The race for smart customer data for the future of fintech

Sasha Dichter, Co-Founder and CEO at 60 Decibels, highlights the importance of using smart customer data for the future of fintech. This article was originally published in FinTech Magazine here.

The rapid growth of fintech has expanded access to financial services to millions, but has also created new risks. As excited as investors are about the financial value of this sector, regulators are wary of exploitation of low-income customers — their concerns fuelled by aggressive offerings from some fintechs.

The question is: which is right? Are fintechs a boon for financial inclusion, or do they need to be reined in quickly lest they increase the debt burden for hundreds of millions of vulnerable consumers?

To answer this question in a rigorous manner, better customer-level data is needed to understand the impacts of fintech products on people’s lives.

While some investors and companies already take extra care around impact measurement and management, the financial industry as a whole needs detailed, comparable, global data directly from the people who are experiencing the impacts of fintech products to inform the continued growth of the sector.

The good news is the same mobile technology fuelling fintech growth has also made it possible to fill this data gap. Today, we can listen to the lowest-income customers around the world at significant scale to understand who fintechs are reaching, how products are being used, consumer protection practices, and how customers speak about the impact in their own words.

For example, in 2022 the microfinance industry gained visibility into their collective impact through a global MFI Index. 60 Decibels conducted voice-based, phone surveys with 18,000 microfinance customers across 41 countries. These respondents represent 25 million of the world’s 140 million microfinance institution (MFI) clients. Many leading microfinance investors have since used these data to defend the industry against ongoing negative attacks, and they are acting on the insights to expand and deepen their impact.

Microfinance and fintech both seek to reach underserved, low-income customer segments. For financial products that serve vulnerable populations, which rightly results in increased regulatory scrutiny, listening to customers’ experience is especially important. In fact, gathering these data is an essential risk management tool for the fintech sector. Without comparable customer data across fintech companies, the industry and regulators are unable to know whether the products — or the rules — they’re creating help or hurt customers.

Accion, a global nonprofit that invests in and supports inclusive financial service providers around the world, supported the participation of its microfinance portfolio in the 2022 and 2023 MFI Index, and is now expanding customer insights across their global portfolio.

“At Accion, we know responsible digital financial solutions are powerful tools to help reduce poverty and create opportunity. Measuring and understanding our impact is critical to our mission, and hearing directly from customers is essential. Accurate data enables us to quickly see what’s working and scale solutions that deliver the most value for small businesses, smallholder farmers, and women, helping them grow their businesses, save for the future, and build their financial resilience,” says Michael Schlein, President and CEO of Accion.

As part of their four-year partnership with Mastercard across Africa, Asia and Latin America, Accion conducted a study with 2,179 small businesses to understand the impact of digital transformation on underserved microbusinesses. The study went beyond reporting how many customers were served to understand what was working and what risks were present in their approach. Accion also supports fintechs in their Accion Venture Lab portfolio to gather rigorous, representative customer voice data.

Through customer phone surveys, fintechs can gain new data on customer profiles, access to alternatives, impact on quality of life, challenges, and areas for improvement. Quona, a global venture firm focused on inclusive fintech, engages with their portfolio to gather direct customer insights.

Kristin Sadler, Manager of Platform & Impact at Quona, says that “having outcome-level impact results directly from stakeholders has been instrumental in supporting Quona’s impact measurement strategy. And what’s truly exciting is that, through these projects, our portfolio companies not only gain valuable insights on their customers, but are already using these insights to drive strategic decision-making and ultimately deliver greater impact.”

Over the past two years, eight of Quona’s portfolio companies in Africa, Latin America, Southeast Asia have participated in studies to listen to their customers. Many were already doing customer research using market data or satisfaction surveys but, as the regulatory context and investor landscape evolves in fintech, data directly from customers about their experience and impact goes a long way to assure regulators of consumer protection and attract investors interested in inclusive finance.

The smart path forward for fintechs will be proactive efforts to understand the experience of their customers. The cost of gathering customer social impact data is negligible compared to the dampening effects that will come from loss of confidence, negative regulatory consensus, or sensationalist journalism that casts fintech as predatory. Better customer data will help fintech fulfil the promise of creating financial inclusion, while protecting against unjust accusations of negative impact.

Sasha is Co-Founder and CEO of 60 Decibels, a tech-powered impact measurement company that helps organizations to tap into high-quality, benchmarked customer insights. With thousands of impact measurement projects delivered worldwide, 60 Decibels proprietary Lean Data approach brings customer-centricity, speed and efficiency to impact measurement. Prior to co-founding 60 Decibels, Sasha worked for 12 years at the social impact investor Acumen. He’d previously worked at GE Capital, IBM, and Booz Allen.