MIX launches data standards for inclusive fintech
11 September 2019
How we can use data to drive capital to inclusive fintech? This is the key question that MIX set out to answer this year, when we partnered with MetLife Foundation on the of design a data solution to support the effort to provide appropriate financial services to the 1.7 billion unbanked people around the world. Keep reading to learn how you can get involved in this effort.
In answering this question, we realized that first and foremost there is a need for data standards. As we discussed on NextBillion in May, the lack of data standards has two key consequences which impact both investors and fintechs: the inability to create benchmarks using comparable data, and particular challenges related to defining and demonstrating inclusivity.
How can Data Standards help? First, in terms of the inability to create benchmarks, we discovered through interviews that nearly all stakeholders need benchmarks. However, benchmarks simply cannot be created if data is not comparable across companies or regions. For investors, this can make it difficult to assess fintechs without accurate and comparable data, particularly those companies operating in less familiar industries or markets. For instance, we heard:
“As an investor, we are starting to move into fintech, but find it challenging since we don’t have the same comparables and benchmarks that we’re familiar with from more traditional financial services investing.”
Meanwhile, fintechs also express a strong desire for data to help them understand how they compare to their peers, which can provide critical insight into their fundraising strategy. We heard similar comments from several fintechs along the lines of:
“As an early-stage pre-revenue start-up, I struggle with the fact that everyone defined active users differently, and in ways that may or may not be relevant to their business model. How do I know where I stand?”
Second, though the lack of data standards makes comparisons difficult across the entire fintech landscape, those committed to financial inclusion face additional obstacles. Most notably, there is no standard way to identify an inclusive fintech. This presents a critical obstacle for investors committed to identifying fintechs best placed to have an impact on the 3 billion financially underserved people globally, as illustrated by this quote from one of our interviews:
“As an impact investor, it’s very hard to define what we mean by inclusivity in terms of fintech. It would be extremely helpful if stakeholders in the industry were starting to coalesce around a certain set of standards, so that we had a framework to say that most of our fintech deals have a certain potential for impact.”
For fintechs who wish to highlight their commitment to inclusivity for investors, it is often difficult to articulate how that commitment translates to their strategy and performance without a common language. Multiple fintechs mentioned this challenge, stating:
“As a fintech committed to inclusion, we have trouble explaining to investors what it means to be inclusive and how it defines our business model.”
In response to these challenges, we are launching the Data Standards for Inclusive Fintech. These standards have been developed in consultation with our Fintech Working Group, made up of fintech investors, founders, and ecosystem actors. Additionally, we’ve posted these online for public comment and tested the standards with publicly available data. These iterations have helped us to refine the Data Standards to a workable prototype for testing our hypotheses on the value of standardized data to the broader industry.
Over the next several months, with support from MetLife Foundation, we’ll be using the Data Standards to create an initial set of benchmarks – allowing us to better understand how to use this standardized data to provide actionable insights for fintechs, investors, and the organizations that support them.
These initial benchmarks are a critical step in testing the value of our Data Standards – but, we cannot do this alone! In order to address the challenges outlined above, the industry must coalesce around standardized data and definitions. Therefore, we are calling on you to test the Data Standards as well. Where in your work could you benefit from standardized data and benchmarks?
Send an email to firstname.lastname@example.org describing how you might use these data standards and providing any and all feedback that you have as you dive in. We’ll publish our initial benchmarks, allowing you to compare any similar data against our analysis. Together, we can ensure that fintech realizes its potential to deliver affordable, accessible and appropriate financial services to everyone, everywhere.