-can-we-bring-insurance-to-those-who-need-it-most">insurtech</a> partners are using technology to protect some of the world’s most vulnerable people. They’re also demonstrating that insurance has immediate value and application. For instance, our partner <a href="https://www.accion.org/four-innovations-making-insurtech-more-inclusive">Toffee Insurance</a> sells health, personal accident, and lifestyle policies targeted to specific customer needs, such as accident insurance for bicycle commuters or dengue or seasonal disease insurance. By making insurance affordable and relevant, Toffee provides the policies that help more people recover from hardships.
<h2>Looking ahead</h2>
Accion will continue contributing to India’s remarkable progress promoting financial inclusion. By prioritizing these four issues and working alongside our local partners, we’ll help more Indian families and businesses access, use, and benefit from the formal financial sector.

India, fintech, and new trends accelerating financial inclusion

Chilean banks have made critical advances to drive greater financial inclusion in recent years. From agent networks to payment platforms to the CuentaRUT account — a simplified deposit account with a debit card that the state-owned Banco Estado made available to anyone in Chile with an identity card, Chile has nearly reached universal access to financial services.

However, despite these advances, many small merchants in Chile still aren’t finding financial tools that meet their needs. Micro, small, and medium enterprises (MSMEs) make up <a href="http://www.smefinanceforum.org/data-sites/msme-country-indicators">98.5 percent of enterprises</a> in the country and are a significant driver of economic growth; however, <a href="http://www.smefinanceforum.org/data-sites/msme-finance-gap">more than a quarter</a> of these microenterprises have faced difficulty in accessing financing in times of need. Compounding this problem are high levels of financial insecurity among Chileans. <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">Nearly half of the population</a> feels unsure about how they would cover their basic needs if they lost their income. For merchants whose personal and business lives are closely intertwined, this lack of financial security in their day-to-day lives translates to lack of security in their businesses as well.

Our Customer Strategy team traveled to Santiago to talk to micro-entrepreneurs so we could better understand how they are currently using their financial services. MetLife Foundation supported this research as part of our <a href="https://www.accion.org/accion-metlife-foundation-improve-financial-inclusion-in-latam">joint effort to boost the financial capability of customers</a>. Just as we <a href="https://www.accion.org/people-saving-money-mexico/">did in Mexico,</a> we conducted interviews with a wide variety of small merchants to understand their motivations, goals, and feelings toward financial services, and to hear about the strategies they use to stay financially healthy.

Here’s what we learned:
<h3><strong>1. Significant barriers block entrepreneurs from using business accounts. </strong></h3>
Every microentrepreneur we spoke with had a CuentaRUT card, but for many, that was the extent of their relationship with formal financial services. All of them cited high fees, interest rates, and long application processes to access business accounts and credit as barriers to usage. Margarita, the owner of a travel agency and a small bookstore, told us that the most challenging part of starting her business was opening a business bank account, which required numerous documents and costly fees. Therefore, many use their CuentaRUT account for both personal and business purposes, making it difficult to manage their business and personal financial lives separately.
<h3><strong>2. Chileans perceive taking credit from banks as risky.</strong></h3>
Gianfranco, the owner of a small restaurant, wants to expand his business, but he has no interest in taking out a loan. He fears losing everything he has worked for by putting his business up as collateral. He told us, “I don’t like the idea of being indebted or dependent on anyone.” Maritza, the owner of a mini-market, shared a similar sentiment: “I don’t have confidence in financial institutions; they don’t worry or care about their smaller clients.” Many of the merchants we spoke to prefer to borrow from friends and family.
<h3><strong>3. Blacklisting deters participation in the formal financial system. </strong></h3>
Dicom, the national credit agency, records negative credit information such as payment delays and defaults. However, the agency does not offer a clear path to resolve negative reports and as a result, many small businesses avoid deepening their relationship with lenders. Many major retail stores offer <a href="https://www.america-retail.com/weekly/falabella-cencosud-y-ripley-concentran-el-86-del-negocio-de-las-multitiendas-en-chile/">consumer credit cards,</a> and in the past, they did so without proper credit assessment and did not inform customers of the <a href="https://www.nytimes.com/2011/07/24/business/global/abuses-by-credit-issuers-in-chile-and-brazil-snare-consumers.html">consequences of default</a>. As a result, many people, unable to pay or unaware of the lasting nature of default, were reported to Dicom, and remain on that blacklist. Today, nearly <a href="https://www.publimetro.cl/cl/noticias/2017/12/15/dicom-explicado-manzanitas.html">900,000 people</a> are recorded as delinquent.

[caption id="attachment_16514" align="alignleft" width="501"]<img class=" wp-image-16514" src="https://content.accion.org/wp-content/uploads/2018/12/IMG_8047-1024x768.jpg" alt="Jaime sits at a table at his restaurant" width="501" height="376" /> <em><strong>Don Jaime, the owner of a restaurant in Santiago.</strong></em>[/caption]

Jaime, a restaurant owner in Santiago, is 74 and has been an entrepreneur all his life. He was reported to Dicom over 30 years ago and has no way to resolve the black mark on his account. In fact, he doesn’t know what caused him to be listed in the first place, despite his efforts to find out. He has upgraded his business several times, but always with his savings, as he has no access to credit. Today, he hopes to buy a car so that he can purchase supplies directly for his restaurant, without paying for transport. However, he cannot make such a large purchase until he builds up enough savings. Jaime needs information to help him better understand why he was blacklisted and concrete steps to help him improve his credit score.
<h3><strong>4. Informal savings remain more comfortable and familiar for people. </strong></h3>
Findex data tells us that only 21 percent of the population in Chile saves money at formal financial institutions. Many interviewees told us that they have difficulty putting money away, often finding it overwhelming just to meet their fixed expenses. When they do set money aside, they prefer to save informally, either in inventory or through investment in assets that will produce income later. Many told us that opening a savings account seems difficult, but everyone wanted to increase their resources so that they could take more time off and work less.
<h3><strong>5. Merchants prefer to learn about financial products from people, not websites</strong>.</h3>
Several merchants mentioned that they are hesitant to make financial decisions based on digital information. Lorena de Diaz, the owner of a house cleaning business, told us that she prefers to learn about new products in person, as she can’t verify the accuracy of information provided through a website or mobile application. She likes to be able to ask questions at the branch and feels that she better understands financial products when a person can explain it.

The microentrepreneurs we spoke to need tools tailored to their needs, from working capital to finance their inventory to inexpensive business saving and checking accounts, delivered with transparent and trustworthy communication from their providers. As we continue working with fintechs and financial service providers of all sizes, we hope that better understanding customers’ pain points, aspirations, and desires will lead to better communication on how to use financial products, or even entirely new products that truly improve people’s financial health. Over the next two years, Accion will be working with financial service providers in Mexico and Chile to use customer research to design, test, and implement product innovations that will drive usage and improve financial health.

<em>This research was conducted by Accion as part of our part of our </em><em><strong><a href="http://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a></strong></em><em> project, supported by MetLife Foundation.</em>

&nbsp;

Five reasons small merchants aren’t using financial services in Chile

<p class="graf graf--p">Too often we hear questions from some of our financial service provider clients such as, “How can we gain market share and beat out our competition?” This isn’t inherently a bad question — it’s important to think strategically about competitors. But this question focuses only on the supply side. To get the full picture, an institution should also ask, “How can we better understand the challenges that our customers face, and how can we help them tackle these issues through our services?” While many financial service providers have made considerable strides in developing customer-centric products, most could be doing more to better understand their customers’ wants, needs, behaviors, and habits.</p>
<p class="graf graf--p">For these institutions that lag behind in customer centricity, it is not that they are unconcerned for their customers and only worried about the bottom line, but they often perceive this to be expensive and can be reluctant to invest in market research. Instead, they rely on anecdotal customer stories from their sales force. Unfortunately, this approach to the collection of customer information often leads these institutions to misunderstand the real problems their customers face. For instance, they may miss how technology is changing customers’ preferences for accessing information and the social groups they are part of.</p>
<p class="graf graf--p">Conventional market research methods rely on focus groups and expensive customer surveys, which don’t always deliver relevant insights. In contrast, a customer-centric design methodology focuses on listening to and observing people in their daily lives and works within market and technological constraints. One particular area of focus is product touch-points. A customer-centric approach regards each touch-point as an opportunity to surprise, delight, and deliver benefits to users. When done well, this approach provides experiences that resonate with the intended customers — driving their engagement and, ultimately, growth for the institution. With a customer-centric design methodology, rapid prototyping and real-world tests with customers are used to validate (or invalidate) early designs and improve the solution.</p>
<p class="graf graf--p">With the aim of teaching financial service providers how to apply Accion’s user-centric design methodology, we hosted a workshop in Queretaro, Mexico, <a class="markup--anchor markup--p-anchor" href="https://www.accion.org/accion-metlife-foundation-improve-financial-inclusion-in-latam" target="_blank" rel="noopener">with the support of MetLife Foundation</a>. This 2-day workshop brought together ten financial institutions, including microfinance organizations, cooperatives, and fintechs, to learn our methodology for designing and developing user-centric products, based on a deep understanding of customers’ behavior, with a high potential for adoption. Participants learned how to reframe their business challenges from a customer-perspective, conduct efficient and useful user research, and use their understanding of their customers’ financial behaviors, capabilities, needs, and desires to conceive and prototype a new product.</p>


[caption id="" align="alignleft" width="1200"]<img class="graf-image" src="https://cdn-images-1.medium.com/max/1200/1*sWmRTbJstsSZrG734Hbjqw.jpeg" alt="Financial service provider presenting poster of potential product to customer." width="1200" height="972" /> A workshop participant shares her prototype travel debit card with a potential user. This product would include a digital application geared to address millennials’ need for saving as well as financial and business coaching.[/caption]
<p class="graf graf--p">After designing prototypes, the participants shared their ideas with potential users and engaged in a conversation about their lives, desires, and fears. By walking the users through each touch point in the proposed customer journey, the participants empathized with the customers’ thoughts, feelings and experiences at each moment. These conversations brought up questions about the usefulness and complexity of many of the products and forced participating institutions to adjust their concepts to make their prototype more customer-centric — ultimately promoting greater adoption and supporting the <a class="markup--anchor markup--p-anchor" href="https://www.centerforfinancialinclusion.org/dollar-by-dollar-or-goat-by-goat-how-financial-health-translates-across-oceans" target="_blank" rel="noopener">financial health</a> of the customer. When financial service providers watched potential users struggle with digital tools or have trouble navigating through non-intuitive wireframe mock-ups, they gained insight in designing user-centered products. The providers told us this was the most influential part of the workshop.</p>

<figure class="graf graf--figure graf--layoutOutsetLeft">

[caption id="" align="alignleft" width="464"]<img class="graf-image" src="https://cdn-images-1.medium.com/max/1200/1*3ExPWEXxHIZOT_zW4PnQfg.png" alt="Poster showing customer journey" width="464" height="327" /> One bank conceptualized a flexible product that will address customer distress in paying their hospital bills. This bank visualizes the customer experience at every touch point with the bank. The visualized product allows the customer to customize their experience by choosing where to open their account, pick the date and portion of the bill they want to pay.[/caption]</figure>
<p class="graf graf--p">Both traditional institutions and fintechs found the user-centric design methodology useful. While many fintechs claim to be more customer-centric than incumbent financial providers, several of the fintech participants admitted that they do not have a process to ensure that their existing products evolve to match the dynamic needs of their clients. Upon reflection, many found that their services were disconnected from client realities.</p>
<p class="graf graf--p">The workshop participants were eager to return to their institutions to share their new product prototypes. As one attendee put it, they were looking forward to using this methodology to, “not only help us to improve our products and services, but to create a more enriching experience for our customers.”</p>
<p class="graf graf--p">However, participants know that the path from prototyping customer-centric products to product deployment is not an easy one. Within an organization, a willingness to embrace change and focus on customers requires a shift in mindset. As one participant said, “it will be difficult to convince others to center their focus on our clients.”</p>
<p class="graf graf--p">Over the next two years, with the support of MetLife Foundation, Accion will continue working with select financial service providers to ensure that they are asking more strategic questions as they apply this user-centric design methodology to develop a product, service, or experience. And we will help the institutions tackle the challenge of internal alignment and cultural change, while ensuring that designs resonate with customers, use innovations in technology, and contribute to the financial health of the low-income population in Mexico.</p>

To help customers, you have to ask the right questions

China’s economy has experienced tremendous growth in recent years, with a booming micro, small, and medium enterprise (MSME) market. There are over 50 million MSMEs in China that collectively account for over 60% of China’s GDP and over 50% of the government’s tax income. These businesses create 80% of total employment in China’s urban areas.

Despite China’s overall economic growth, the need to foster full financial inclusion is still imperative. In 2010, 38 million MSMEs lacked access to formal financial services, forcing them to borrow informally from friends, family, and moneylenders.

MetLife Foundation's longstanding partnership and philanthropic support of Accion’s work, and our joint public engagement efforts, have raised awareness of the opportunities and solutions to advance financial inclusion. Since 2013 MetLife Foundation's core focus has been to improve the financial health of low-income individuals across the globe. Together, we’ve helped underserved people around the world gain access to the tools they need to improve their lives.
<h5>EMPOWERING THE PEOPLE OF MYANMAR</h5>
Since 2015, MetLife Foundation has supported Accion’s partnership with Early Dawn Microfinance (DAWN) to provide entrepreneurs in Myanmar — especially women in rural areas — with microfinance services. When we began working with DAWN, it served 25,000 clients with less than $2 million in loans, and loan officers recorded clients’ activity entirely by hand, which could take up to four hours a day. As an investor and operating partner, Accion has worked with DAWN to reach new customer segments, improve and expand its product offerings, leverage new technologies and channels, and improve its operational efficiency. Today, that previous four hours of work takes just 20 minutes, giving loan officers more time to meet with and understand their clients. Now, DAWN is a premier institution that serves as a model for the country’s nascent microfinance industry, serving more than 160,000 clients with more than $30 million in loans.

MetLife Foundation and Accion: Seeking opportunities to advance financial inclusion

<p class="graf graf--p">According to the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">Global Findex</a>, the percentage of adults in Mexico who are saving money at a formal institution plunged from 15 percent to 10 percent in just the <a class="markup--anchor markup--p-anchor" href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">past three years</a> — despite financial inclusion strategies <a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2016/07/01/mexico-launches-comprehensive-financial-inclusion-strategy/" target="_blank" rel="noopener noreferrer">enacted by the government</a>. This steep decline in usage of savings accounts came as a surprise and also hit close to home for me as a Mexican. This <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/is-financial-inclusion-stalling-af0fbd502550" target="_blank" rel="noopener noreferrer">trend is a cause for concern</a>, and it’s also a call to action. At Accion, we took this as an opportunity to listen to the people we’d like to see benefit from financial services. <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/how-accion-metlife-foundation-will-improve-financial-inclusion-in-latam-1838b934d3e0" target="_blank" rel="noopener noreferrer">With the support of MetLife Foundation</a>, we wanted to understand why fewer people were saving in banks, what products and services people were using — and who was providing those services if it wasn’t formal institutions.</p>
<p class="graf graf--p">To get answers about what people in Mexico want from their financial service providers, I recently traveled home to Mexico City as part of a team of researchers. We listened to small merchants map out their entire financial lives; their motivations, goals, and aspirations, how they feel about various types of financial services, the strategies they use to stay financially healthy, and more.</p>
<p class="graf graf--p">Our biggest surprise? The individuals we talked with know about and can access a lot of financial products — they just aren’t using them.</p>
<p class="graf graf--p">All of the individuals we spoke to reported having access to microloans, consumer store credit, credit cards, and savings accounts. Financial access didn’t seem to be an issue for them — not even in the more rural areas we visited two hours outside the city. Even though our small, qualitative study may not be rigorous enough to extrapolate to the broader population, this finding seems to be consistent with national data. In Mexico, <a class="markup--anchor markup--p-anchor" href="https://www.cnbv.gob.mx/Inclusi%C3%B3n/Documents/Reportes%20de%20IF/Reporte%20de%20Inclusion%20Financiera%208.pdf" target="_blank" rel="noopener noreferrer">86 percent of banking branches are located in urban areas</a>, so people close to the city are unlikely to deal with a shortage of services. What our interviews revealed is that a different issue is preventing further inclusion: lack of alignment between what low-income customers want and what current financial products offer. Most people we talked to dislike dealing with large commercial banks, and they continuously decline the offers for financial services they regularly receive, at their doorstep or in public places</p>

<figure class="graf graf--figure graf--layoutOutsetLeft"></figure>
<div id="attachment_8449" class="wp-caption alignleft">

[caption id="attachment_8449" align="alignleft" width="500"]<img class="wp-image-8449" src="http://blogs.accion.org/wp-content/uploads/2018/07/IMG_0825-768x1024.jpg" alt="Woman holding baby" width="500" height="667" /> Azucena works as a housewife in Alpuyeca, Morelos in Mexico.[/caption]
<p class="wp-caption-text"></p>

</div>
<p class="graf graf--p">Many of the people we interviewed still prioritize saving cash at home, even if they also have a formal savings account. For example, Azucena, a former teller at a large commercial bank branch, told us that despite her relationship with a bank, she and her husband still prefer to store cash informally. “We save at home, but we do so separately, using different lock boxes for different purposes,” she says.</p>
<p class="graf graf--p">Through our conversations with clients like Azucena, we discovered that informal alternatives like lock boxes continue to be more convenient for clients and preferable to formal options. Keeping cash at home is, after all, indispensable for unexpected emergencies. If your money is in a bank, you’d have the hassle of getting there and waiting. Plus, it may not be available 24/7, and you can run into issues if the ATM is offline or the pharmacist, mechanic, or whomever else you’re turning to for help doesn’t take a debit card.</p>
<p class="graf graf--p">In many cases, the interviewees’ savings accounts had been opened for them by former employers to serve as payroll accounts or by government programs for disbursement of benefits. These accounts were less “savings accounts” and more “distribution” accounts that were immediately turned into cash and saved at home. Because the savings aspect wasn’t used — in fact, was never emphasized — once they switched jobs or stopped receiving benefits, they let the accounts lapse.</p>
<p class="graf graf--p">Convenience may be a key issue, but it is not the only one. Feeling unsafe withdrawing money from a bank branch is also an issue because thieves wait where the money is — outside bank branches and near ATMs. The lack of trust our interviewees placed in financial institutions was often less about security and more about the unclear, high (real, or perceived) maintenance fees banks charge on savings accounts.</p>
<p class="graf graf--p">Despite this perceived aversion to formal accounts, we found that people still continue to save and set high financial goals for themselves. In all the interviews we conducted, the number one financial goal was saving to access better opportunities: the education of their children, a home for their family, or the chance of opening their own business. The demand is clearly there, and most of the people we talked to were indeed saving.</p>
<p class="graf graf--p">We heard from customers, and now we’re working with a mix of fintechs and financial service providers of all sizes to use those insights to create financial products that customers will want to use as key tools for their financial lives. Stay tuned!</p>
<p class="graf graf--p"><em class="markup--em markup--p-em">This research was conducted by Accion, the </em><a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">Center for Financial Inclusion at Accion</em></a><em class="markup--em markup--p-em">, and </em><a class="markup--anchor markup--p-anchor" href="http://www.dalbergdesign.com/" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">Dalberg Design</em></a><em class="markup--em markup--p-em"> as part of our part of our </em><a class="markup--anchor markup--p-anchor" href="http://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/" target="_blank" rel="noopener noreferrer"><em class="markup--em markup--p-em">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</em></a><em class="markup--em markup--p-em"> project, supported by MetLife Foundation.</em></p>

Why aren’t people saving money in Mexico?

Center for Financial Inclusion

<em>Originally published on </em><a href="https://www.bnamericas.com/en/"><em>BNamericas</em></a><em> by </em><a href="https://www.bnamericas.com/en/profile/urindebro"><em>Ulric Rindebro</em></a>

Global nonprofit Accion and the <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html">MetLife Foundation</a> announced a <a href="http://www.accion.org/accion-and-metlife-foundation-announce-partnership-to-advance-financial-inclusion-in-latin-america/">new partnership in Latin America</a> earlier this month to empower underserved consumers and enable financial service providers to better serve low-income people in the region.

MetLife Foundation is providing US$3.9 million in funding to support the three-year initiative, which has a strong focus on Argentina, Chile, and Mexico.

BNamericas conducted an email interview with María Camila Gómez, VP of <a href="https://www.accion.org/content/microfinance-services">global advisory solutions at Accion</a>, to find out more details about the partnership and also what to expect in the future in terms of partnerships aimed at improving financial inclusion. The interview also included the participation of Evelyn Stark, assistant VP of financial inclusion at the MetLife Foundation.
<h4><strong>BNamericas: </strong><strong>Why did Accion decide to team up with MetLife Foundation for this partnership? </strong></h4>
<strong>Gómez: </strong>Throughout Latin America, and especially in this project's focus countries of Argentina, Chile, and Mexico, we see evidence that many consumers do not have their current financial needs met. For example, nearly half of adults in Latin America do not have an account at a formal financial institution. With MetLife Foundation's support, we will equip financial service providers with the skills to truly listen to what their customers need, design best-in-class digital products that are easy to use, and help customers build healthy financial habits. This aligns with Accion's focus on ensuring that the digital transformation of financial services happens in a way that benefits the underserved.
<h4><strong>BNamericas: </strong><strong>Is this the first regional partnership in Latin America launched together by Accion and MetLife Foundation? If so, why launch it now? </strong></h4>
<strong>Gómez: </strong>This is the first project of its nature between MetLife Foundation and Accion, but the foundation is a longstanding supporter of our work to advance financial inclusion. For example, MetLife Foundation, the <a href="http://www.centerforfinancialinclusion.org/">Center for Financial Inclusion at Accion</a>, and the <a href="https://www.iif.com/">Institute of International Finance</a> are currently working together on another project called "Mainstreaming Financial Inclusion: Best Practices" to develop practical guidance for financial institutions to expand quality services to the poor. This latest partnership with the Foundation in Latin America takes advantage of the moment of opportunity presented by today's digital transformation of financial services. This project will allow us to leverage those technologies to build better products, services and delivery methods that can improve the financial capabilities and health of low-income consumers.

I shared this question with my colleague Evelyn Stark, who leads the financial Inclusion portfolio at MetLife Foundation, as well. She noted that 'The region is a priority for both Accion and MetLife Foundation and we saw an opportunity to expand our reach by partnering with an experienced actor like Accion to affect low-income communities in Latin America and help people lead healthier financial lives.'
<h4><strong>BNamericas: </strong><strong>Do you expect similar partnerships to be launched in the coming years where the non-profit sector and the private sector team up to improve financial inclusion? </strong></h4>
<strong>Gómez: </strong>Yes, absolutely. Cross-sector collaboration and private sector support are crucial to improving financial inclusion. We at Accion are seeing that private sector support takes a number of different forms. One is philanthropic partnerships with corporations and foundations, like this one, which are critical to Accion's ability to pursue our mission of giving people the financial tools they need to improve their lives.

More broadly, Accion sees a tremendous amount of private sector interest and investment in inclusive fintech. For example, we recently launched the Accion Frontier Inclusion Fund — managed by <a href="https://quona.com/">Quona Capital</a> — the first global fintech fund for the underserved. The fund was oversubscribed and represented US$141 million in commitments from an array of leading institutional investors, including MetLife.<strong> </strong>
<h4>BNamericas: Why was Chile selected as one of the three countries when it is known as being one of the nations in Latin America with the highest level of financial inclusion and bank penetration?</h4>
<strong>Gómez: </strong>Accion's historical roots are deeply embedded in Latin America, where our work first began, and we worked with MetLife Foundation to select our target markets for this project. It's important to keep in mind that access to a financial account is an important step, but only one of many important measures of financial inclusion.

We are interested in ensuring that people have access to a full suite of quality financial products and services that allow people to manage their day-to-day needs, be prepared to face life's inevitable challenges, and make it easier to plan for and prepare to achieve their long-term goals. In other words, we're interested in their financial health. There is still much work to be done to ensure that all Chileans have access to the full range of services they need, and we're excited to advance that effort through this project with MetLife Foundation.<strong> </strong>
<h4><strong>BNamericas: </strong><strong>What kind of financial products will be in focus? Given that MetLife is an insurance company, will micro-insurance products be included? </strong></h4>
<strong>Gómez: </strong>Through this partnership with MetLife Foundation, Accion will convene workshops in Mexico, Chile, and Argentina and select six financial service providers to work with us to design, pilot, test, and roll out new customer-centric digital financial products, services, and delivery channels. We will leverage human-centered design principles and behavioral economics to help ensure providers offer products that truly reflect the needs and interests of their low-income clients, empowering them to improve their financial capabilities. We will consider a wide range of digital financial service products, though insurance products are outside the scope of the project.

For a look at the work Accion and MetLife Foundation have done around inclusive insurance, see the recent report from the Center for Financial Inclusion at Accion and the Institute for International Finance, done with the support of the Foundation, <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/973-inclusive-insurance-closing-the-protection-gap-for-emerging-customers"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Consumers</em></a>. The report identifies the main challenges of providing insurance to lower-income populations, as well as the solutions companies are using to overcome them.<strong> </strong>
<h4><strong>BNamericas: </strong><strong>Accion and MetLife Foundation both have vast financial experience from many countries in Latin America and the rest of the world. How easy or difficult is it to 'transfer' best practices between countries that are likely to have different kinds of market structures, regulations, and cultures? </strong></h4>
<strong>Gómez: </strong>This project in Latin America is part of a broader partnership between Accion and MetLife Foundation that aims to enhance financial customer engagement by building their capabilities. A major part of this is our effort to synthesize learning and insights — about subjects like product design, financial capabilities, and digital solutions — across our work, and share those insights globally.

We hope that our efforts in Latin America can inform best practices and serve as demonstration models for how to leverage digital technologies to reach underserved consumers. Practitioners can then take these insights and knowledge and apply them to individual markets, taking into account factors such as the regulatory environment, market structures, history and culture, and local client needs.

I asked my colleague Evelyn from MetLife Foundation for her point of view. She shared the following: 'Best practices that our organizations would promote are those that do transfer between countries quite easily: listen to your customer; design for their needs; make products convenient, fair-priced and easy to understand; ensure that products and services are good for clients, and can be delivered sustainably by the institutions that serve them.

These practices can transfer virtually anywhere. Getting to the details of the environment that may enable digital products, for example, means that you have to be on the ground — you have to understand your customers' willingness and ability to transact digitally, and you have to understand institutions' ability to build and deliver products that work seamlessly. Of course, you must know the regulatory environment and maintain good ties with the governments' goals on financial inclusion and financial health. Accion and MetLife Foundation leverage all of our experience, colleagues, and connections to ensure that we work with safe, sustainable, and customer-centric financial service providers in Mexico, Chile, and Argentina.'
<h4><strong>BNamericas: </strong><strong>What are the main reasons behind the often slow progress of financial inclusion in Latin America, and globally, when so much effort is made by the private sector, non-profits and governments to speed up this process? </strong></h4>
<strong>Gómez: </strong>With three billion financially underserved people around the world, a lot of work remains before we achieve full financial inclusion. It's also important to keep in mind that much progress has been made, and today, we stand at a moment of great opportunity. Within the last several years, governments throughout Latin America have indicated their commitment to, and support of, financial inclusion, making it a priority in their national planning.

Additionally, digital transformation offers an unprecedented opportunity to scale efforts to reach the underserved — a process that has typically been a high-cost and labor-intensive effort. With digital technologies, we can improve the quality and lower the cost of financial services, reaching more people than ever before.

My colleague Evelyn at MetLife Foundation noted, 'According to the Economist Intelligence Unit's Global Microscope, which both Accion and MetLife Foundation have supported, Latin America continues to rank amongst the leading regions worldwide in providing a conducive policy environment for financial inclusion. Latin America is also home to some of the earliest and most successful microfinance institutions in the world, which have had great success in serving low-income people. While progress may not be as fast as we would all hope for, we believe that Latin America has all the right ingredients in place for the next wave of inclusion and financial health.

We believe digital financial services will be a key driver in the next wave, and Latin America has no shortage of mobile phones, fintech players, and ingenuity and imagination. In this partnership and more broadly, Accion and MetLife Foundation support digital financial services in many ways in Latin America. We're looking forward to continued success throughout Latin America and to seeing the improved financial health throughout the region.'

How Accion, MetLife Foundation will improve financial inclusion in LatAm

Mexico has one of the most diverse financial services landscapes in all of Latin America, including about <a href="https://www.finnovista.com/update-fintech-radar-mexico/?lang=en">250 fintech firms</a>. In fact, <a href="https://www.finnovista.com/fintechforinclusionradarlatam/?lang=en">35 percent</a> of the fintech companies in Latin America that serve people left behind by traditional banks are in Mexico, according to fintech start-up accelerator Finnovista. They also project that Mexico’s fintech space could dominate <a href="https://www.finnovista.com/fintech-radar-mexico/?lang=en">nearly a third of the banking sector</a> within a decade.

What has enabled Mexico’s evolving culture of innovation? Increased adoption of mobile phones plays a significant role. Factor in the vast, unmet need for customer-centric products and a competitive industry space — and you have a market ripe for new ideas and products.

Mexico is increasingly embracing technology. Nearly 7 in 10 people have mobile phone service, and according to a survey by the Mexican Association of Internet, smartphones account for almost <a href="https://www.asociaciondeinternet.mx/es/component/remository/Habitos-de-Internet/13-Estudio-sobre-los-Habitos-de-los-Usuarios-de-Internet-en-Mexico-2017/lang,es-es/?Itemid">90 percent of internet connections</a>.

That embrace of technology complements a focus on inclusion in the financial services sector. The country’s commitment to inclusive digital finance is particularly evident in President Enrique Peña Nieto’s launch of the <a href="https://cfi-blog.org/2016/07/01/mexico-launches-comprehensive-financial-inclusion-strategy/">2013 Digital Strategy and the 2016 National Financial Inclusion Strategy</a>. Recently, Mexico also partnered with the UN’s <a href="https://www.betterthancash.org/"><em>Better Than Cash Alliance</em></a> to encourage digital payments as a means to promote financial inclusion.

Businesses are taking notice of the opportunities offered by Mexico’s fintech boom and interest in financial inclusion. Retail chains, such as Coppel, Elektra, and Walmart, add to the diversity of Mexico’s financial services institutions. These companies bolstered the idea of neighborhood-friendly financial services with “consumption credit” for their products, and, eventually, they developed full-fledged retail banking. Retail banks, including BanCoppel, Banca Azteca, and Banco Walmart, have skyrocketed in popularity. Customers can pay bills and receive remittances at these institutions without significant credit history or identification documents.

<strong>How Fintech Is Revolutionizing Financial Services</strong>

In the fintech arena, many entrepreneurs have experience in Silicon Valley or have spent time working with underbanked communities, so they’re well-versed in both the problems and the solutions around access and usage of financial services. Mexico’s banking and securities regulator recently passed a <a href="https://www.reuters.com/article/us-mexico-fintech/mexico-financial-technology-law-passes-final-hurdle-in-congress-idUSKCN1GD6KX"><em>Law to Regulate Financial Technology Institutions</em></a>. Under these regulations, fintechs will have the protection and structure to become even more innovative. The law allows startups to use information from clients of large banks through public application programming interfaces (APIs), provided that they have the authorization of the user — which will lead to better services and greater financial inclusion. More so, the Law’s section on <a href="http://www.cgap.org/sites/default/files/Working-Paper-Regulatory-Sandboxes-Oct-2017.pdf">regulatory sandboxes</a> provides temporary authorization to test innovative business models that are currently not regulated — to give financial service providers the freedom to push the envelope and safely navigate risks.

However, even before the passage of the new law, fintech companies in Mexico excelled in targeting two frequently ignored market demands:
<ul>
 	<li>Financing for small- and medium-sized businesses— which account for <a href="http://www.keepeek.com/Digital-Asset-Management/oecd/industry-and-services/financing-smes-and-entrepreneurs-2016/mexico_fin_sme_ent-2016-28-en#page2">99 percent of all Mexican enterprises</a> but garner <a href="http://www.cnbv.gob.mx/Inclusión/Documents/Reportes%20de%20IF/Reporte%20de%20Inclusion%20Financiera%207.pdf">only 11 percent of total bank credit for businesses</a>.</li>
 	<li>Individual loans, which microfinance institutions rarely offer over <a href="https://cfi-blog.org/2017/01/09/growing-concerns-about-overindebtedness-in-mexicos-microfinance-sector/">smaller, less risky, and group-based financing</a>.</li>
</ul>
Additionally, fintechs have capitalized on the technology wave and digitized the credit process. A customer no longer has to wait two hours at a branch to pay the gas bill thanks to new mobile payments solutions. Creative digital solutions include:
<ul>
 	<li>Individual lending through mobile and online-only platforms (e.g., <a href="https://negocios.epesos.com/">ePesos</a>, <a href="https://www.mimoni.com/#/?_k=wykymq">MiMoni</a>).</li>
 	<li>Online loan providers that can calculate creditworthiness from a customer’s Facebook login frequency, habits in charging their mobile device, or bill payment history, (e.g., <a href="https://credilike.me/prestamos-personales-online/">Credilikeme</a>, <a href="https://konfio.mx/">Konfio</a>, <a href="https://kueski.com/">Kueski</a>, <a href="https://www.mrpresta.com/">MR Presta</a>).</li>
 	<li>Online marketplaces in which small businesses can find investors or setup crowdfunding campaigns (e.g., <a href="https://www.doopla.mx/">Doopla</a>, <a href="https://www.kubofinanciero.com/Kubo/Portal/index.xhtml">financiero</a>, <a href="https://www.micochinito.com/">MiCochinito</a>, <a href="https://prestadero.com/">Prestadero</a>, <a href="https://visor.io/">Visor</a>).</li>
 	<li>Payment platforms based on prepaid or discounted mobile subscriptions, as well as gift cards for online or in-store purchases (e.g., <a href="http://www.micel.mx/">Micel</a>, <a href="https://revworldwide.com/major-opportunities-for-prepaid-in-mexico/">RÊV Mexico</a>, <a href="https://www.sivale.mx/conozcanos">Sí Vale México</a>).</li>
 	<li>Payment acceptance applications that build or enhance electronic payment solutions, mobile points of sale, and cash displacement (e.g., <a href="https://www.izettle.com/mx">iZettle</a>, <a href="http://www.yabit.io">Yabit</a>, <a href="https://senorpago.com/"> Pago</a>).</li>
</ul>
Finally, the digital backbone of fintechs easily allows for data monitoring and collection. Fintechs have the flexibility to adapt to the market quickly and to develop more customer-centric offerings. In Mexico, fintechs are serving a customer base in need of individualized products and more convenient processes, as well as low-income customers, who haven’t had easy access to credit in the past. Fearing a cut in market share, traditional institutions have begun to release tech-based services, too, and the upsurge has only furthered competition and innovation.

Mexico’s innovative financial services landscape has created more efficiency and smarter products. These improvements help people in Mexico build better lives for themselves and generate more economic activity. Despite this progress, opportunities still abound in Mexico: small and medium businesses still face difficulty in obtaining financing, and <a href="http://www.cnbv.gob.mx/Inclusi%C3%B3n/Documents/Encuesta%20Nacional%20de%20IF/Cuadr%C3%ADptico%202016%20%28ingl%C3%A9s%29.pdf">32 percent of the adult population</a> continues to forego financial services. But as long as financial services providers continue to innovate, and the government continues to enable that innovation, Mexico’s diverse players should be able to deliver products and services to meet these ongoing needs. Both industry and government are optimistic that encouraging innovation and prioritizing financial inclusion will lead to a brighter future for Mexico.

<em>Christina Holman also contributed to this article.</em>

Mobile phones are one of Mexico’s secret weapons for battling inequality

Konfio

<figure class="graf graf--figure graf--layoutOutsetLeft">

[caption id="" align="alignleft" width="400"]<img class="graf-image" src="https://cdn-images-1.medium.com/max/1080/1*NZb7E3yqRzGvfbNmwO2swg.jpeg" alt="Entrepreneur Nelcy Gamarra accesses the Dialogue on Business program from her mobile phone." width="400" height="533" /> Entrepreneur Nelcy Gamarra accesses the Dialogue on Business program from her mobile phone.[/caption]

<figcaption class="imageCaption">Shoemakers, tailors, bakers — these small business owners are usually experts at their craft, but that doesn’t mean they automatically know everything about running a business. Dialogue on Business (DOB) is a classroom-based business education program designed to help low-income entrepreneurs gain the skills they need to succeed in their enterprises and grow their businesses.</figcaption></figure>
<p class="graf graf--p">In 2016, Accion and <a href="http://fedexcares.com/">FedEx</a> launched a two-year initiative to create a digital version of this award-winning program to use in Colombia. By bringing the DOB program online, we can make the program more cost effective to deliver, more flexible, and more easily accessible for a broader audience.</p>
<p class="graf graf--p">This digital business development program has been designed specifically for low-income women entrepreneurs and business owners who can access the platform with an internet connection — or even offline — from a computer, tablet, or smartphone. We hope to reach more than 2,000 entrepreneurs by the end of 2018.</p>
<p class="graf graf--p">To make sure the program is as engaging and useful as possible for entrepreneurs, we’ve enlisted their help in its creation by performing market research in three regions of Colombia. We conducted 600 questionnaires and 24 ethnographic interviews on the training needs of small business owners. We found out that:</p>

<ul class="postList">
 	<li class="graf graf--li">All respondents owned cell phones, and they were familiar with the internet — though they had not used it for learning</li>
 	<li class="graf graf--li">Women wanted practical, concrete information that could be easily applied to their work for short-term results</li>
 	<li class="graf graf--li">Women felt more comfortable having some degree of interaction with people despite the digital approach of the program</li>
</ul>
<p class="graf graf--p">The design of the digital version of the Dialogue on Business program also incorporates relevant research findings from the Center for Financial Inclusion at Accion (<a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">CFI</a>). CFI’s report, <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/fi2020/roadmap-to-inclusion/innovations-in-financial-capability" target="_blank" rel="noopener noreferrer">A Change in Behavior: Innovations in Financial Capability</a>, details seven practices that help people cultivate the knowledge, skills, attitudes, and behaviors to make sound financial decisions.</p>
<p class="graf graf--p">The program also incorporates peer-to-peer interaction into its user-friendly and intuitive platform. This collaboration allows for a smoother transition from traditional classroom-based programs to digital ones. It also helps provide a balance of human-centric and technology-enabled</p>
<p class="graf graf--p">The digital version of Dialogue on Business focuses on three main dimensions:</p>

<ul class="postList">
 	<li class="graf graf--li">Personal — identifying skills, competencies, and behaviors to improve each entrepreneur’s profile through goal setting</li>
 	<li class="graf graf--li">Enterprise — widening the participant’s entrepreneurial vision and skills through knowledge, tools, and business consolidation</li>
 	<li class="graf graf--li">Financial System — motivating entrepreneurs to engage in the financial system and strengthen their ability to make smart financial decisions</li>
</ul>
<p class="graf graf--p">By creating a digital version of this ground-breaking program that expands financial and digital literacy and capability, entrepreneurs can achieve even more success. Through our partnership work with FedEx, we’re excited to give a boost to entrepreneurs in Colombia, across Latin America, and potentially even globally.</p>

From the classroom to the phone

<div class="byline"><img class="alignnone size-full wp-image-7384" src="http://blogs.accion.org/wp-content/uploads/2016/11/Hot-Bread-Kitchen-Accion-East-3.jpg" alt="hot-bread-kitchen-accion-east-3" width="900" height="900" />
Earlier this fall, a group of a dozen women ventured to the social enterprise <a href="https://hotbreadkitchen.org/">Hot Bread Kitchen</a> and <a href="https://hotbreadkitchen.org/incubates/">HBK Incubates</a> in East Harlem. Founder Jessamyn Rodriguez led participants on a tour of Hot Bread Kitchen – a collective of women bakers-in-training, most of whom were previously unemployed or underemployed, and many of whom are immigrants.  These women enroll in an intensive 6-month program, during which time they learn all aspects of bread preparation as well as relevant lessons in English, math and organizational skills.</div>

[caption id="attachment_7385" align="alignnone" width="900"]<img class="wp-image-7385 size-full" src="http://blogs.accion.org/wp-content/uploads/2016/11/Hot-Bread-Kitchen-Accion-East-2.jpg" alt="hot-bread-kitchen-accion-east-2" width="900" height="675" /> From left to right, Vanessa Dager; Jessamyn Rodriguez, Hot Bread Kitchen; Anne Thompson, NBC; and Diana Taylor, Board Chair at Accion and Board Chair at Hot Bread Kitchen.[/caption]

All of the Hot Bread Kitchen graduates who seek employment are able to find full-time, fair wage positions with access to benefits and opportunities for advancement – a remarkable achievement.  Hot Bread Kitchen earns revenue through the sale of its extensive line of bread products to such high profile companies as Whole Foods and JetBlue.

A few years ago, Hot Bread Kitchen expanded to establish HBK Incubates, an incubator to support and foster the growth of local, food-related businesses. After our tour, we heard from two extraordinary clients of <a href="https://us.accion.org/region/the-east-coast/">Accion serving the East Coast</a> who operate out of the incubator: Isabel of <a href="http://www.littlegreengourmets.com/">Little Green Gourmets</a> and Jessica of <a href="http://www.harlemchocolatefactory.com/">Harlem Chocolate Factory</a>. They candidly shared with us the stories of their uncharted paths to launching a business, the challenges they’ve encountered along the way, and the rewards of pursuing their dreams.

[caption id="attachment_7382" align="alignnone" width="826"]<img class="wp-image-7382 size-full" src="http://blogs.accion.org/wp-content/uploads/2016/11/Hot-Bread-Kitchen-Accion-East-1.jpg" alt="hot-bread-kitchen-accion-east-1" width="826" height="900" /> Jessica Spaulding of Harlem Chocolate Factory.[/caption]

Jessica spoke of the challenges of taking her chocolate enterprise from a simple idea to full-fledged production. In college, she tried to get her business off the ground, whipping up small batches for friends, but she was not able to get the support and capital she needed. A few years later, she saw a business competition flier at the public library and submitted her business plan. Jessica won the competition and the $15,000 grand prize.

From there, Jessica confidently pursued more alternative options, even participating in Accion and Sam Adams’ <a href="http://btad.samueladams.com/"><em>Brewing the American Dream</em> <em>Pitch Room Competition</em></a> last year<em>.</em> She has since worked with Sam Adams to improve her sales strategy and was asked to include her chocolates in the company’s holiday gift boxes. Now, Jessica is trying to keep up with increased demand from major corporations across the country looking to gift sweet treats. Thanks to support from <em>BTAD, </em>Accion, and HBK Incubates, Jessica is able to spread her love of chocolate and share Harlem’s rich history with a broader audience.

<img class="alignnone size-full wp-image-7383" src="http://blogs.accion.org/wp-content/uploads/2016/11/Hot-Bread-Kitchen-Accion-East-4.jpg" alt="hot-bread-kitchen-accion-east-4" width="900" height="813" />
Isabel Gunther is quite the foodie, and cooking for her son gave her the opportunity to be more creative in the kitchen. Her love of cooking healthy meals sparked an idea to launch a specialized delivery service just for children. Little Green Gourmets caters to New York parents who want convenient and wholesome meals, mostly delivering to homes independent schools in Manhattan. Isabel recently graduated from the incubator into her own production space in East Harlem and has begun working closely with Accion East to continue her expansion.

Accion is proud to have a role in helping these women and others to grow their businesses and to generate a ripple effect of economic opportunity for communities that are too often underserved.  Key collaborations at every stage of these client’s journeys to build their businesses are the recipe for success.

Hot Bread Kitchen: Recipe for success

Samuel Adams

Loans in the U.S.

<em>By Usha Gopinath</em>

In the village of Sarai Kaji outside the city of Varanasi in Uttar Pradesh, India, Chanda lives with her husband and three kids. She and her husband farm to support their family, but it never seemed to be enough.

Like all parents, she wants a better life for her three children. Although she is illiterate, Chanda works hard so they may go to university and get the education she never had.
<h2>Starting a business with microfinance</h2>
Luckily, Chanda found Utkarsh Microfinance. She took out a loan to support the family’s farming. After paying that back successfully, Chanda got more ambitious: she took out a larger loan to start a small grocery store in her village. Business is good, and she’s currently working to pay that loan back.

But microfinance alone wasn’t enough. Chanda had a loan, but no business plan and no safety net. She was running their home and business with no budget. If she or someone in her family became ill, or their business had an unexpected emergency, they had no savings and no plan to get back on their feet. One small hiccup could wash away all of her hard work.
<h2>Enter MoneyPlan</h2>
In July of 2015, Chanda completed <a href="https://www.accion.org/content/accions-money-plan-financial-literacy-training-professionals-and-institutions">MoneyPlan</a>, a financial literacy training program put on by Utkarsh, one of several local microfinance institutions working in collaboration with Accion across the country. The seven modules taught her how to create and manage a budget, how to save for emergencies and long-term goals, and about government services available to her, like life insurance. The program meets rural Indians where they are, literally and figuratively. The participants, the majority of whom are women, are able to attend trainings in their own village. Trainings are designed for those who are illiterate and have no prior financial knowledge, so MoneyPlan can reach those most in need.

Chanda is one of over 100,000 people, mostly women, throughout five states in India who have gone through the MoneyPlan program already. Eventually, MoneyPlan’s goal is to reach 250,000 people in rural India by 2017. Mass awareness campaigns help MoneyPlan reach even more people, using magic shows and trivia games to make financial literacy lessons entertaining and memorable, featuring repetition and testing to reaffirm the lessons learned.
<h2>Saving for the future</h2>
Since attending the MoneyPlan training, Chanda has made some serious changes. She has put her household and her business on a budget, tracking recurring, short-term, long-term and unexpected expenses. She has also begun saving 4,000 rupees a month, or about $60, for her family’s future. For the first time in her life, Chanda is planning for her advanced year, and putting money away for her children’s education.

With these measures in place, Chanda is planning for her family’s future and making her dream of educating her children come true.

More than microfinance: Financial literacy in India

<div class="byline"><em>By Center for Financial Inclusion staff</em></div>
After over a year of research, we at the Center are excited to launch <em>A Change in Behavior: Innovations in Financial Capability</em>, the result of a project funded by JPMorgan Chase &amp; Co. which assesses the landscape of financial capability-building interventions across the globe, with a special focus on Mexico and India. Highlighting an industry trend in its early stages, the report explores innovations that focus on triggering positive customer behaviors, especially at critical decision-making moments, such as when signing up for and using financial products, or when putting money aside to meet savings goals.

We define financial capability as <em>the combination of knowledge, skills, attitudes, and behaviors a person needs to make sound financial decisions that support well-being</em>. This definition reflects an emerging industry view that focuses attention on behavior. Financial capability focuses on behavior change as well as the customer’s end state: financial health and well-being. This school of thought contrasts with traditional financial education, which has generally been more focused on the transfer of knowledge, skills, and information.

The financial capability approach stems from the growing body of industry research which reveals an important gap between knowing and doing. When techniques informed by behavioral economics are integrated into client interventions, people are more likely to translate their knowledge into action. While traditional financial education methods still predominate, our research identified a host of exciting financial capability innovations. These interventions range from personal counseling to mobile apps that help customers understand their finances at a glance, to soap operas that embed financial capability messages and lessons.

In our assessment of over 100 innovations, we identified seven behaviorally-informed practices that show great promise for application in financial capability-building:
<ol>
 	<li><strong>Teachable Moments.</strong> Reach consumers when they are making financial decisions.</li>
 	<li><strong>Learning by Doing. </strong>Let consumers practice using products.</li>
 	<li><strong>Nudges, Reminders, and Default Options. </strong>Timely reminders and default options support good habits.</li>
 	<li><strong>Rules of Thumb (Heuristics). </strong>Mental shortcuts help turn learning into habit.</li>
 	<li><strong>Make It Fun. </strong>Games and humor aid learning and retention.</li>
 	<li><strong>Customize It.</strong> Tailor advice to an individual’s specific financial situation.</li>
 	<li><strong>Make It Social. </strong>Leverage the influence of peers and culture.</li>
</ol>
As the number of first-time consumers of formal financial services expands rapidly over the next decade, it will be imperative that new consumers are able to use products actively for their own benefit. To address the huge financial capability gap, action from many stakeholders is required, including financial service providers, governments, and social service organizations that interact with clients at critical moments. The provider case for addressing financial capability rests on the risk reduction, enhanced product use, and long-run opportunity for growth that a capable clientele can bring. The policy case involves the government’s role as custodian of a safe and stable financial system that protects the vulnerable. And for the consumer, financial capability means greater confidence in using financial services in a way that promotes their ultimate outcome – financial health.

<em>A Change in Behavior</em> argues that a major redeployment of resources is needed to ensure that the millions of dollars spent on traditional financial education interventions yield substantial benefits. Its recommendations include enabling financial service providers to take a greater role in building financial capability; engaging social service agencies, such as hospitals that provide financial counseling to families experiencing a health shock; and strengthening governments’ focus on shared responsibility among stakeholders.

The full report and appendices, including dozens of examples of innovations in financial capability, are available online <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/724">here</a>. For your navigating ease, <em>A Change in Behavior: Innovations in Financial Capability</em> includes the following elements:
<ul>
 	<li>Abridged Report (18 pages)</li>
 	<li>Full Report (60 pages)</li>
 	<li>Frequently Asked Questions (FAQs) – based on discussions with experts, including roundtables in Washington, D.C., Mexico City, and New Delhi</li>
 	<li>Financial Capability Building Practices in Mexico</li>
 	<li>Financial Capability Building Practices in India</li>
 	<li>Catalogue of Innovations</li>
 	<li>Executive Summary</li>
</ul>
<em>This post originally appeared on the <a href="https://cfi-blog.org/2016/04/12/a-change-in-behavior-innovations-in-financial-capability/" target="_blank" rel="noopener">CFI Blog</a>. It is republished here with permission. </em>

A change in behavior: Innovations in financial capability

Having access to a bank account isn’t always beneficial for families in the developing world — which sounds counterintuitive. Theoretically, formal financial services — savings, insurance, credit — can make an enormous difference in the lives of those living in poverty. But it isn’t always the case. Adequate use and adoption of those financial services is the breaking point to really making a difference.

Under India’s new financial inclusion program, about 200 million new bank accounts have been opened since August 2014, but, according to <a href="http://www.bloomberg.com/news/articles/2016-01-06/india-goes-postal-in-quest-to-open-bank-accounts-for-the-masses">Bloomberg</a>, about one-third of those accounts are empty.

In Colombia, the percentage of adults with savings accounts rose 8 percent in the last five years, but active account usage has only risen by 3 percent.

So what gives? If families living in poverty are presented with an opportunity to more safely save for their futures and improve their financial health, why don’t they take it?

[caption id="attachment_6665" align="aligncenter" width="408"]<img class="wp-image-6665 size-full" src="http://blogs.accion.org/wp-content/uploads/2016/03/Personal-finance-financial-literacy-LISTA-initiative-6.jpg" alt="Personal-finance-financial-literacy-LISTA-initiative-6" width="408" height="255" /> Screenshot of the app[/caption]

As governments, the finance industry, and NGOs are now uncovering, it takes a lot more than a bank account to build a financial system that meets these families’ needs.

The Colombian government has reported that only about 32 percent of the population is what you’d call “financially literate” – aware of and educated on financial concepts that help them use financial services to improve their lives. For these segments to be included and catered to in the formal economy, organizations need to work to provide them with the training and customized services that they need in order to actually benefit. And that’s just what Colombia is working to do.

Through the national social protection program called <em>Más Familias en Acción</em> (More Families in Action – or MFA), the Colombian government makes bimonthly deposits to 3 million low-income family’s bank accounts throughout the country, so long as they meet certain criteria such as keeping children in school and taking them to periodic doctor’s appointments. While the program isn’t uniquely Colombian – it exists in similar formats in more than sixty other countries – it has evolved with the opening of more than 2.5 million of bank accounts, which are being used as an opportunity to improve the transfer system, leverage the bank deposits and help make those families more financially savvy.

<img class="size-full wp-image-6663 aligncenter" src="http://blogs.accion.org/wp-content/uploads/2016/03/Personal-finance-financial-literacy-LISTA-initiative-4.jpg" alt="Personal-finance-financial-literacy-LISTA-initiative-4" width="411" height="260" />

The idea came from <a href="http://fundacioncapital.org/?lang=en">Fundación Capital</a> – an international organization that imagines, creates and tests innovative ideas that enable low-income families to grow, value and protect their financial and productive assets. It partnered with <em>Prosperidad Social </em>(Social Prosperity – the public department in charge of the MFA program execution) through the <a href="http://proyectocapital.org/en/">Proyecto Capital</a> project to promote effective financial inclusion of their recipients, a challenging task: how to get millions of families to go beyond education and actually put those concepts into practice and change their behavior around personal finance? How to make sure that those families, many of whom had never before had savings or bank accounts, actually make use of these services?

One of the strategies designed and tested by Fundación Capital, with support from the Citi Foundation, is the use of  a tablet-based app that is designed to help low-income families adopt better savings habits, reduce their informal indebtedness, learn how to interact with banks, and educate them on their options for financial transactions and planning.

This program, called the LISTA Initiative (LISTA means “ready” in Spanish, and is also an acronym for “Logrando Inclusión con Tecnología y Ahorro” or “Achieving Inclusion through Technology and Savings”), was built to address a very specific type of customer’s needs. Many of these families are not only low-income but often have low levels of education and minimal contact with technology, with very little time to learn something new. So, a fun and time-flexible tool to learn about personal finance had great potential to help them build their financial capabilities. LISTA not only teaches participants about financial concepts but also provides simulators for them to gain confidence in actually using financial services such as ATMs and mobile banking.

<img class="size-full wp-image-6662 aligncenter" src="http://blogs.accion.org/wp-content/uploads/2016/03/Personal-finance-financial-literacy-LISTA-initiative-3.jpg" alt="Personal-finance-financial-literacy-LISTA-initiative-3" width="393" height="247" />

LISTA also came as a scalable and cost-effective answer for reaching millions of families, even in remote and rural areas. Anchoring the program in local trusted channels was a key to success and when it came time to spread the word, LISTA decided to let the families themselves do the talking – and so they came up with a process. First, the tablet is given to a leader in the community, who then rotates it within a group of families. Each family only has two days to use the app, and then passes the device to along to another family. This practice fostered dialogue amongst parents, children, neighbors, and friends about the importance of savings, and the skills they learned to better manage their finances.

So far, more than 75,000 low-income families from 30 municipalities in two of Colombia’s poorest regions have trained themselves through the app, as part of a national strategy promoted by the government. And the LISTA Initiative has spread to other countries in the region as well, where it is now being implemented in Brazil, Honduras, Mexico, and the Dominican Republic. What’s more, it seems to be working.

<img class="alignnone size-large wp-image-6674" src="http://blogs.accion.org/wp-content/uploads/2016/03/personal-finance-LISTA-Créditos-FundaK-Accion-2-1024x683.jpg" alt="personal-finance-LISTA-Créditos-FundaK-Accion-2" width="1024" height="683" />

To follow up on LISTA’s efforts, Fundación Capital and <a href="http://www.poverty-action.org/">Innovations for Poverty Action</a> (IPA) are now  partnering to test the program’s approach, measuring the impact of the program on participants’ financial skills and habits through a Randomized Control Trial (RCT) evaluation supported by the Citi IPA Financial Capability Research Fund, meaning that results will be based on a statistical comparison of a group of people that took part in the program and a group of people, statistically identical, that didn’t.

<a href="http://fundacioncapital.org/2016/03/evaluacion-de-impacto-muestra-resultados-positivos-en-lista-a-corto-plazo/?lang=en">Preliminary results</a> are very promising. Based on IPA’s current survey data, those families who got the tablet were more likely to establish savings goals and initiate savings — a big leap forward for those of us who work on mobilizing savings. Participants also tended to have written household budgets and be more trusting of their financial institutions.

<img class="size-full wp-image-6660 aligncenter" src="http://blogs.accion.org/wp-content/uploads/2016/03/Personal-finance-financial-literacy-LISTA-initiative-1.jpg" alt="Personal-finance-financial-literacy-LISTA-initiative-1" width="454" height="283" />

IPA is now measuring the possible impact of reminders through text messages, which will complement the training on the tablet. As part of the current implementation, IPA randomly divided families into two groups: one that receives text message reminders on their cellphones to reinforce their newly acquired financial skills, and one that will not receive any follow-up.

So what makes a program like LISTA more successful than simply extending the offer to open a bank account? The gap between access and the adoption of those financial products is increasing. Tools like LISTA focus on the development of people’s financial capabilities, building trust in the formal financial system, and relaying relevant personal finance training in a simplified way, which are key steps forward to advancing real financial inclusion.

How an app promotes personal finance in Colombia

Citi Foundation

This past fall at the United Nations, world leaders gathered together and pledged to eradicate extreme poverty worldwide by 2030. Shortly thereafter, the World Bank raised the definition of “extreme poverty” from those living on less than $1.25 per day to those living on $1.90 – which means that we’re making progress, and enough of it to raise our ambitions even further. The total number of financially excluded people has <a href="http://www.worldbank.org/en/programs/globalfindex" target="_blank" rel="noopener">dropped from 2.5 billion to 2 billion in the past three years</a> — but we’re not there yet.

That progress represents an important first step for all of us in the financial inclusion movement who are committed to the belief that everyone should have access to the financial services they need to protect their families, send their children to school, and improve their lives. Here are three major ways we can work towards the <a href="https://sustainabledevelopment.un.org/post2015/transformingourworld" target="_blank" rel="noopener">UN’s 2030</a> through expanding financial inclusion.
<ol>
 	<li><strong>Look beyond bank accounts</strong></li>
</ol>
<p style="padding-left: 30px"> Though more people around the world have access to an account, access alone is not the same thing as creating global financial inclusion — having only a savings account wouldn’t protect us if we became sick or injured, or help us build the credit we needed to buy a home. Having a bank account is just one step in the process needed to become fully financially included.</p>

<ol start="2">
 	<li><strong>Invest in financial education</strong></li>
</ol>
<p style="padding-left: 30px">Likewise, although access is up, actual usage is stagnant. In too many instances, adults open a bank account and only use it to receive and withdraw payments, or in some cases, not at all. That’s not the relationship we think we should be creating with financial services — we need to affect cultural change through financial education, so those 2 billion people can not only open bank accounts but use them and other services to improve their own lives.</p>

<ol start="3">
 	<li><strong>Learn to reach out to the most excluded</strong></li>
</ol>
<p style="padding-left: 30px">Finally, the remaining financially excluded people represent some of the most overlooked and underserved communities on earth: women, the elderly, <a href="http://www.accion.org/how-impact-investing-can-help-people-with-disabilities/" target="_blank" rel="noopener">people with disabilities</a>, young people, and those in <a href="http://www.accion.org/disability-inclusion-solar-power-rural-paraguay/" target="_blank" rel="noopener">rural areas</a>. We have to do more to ensure that they, too, have the same degree of access to quality financial services that they need and deserve.</p>
Still, this progress should help inspire even greater action, commitment, and creativity in promoting financial inclusion and working to end a problem that we can actually solve.

We’ll also keep working with microfinance institutions, financial technology startups, and industry partners to keep expanding access to financial services and promoting usage. We’ve made so much progress, and we know that if we keep working together then we’ll achieve even more.

3 ways to accelerate financial inclusion worldwide