60 Decibels: Customer Impact Data – The Greatest Unmanaged Risk in Fintech

A positive customer experience is the lifeblood of any organization, fintech or not. Failure to properly address customer impact data can be detrimental to your business.

Sasha Dichter is the co-founder and CEO of 60 decibels, a social impact and customer intelligence company. 60 Decibles helps organizations around the world better understand their customers, suppliers and beneficiaries. Prior to co-founding 60 Decibels, Sasha worked at a social impact investment firm where she worked for 12 years. Insighthe had previously worked GE Capital, IBMand Liquor Allen. talk Fintech TimesDichter explains how fintechs can ensure they get the most out of their customer impact data:

Customer Impact Data: The Biggest Unmanaged Risks in Fintech
Sasha Dichter, Co-Founder and CEO of 60 Decibel

For the global fintech market, recently HBR article As an investor’s “Goldilocks dream”. This is thanks to the promise of great returns for investors and a positive impact on society. In 2021, a total of 113 new fintech “unicorns” were born. They had the potential to bring his 1.4 billion customers in the unbanked world into the financial mainstream.

However, while financial access is increasing at a furious pace around the world, in Kenya 82.9 per cent of the population had access to finance. high quality financial services In 2019, it increased from 26.7% in 2006. Access to digital financial products is neutral in terms of social impact. Some products have a significant positive impact on the lives of their customers. However, sometimes it’s just to satisfy an immediate need (purchase or debt repayment). As a result, people’s lives become even worse.

Many new digital financial products repackage old business models that pose as much risk as opportunity. Quick and easy credit first became popular in the United States after the Great Depression. We all knew that buy-now-pay-later pawnshops and payday lenders did as much harm as good to their customers.

With glossy apps and big claims about facilitating financial access, it’s easy to overlook the fraudulent activities of some fintech financiers. 600 percent interest rate Rivals the most aggressive payday lenders in the US. As of 2019, Kenya’s digital lending interest rate exceeded 400%, with several companies charging annual interest (annual rate) of 100% or more, attracting attention. media and Regulatory authority.

Fintech response

How should fintech companies and their investors respond in this context? is pursuing This approach is short-sighted and ignores the risks of regulatory backlash and shifts in public sentiment.

Just last year, the headline-grabbing crash of the cryptocurrency market brought about a change that seemed to wipe out the cryptocurrency market. $1 trillion market value, which accounts for more than 50 percent of the global market capitalization. Could the fintech market face a decline in value of 10-30 percent or more in market capitalization?

There are already signs of a backlash. Google delete Fintech apps from India’s Google Play Store Violation of User Safety Policy. The Central Bank of Kenya will get formal regulatory authority over fintech in 2021.millions of dollars settlement The U.S. is fighting fintech companies for predatory behavior. These could be the first signs of greater systemic risk. This results in lower valuations and real harm to fintech customers.

The microfinance industry, which has the sole purpose of reaching unbanked customers with less aggressive tactics than fintech, recently came under the microscope. In 2022, bloomberg published exposure On the harm caused by Microfinance Institutions (MFIs) and the enormous profits accruing to microfinance investors.

The article shocked the industry by depicting aggressive loan collection actions and forced land sales. A similar revelation about harm to fintech customers could be imagined to have deeper repercussions.

But fintech companies have a way to go. It is arming ourselves with data to deliver on our promise to create financial inclusion and defending ourselves against negative accusations.

customer identification

The industry needs detailed and comparable customer base information about who they are reaching. This is in addition to how we use our products, our consumer protection practices, and the impact these products have on our customers’ lives. either in a positive sense or in a negative sense.

By 2022, 60 decibels will be Analysis of the microfinance industry, which focuses on social performance comparisons and consumer protection. A survey of nearly 18,000 microfinance clients in 41 countries found that he included more than 25 million of his 140 million MFI clients worldwide.

The data shows that 6% of customers said that the microfinance loan made them significantly worse off. However, the majority believe that their lives are the same, better, or much better thanks to access to microfinance.

Armed with this data (rigorous evidence from large datasets collected directly from clients), microfinance institutions and their investors can make persuasive arguments in the face of criticism and using the mobilize Further enhance consumer protection and protect against regulatory overreach.

We need to create a similar global data set on our fintech customers and we need to act now. Without it, the industry and regulators would be acting blind. They don’t know if the products and rules they create will help or harm their customers.

The cost of collecting customer impact data globally and annually is a rounding error. Especially when compared to the potential value destruction that a massive loss of trust and negative regulatory agreements can create.

A fully transparent and comparable customer data set is the best defense against misinformed campaigns threatening to throw the fintech baby in the water. Specifically, it identifies performance by company and by investor. And what’s more, it just happens to be right for the customer.

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