technology

Dinner Debrief: Digital currency platform, Uphold, making global remittances more cost effective

by Miranda Barham, WAM UK Steering Committee Member

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WAM UK Dinner with Uphold on Digital Currency & Financial Inclusion

WAM was delighted to have Diana Biggs, VP of Uphold, the fastest growing money platform, speak at our latest dinner on how digital currencies can enable financial inclusion.

Today, more than 50 percent of the world’s adult population is denied access to affordable banking or basic financial services. Globally, 2.6 billion people are considered ‘unbanked’ or ‘unbankable’. The World Bank has identified cost and travel distances as two of the key reasons that 73% of the world’s poor remain unbanked: two factors that digital currencies can severely undermine.

Often the people who can least afford banking services are charged the most for them in the form of over-priced money transfer services, expensive currency exchanges, costly payment processors and risky cash couriers.

One of the major ways technology can enable financial inclusion is in making it cheaper and easier to send money quickly and safely. The World Bank’s data[1] shows that money sent home by migrants now represents one of the largest foreign income inflows to developing countries.  Eighty to 90 percent of remittance money is spent on basic necessities including food, clothing, shelter, healthcare etc.

Remittance funds are no small fry. Globally, remittance receipts (including both developing and high-income countries) were estimated at $563 billion in 2014 and are forecast to increase to $636 billion in 2017.  Typical remittance fees for sending $200 are around seven to eight percent.  Such fees are diverting money away from the recipients who need to keep as much of it as possible.

Uphold’s mission is to make it easier and cheaper for everyone to send, hold and receive money and allows its customers to do so only paying a small fee locally when the funds are withdrawn.  Users of Uphold’s platform, located in over 170 countries around the world, can upload funds through a variety of methods, including cash deposit, bank transfer, credit card and Bitcoin and send funds to other users regardless of their location instantly and for free. One of Uphold’s partners, LibertyX, allows access to bitcoin purchase and transfer using cash at 19,000+ plus stores across the US, many of which are convenience stores, and has become an increasingly popular tool for Latin American immigrants to store and send money abroad.

Users can also hold their funds on Uphold’s platform and swap it between currencies of their choice.  This allows users to protect themselves from fluctuating currencies and also have the option to store their funds in one of four precious metals.

The firm is actively working on partnerships to create more ways for people to access, send and hold money in more countries around the world.  It is also dedicated to keeping its pricing as low as possible, with the majority of services being free with the company instead charging small fees at the point of withdrawal of funds – it is after all intended to be a sustainable business model.

Diana notes that there is still much work to be done in working towards full financial inclusion via digital currency and platforms, such as access to connectivity and technology, educating customers on how to use the service and the technology that enables it, However electronic money transfer and digital currencies could be a powerful tool to enhance financial inclusion and much of its potential is yet to be explored. Moreover it can provide opportunities for those who live in unstable monetary regimes to manage their savings and payments by keeping their savings with Uphold in US$ for example or other more stable forms of value.

The point was made by some at the dinner, and agreed by Diana, that Uphold is not yet set up to reach the poorest who may even have issues with technological or even more basic literacy which will be a barrier to them accessing these services, unless through a grassroots partner that Uphold might work with. But we also concluded that the service fills an important gap in providing access to financial services to many who are unbanked or have limited access.

 

Group pic digital dinner

Event Attendee Group Photo  On the night, we discussed how decentralised blockchain currencies work, details of which are covered in a Q&A we did with Diana ahead of the event to bring us up to speed on this financial technology. It is clear that globally there is a lot of interest and momentum behind digital currencies and blockchain, however we do not often hear of strategies that grow financial inclusion or even consider it at all in their expansion plans. Diana gave us an interesting perspective as to how a disruptive, high growth technology could consider and be used to expand the global reach of financial services for all – including the unbanked and hard to reach – and therefore not exacerbate financial exclusion through a digital divide.

 

[1]World Bank press release October 22, 2015 http://www.worldbank.org/en/news/press-release/2015/10/22/world-bank-forecasts-a-slowdown-in-migrant-remittances-in-2015

 

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Q&A With Thea Anderson, Director of Financial Inclusion at Mercy Corps

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Two women transacting payments over their phones in Kathmandu, Nepal Source: Mercy Corps

WAM UK hosted a dinner with Thea Anderson, Mercy Corps’ Director for Financial Inclusion, with our members to learn more about the global organisation’s engagement in advancing access to financial services for women. Mercy Corps operates in 42 countries and is a leader in integrating mobile technology in financial inclusion. On the night, Thea shared her experiences working directly in designing and implementing solutions on the ground for Mercy Crops, and for the benefit for those who couldn’t join us, we asked her some questions here:

Thank you Thea for sharing your experiences with WAM, but first things first, could you introduce us to Mercy Corps?

Mercy Corps is an international non-governmental, non-profit agency impacting over 30 million people each year in the world’s most difficult places and emerging markets. We focus on solutions to systemic global poverty through humanitarian relief and long-term development. We recognize that new technology, business models and creative partnerships provide transformational opportunities to overcome poverty. Managing and providing technical assistance to over 40 country offices, with US and European Headquarters (based in Scotland) and a representative office in London U.K. Mercy Corps complies with the U.K. International Aid and Transparency Initiative and is rated each year by the U.S. Better Business Bureau and Charity Navigator – the premier American charity evaluator. Consistently, Mercy Corps receives the highest ratings. Mercy Corps ranked in the Top 10 in the 2013 Global Journal list of top 100 NGOs.

As Director of Financial Inclusion you’ve worked on expanding the reach of financial services in some of the world’s most fragile environments. Could you tell us more about Mercy’s Corp’s approach to financial inclusion?

Mercy Corps leads financial inclusion initiatives in over 30 countries partnering with commercial and public banks, MFIs, non-bank financial institutions, community-level financial institutions, and technology providers.  Even as a non-profit, we have launched commercial bank models in the Philippines, Mongolia and Indonesia, and most recently agent banking in Ethiopia which all use digital payments to serve millions of low-income clients without the need of a physical bank branches.

We recognize that traditional foreign aid hand-out programs will not lift and keep the billions of people at the bottom of the pyramid out of poverty. Mercy Corps therefore uses market-based approaches in partnership with commercial actors where feasible. We see technology as the key driver to lower transactions costs and payments as the entry point for other financial services allowing people to access money with the longer-term goal of establishing a place where they can safely save money, access capital and insurance products.

How does Mercy Corp use Technology to achieve financial inclusion, in particular with women?

Globally, Mercy Corps supports technology providers, financial institutions, and mobile network operators (MNOs) to identify and expand access to financial services at scale through the use of mobile and cashless technologies. This includes digital financial services and e-commerce platforms, agent networks, and bundled technology solutions such as the examples below:

  • In Nepal, Mercy Corps works with over 260 community-level financial institutions to access wholesale capital as well as introduce new savings, affordable credit, and remittances. This includes scaling several mobile payment platforms to rural Nepal in partnership with banks and Nepal’s largest branchless banking provider to reach thousands of new clients.

  • In Indonesia, Zimbabwe, and Uganda, Mercy Corps bundles financial services and farm- and crop-management tools for 170,000 small-holder farmers on affordable, unified mobile phone platforms. Farmers move along a four-step process using access to digital information and payments solutions as an entry point. Through these digital transactions, farmers build a transaction history to develop credit scores that enables them to engage with more formal financial services, including remittances, savings, credit, and insurance.

  • Mercy Corps hosted Tunisia’s first ‘Innovation Challenge for Financial Inclusion’ with financial institutions, crowd- sourcing platforms and angel investors for new mobile financial products for the growing Tunisian market. As a result, Mercy Corps is co-financing new crowdfunding platforms targeting youth entrepreneurs. In 2015, the Tunisian Post Office, which has over 1,000 branches and millions of clients, will launch a micro-savings product via mobile phones and electronic cards across the country with support from Mercy Corps.

Is Technology an effective enabler for financial services? If so, how can we ensure that women are not left out of the digital revolution?

Digital technology can change lives. It provides access to critical information for women. Female farmers can learn to weather costs of agricultural inputs, be linked to financial services such as payments, remittances, and savings, and connect to social media and e-commerce platforms. However, to benefit from technology you must have access to technology. Globally, over a billion women do not have full access to a mobile phone or access to digital financial services even in its most basic form.[1] This is especially acute in South Asia. Recent data shows than more that up to 50% of women in Niger, the Democratic Republic of Congo, and Indonesia have never used a mobile phone, even for voice calls.[2]

As the world moves forward towards digital, huge numbers of the population are being left behind. Not only is this a missed opportunity for women on the customer-side this is a huge lost for the commercial sector – up to an estimated £111 billion for MNOs alone over the next five years.

Mercy Corps has a major role to play – to connect different segments of women to technology providers, financial institutions, and MNOs to expand their access to and usage of digital financial services. International agencies like Mercy Corps offer valuable insights about potential client demand to governments, multinational corporations and technology firms that don’t have first-hand knowledge of field realities and needs. Development actors like Mercy Corps play a critical partnership role by mitigating risks for other actors, especially in complex and fragile states.

Looking ahead, what are the key priorities for Mercy Corps’ in financial inclusion?

Mercy Corps will continue to prioritize countries in transition from war or natural disaster or in the midst of economic or social transformation. For us, ‘business as usual’ means partnerships with governments and the private sector to solve complex global challenges of both emerging and pre-emerging economies, including financial inclusion.

Please find more on Mercy Corps current work in financial inclusion here.

[1] http://www.gsma.com

[2] Ibid.

What I Talk About When I Talk About Money

by Lisa Wong, WAM UK

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“Money is never just about money” argues a leading financial services designer, James Moed, over a dinner attended by financial inclusion professionals hosted by Women Advancing Microfinance UK. “Instead”, he explains, “it’s pretty much always about something else”. In conversation with James, who has over 11 years of experience in helping innovation leaders and design teams understand people’s complex behaviours around money, we learnt how we can use Human Centered Design (HCD) to promote global financial inclusion – an issue particularly pertinent to the world’s women.  According to the UNDP, 6 out of 10 of the world’s poorest people are women; women may comprise more than 50% of the world’s population but only own 1% of the world’s wealth. Some 75% of the world’s women are without access to bank loans as they have unpaid or insecure jobs and are not entitled to property ownership.

This blog will share some of the insights from James’ experiences having advised companies, governments, startups, and social enterprises, most recently as the Director for Financial Service Design at the London office of IDEO – a global innovation consultancy.

First, what is human-centered design (HCD)?

HCD applies the design process to create innovative solutions based on observations on humans. The HCD process begins by examining the needs, dreams and behaviours of people relevant to a prospective solution. A solution can be a product, a service, an environment, an organization or a mode of interaction. HCD focuses on desirability (what do people desire?), feasibility (what is technically and organizationally feasible?) and viability (what is financially possible?). It is an iterative process – borrowing from the designer who observes, prototypes, tests and then repeats until an appropriate solution is reached. James describes the approach as “building to learn”, creating imperfect examples of solutions to be tested by user experience instead of aiming to launch the perfectly formed solution straightaway.

How can HCD help promote women in financial inclusion?

HCD depends on human observation and often women and girls have been ignored in the design of financial products and services. Even if they haven’t been explicitly ignored, then perhaps not enough nuance to their culture could have supported their financial exclusion. Such as failing to pay attention to what women and girls feel like they can and cannot say in interviews and surveys. Moreover, there is a big difference between what people say they will do, and what they actually do – especially when it comes to money. HCD promotes user insight, so adopting an approach to always consider gender in the target user group is vital and can be extremely telling. Designing solutions with women’s behaviours, aspirations and needs specifically in mind can lead to women-inclusive financial solutions.

What kind of HCD insights on women do we have?

Investing in women has a multiplier effect

One of the major observations in microfinance – the provision of financial service to the under and unbanked – is based on gender. Women’s World Banking found that “when a woman generates her own income—and this holds true no matter what the  country—she re-invests her profits in ways that  can make long-term, inter-generational change: the  education of her children, health care for her family and improving the quality of her family’s housing”. As James highlighted in our conversation, time and time again in his fieldwork he saw that for women “finances are less about her own interests, but for others”. Financial inclusion for women does not only empower the woman user, but often has positive impact on her wider community.

For some women illiquidity is attractive

Mind boggling at first, especially when we consider the gender discrimination that has led to three quarters of the world’s women unbanked, women may actually prefer access to financial services with features of illiquidity in some circumstances. Liquid cash could be dangerous to a woman’s wealth if socially she is obligated to financially help out family members and friends if they ask. It may be hard for a woman to not hand over her cash to her husband for example or her friend in financial difficulty – it could bring stigma, perhaps attack if she says no. However a savings account with fixed non-withdrawal periods, or other features to lock funds away, could provide a socially acceptable excuse. In providing illiquidity in formal financial services, it could attract women who otherwise would prefer to store their wealth in more illiquid forms such as gold and livestock or hidden away in difficult to reach places. Illiquidity could not only protect wealth from the saver’s own impulses, and the demands of those around her.

Women experience high emotional return for good financial management

A recurring theme in James’ work saw that the rewards for good financial management were beyond financial for women – this applies to women across the economic spectrum. Juntos Finazas, which was borne out of a class project from the Stanford Design School, helps Spanish speakers save via SMS. The founders saw that SMS was the right technology to help low-income Latinos as they tend to use mobile devices more than other groups and are substantial SMS users. 72% of successful Juntos Finazas savers said at sign up that they had never saved successfully before. Importantly, in feedback, users cite that using the tool to help them save has made them feel like better mothers, better daughters – the return is more than extra money leftover in an account.

In consultation with IDEO, the successful Keep the Change savings program from Bank of America originated from the observation that women were more satisfied by the act of saving than the interest rates offered on savings itself. The program was therefore designed to emphasise the action of saving rather than focusing on the potential reward. Keep the Change automatically rounds up purchases on the Bank of America debit card and transfers the difference to a savings account, building up a savings balance subtly over time. Since its launch in 2005, the program has led to 12 million new customers building up an additional $3.1 billion of savings.

Financial planning can save lives

Having a financial plan in place affords protection for life’s shocks, and in some cases can make the difference between life and death. Although still imperfect, there are now maternity saving programs to help women save money over time to access skilled maternal care. In Kenya, where only 43% of births occur in health facilities and many Kenyans still lack access to basic maternity care and health insurance, medical payment can be a life-threatening barrier for mother and child. Changamka, established in 2008, developed a smartcard program which allows women to set saving goals and save via the mobile payments service, M-PESA. The program is a dedicated maternal savings program which locks the deposited funds for maternity expenses only. USAID has written up a case study on this project, which can be accessed here.

With financial technology advancing globally the practice of HCD puts people back in the center of experience to build lasting solutions. With 75% of women worldwide without access to financial services – and importantly the lack of understanding and emphasis upon their needs as cause and effect of their exclusion – HCD can provide an attractive framework to unlock their considerable potential.

For more information on the topic connect with @jamesmoed on twitter.

Other interesting links on HCD and financial inclusion include:

This blog first appeared on the Global Fund for Women Blog, Her Blueprint