MIX News Brief: 30 November 2018
30 November 2018
Every other week we post recent articles curated by our team of data analysts and financial sector experts. The articles span sectors and topics including fintech, smallholder finance, mobile money and more. The MIX News Brief is intended to keep socially responsible investors and businesses updated on the latest thinking on financial services for the poor because, at MIX, our mission is to provide the data, analytics and insight that enable decision makers to build inclusive financial services ecosystems. Let us know what you think by tweeting at @mix_market!
The 'Neo Banks' are finally having their moment (The New York Times)
Neo-banks - startups that, for the most part, offer fee-free basic banking services - are gaining traction in the United States against the entrenched incumbents. One of these newcomers, Chime, is "adding more customers each month than Wells Fargo or Citibank." But success is not guaranteed because, believe it or not, business fundamentals still matter. These companies will eventually need to transition away from a hyper-focus on customer acquisition to build a profitable business and, as Mr. Popper predicts, that likely means introducing fee-based services that can compete with the incumbents' offerings. Will their advantage in terms of usability and convenience be enough to keep those new customers? Perhaps it's too early to tell but we're glad to hear - at least according to Jack Dorsey of Square - that these fintech startups are reaching underserved and unbanked populations.
Borrowing by mobile phone gets some poor people into trouble (The Economist)
Now that there is more robust data to back up the anectdotal evidence - see CGAP's recent study - the scope of the consumer risks related to digital credit is clear. The rates of late repayments and defaults are certainly concerning but the difficulty in addressing the underlying challenges is compounded by the rapid pace of innovation. As Deborah Drake from the Center for Financial Inclusion at Accion states in the article, "Fintech is evolving quicker than regulation can keep up." This simple statement belies the complexity of addressing this very 21st century problem. But we'll take solace in bearing witness to the growing emphasis on using data and information to create awareness of risks, and advocate for accelerated efforts to put consumer protections in place.
Speaking of consumer protections ... Lauren Saunders of the National Consumer Law Center, a US-based nonprofit, isn't convinced that regulatory sandboxes are anything more than "thinly veiled efforts to waive consumer protection laws...". Two thoughts here: (1) we certainly know where she stands on the issue and (2) maybe she has a good point. The U.S. Consumer Financial Protection Bureau's proposal would allow pilot programs to last over a decade with few legal requirements for disclosing information about risks. Ms. Saunders also makes a compelling argument about the importance of using 'uncertainty' in business to hold companies to account in their own product development. If nothing else, this op-ed adds a critical perspective to the conversation around regulatory sandboxes for fintech. While they can protect consumers, there is no guarantee that they will.
If you're Kosta Peric from the Bill & Melinda Gates Foundation, you're probably very happy right now. As we noted in a previous MIX News Brief, mobile money interoperability is crucial to financial inclusion. So the announcement from Orange and MTN that the two giant mobile network operators formed a joint venture to "enable interoperable payments across [Africa]" was music to the ears of mobile money advocates everywhere. The venture, Mowali, will make it possible to send money between accounts and is open to all mobile money providers in Africa. Between them, Orange and MTN have 100 million accounts; but they're hoping to bring together other financial service providers to support the 338 million mobile money accounts across the continent.
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