Every half hour, the internet, mobile phones, and other internet-connected devices generate digital data equal to all of the written works in human history. A resource that vast can inform nearly everything — from how we shop, travel, or build credit history.
As data becomes increasingly available, we’ve grown better at analyzing and mining it to make predictions. That’s the value of big data — with enough information on hand industries can gain additional insights, improve operations, and even automate certain processes.
For those of us working to create a financially inclusive world for the three billion people failed by the world’s financial sector, big data also holds the promise of providing better, expanded services to those who live in or near poverty.
Accion’s latest Insights paper, Unlocking the Promise of (Big) Data to Promote Financial Inclusion, documents the steps that financial service providers can take to harness data’s transformative power, improve their operations, and accelerate financial inclusion.
Key finding: “small data” can have a big impact
One of the paper’s key findings is that even “small data” can have a big impact. Many financial service providers working in emerging markets assume that, just because they don’t have as much data as a larger commercial institution might, they can’t benefit from data-driven innovations.
That just isn’t the case: any amount of data is worthwhile, and financial service providers working with the financially underserved typically have a wealth of valuable information on hand already. They should find ways to use what’s available to them to improve and inform their operations as soon as possible.
For instance, one Accion partner offered financial literacy classes followed by exams for loan applicants. Those exams scores were never intended as a part of our partner’s loan assessments — but they should have been: once those scores were digitized, it was discovered that the exam results were highly predictive of loan default rates.
And that’s just one example. Financial service providers sometimes interview applicants, visit their homes and businesses, and speak with neighbors before making a decision. And while all of that data can inform an individual loan decision, if those processes are digitized and formalized then they can reveal a great deal more.
How to use data to promote financial inclusion
Our paper details every step that financial service providers need to take to go from “small data” projects to “big data”-driven automation. There are a number of factors to consider, including what to look for when hiring, technical requirements, legal questions, and more.
The paper — which was written with support from the Citi Foundation — also details nearly 60 ways that financial service providers from around the world are using data to improve their operations and extend financial services to the underserved.
I hope that this new research will be a resource to the broader financial inclusion community, and that it helps provide still more people, businesses, and communities with the high-quality financial services that they need to build better lives.