Using behavioral science, gamification, and data science to enable micro-entrepreneurs to flourish across Latin America
The following is a guest post written by Flourish Fi, an organization whose mission is to empower all people to build positive money habits and achieve financial security.
Changing habits is not easy. When those habits are financial, the mission gets even more challenging. Simply talking about money can be taboo in some cultures, and when it is not talked about, good money management can feel elusive and exclusive, leading to the idea that having an emergency fund or taking good care of your money is something for the rich and privileged.
Flourish Fi is tackling this mission of empowering people to create positive money habits. We combine behavioral science, gamification, and data intelligence to drive behavior change with our module technology that uses an API to connect with financial institutions’ apps or websites. In partnership with Strive Community, we have an opportunity to expand our personalized platform for a new segment — micro-entrepreneurs — and expand our impact across Latin America, with a special focus on Brazil.
For micro-entrepreneurs, the global COVID-19 pandemic highlighted the deepening importance of better financial management, as well as the new demands that arose from the need to keep up with changing technology and innovation. Pre-pandemic business models — as simple as knocking on people’s doors, selling cake, or having clients come to their restaurants — had to adopt the use of food delivery apps, digital messenger platforms, and digital payments. All those learnings had to happen fast.
Engaging the first generation of digital banking users
During the pandemic, many Brazilians opened bank accounts for the first time to receive government assistance. Agencia Brazil reports that around 14 million people opened their first bank account in 2020, increasing the percentage of financially included Brazilians over 15 years old from 86% to 96%. That growth in digital banking is also reflected in small businesses. In 2020, the Central Bank of Brazil released Pix, an instant digital payment system. According to Agencia Brazil, by 2022, 86% of Brazilian small businesses were using Pix as a payment method.
Digitalization has been accelerated through contactless payments, instant payments, online shops, and delivery services. For the first time, almost all the adult population in Brazil has access to financial institutions and digital banking. Younger generations had an easier time adapting to the quick change, but for many, especially micro-entrepreneurs in remote or underserved areas, it was more difficult to understand the banking system and the digital world.
This shift towards a more digital world highlighted the need for banking products that create personalized and engaging experiences that guide newcomers to understand digital banking and the products and services that fulfill their needs and lead to loyal customers.
Flourish Fi’s solution is already being used in Latin America to engage and welcome new users to digital banking and, at the same time, empower them to have good financial habits. For example, this could include incentivizing them to increase deposits, build better financial knowledge, and pay bills on time. Our solution also provides data to financial institutions by using elements from gamification and behavior science — with better knowledge of their clients, financial institutions can more easily create personalized and engaging experiences that lead to loyal customers. In our partnership with Strive Community, we are expanding our products to focus specifically on micro- and small entrepreneurs.
The power to guide digitalization and better financial management for micro-entrepreneurs
In Brazil, the need for an easy-to-use and engaging digital technology targeting micro-entrepreneurs is clear. According to the Brazilian government, micro- and small businesses are growing fast in the country. In 2018 there were 540,600 micro-businesses, which grew to 579,900 in 2020. In the last two years, almost 8 million new micro- and small businesses were registered in the country, according to Agência Brazil and Sebrae. This growth, combined with Brazil’s open banking, creates an opportunity to adapt our technology to help micro- and small entrepreneurs navigate digital banking and find the best opportunities for their growth.
Sebrae, a Brazilian micro- and small business support service, reports that 77% of Brazilian micro-entrepreneurs have never taken a course or training in finance. Further, one in every three micro-entrepreneurs does not check their bank account and has no record of how much money is coming in and out of their business. Our Flourish Fi technology is designed to incentivize responsible financial management practices, such as saving or investing money, and paying loans and bills on time. Previously, we’ve seen users increase deposit values by 32%, increase online bill payments by 26%, and double their usage of partner banking apps.
Those changes came from the powerful combination of behavior science, gamification, and data intelligence to drive behavior change in an easy and fun way for the end user, while at the same time increasing loyalty and engagement between financial institutions and their customers.
While gamification is becoming more frequent in digital financial services, it’s not as common when in technology geared toward micro- and small businesses. The Filene Research Institute estimates that the gamification market will grow to $30.7 billion by 2025 — representing a big opportunity for financial institutions to embark on this new trend. Flourish Fi is leading the way by focusing on this segment with the Strive Community partnership.
Flourish Fi’s technology and the power to guide to better financial habits
We achieve behavior change by combining transactional and behavioral data with gamification elements to help financial institutions create personalized and rewarding experiences that incentivize users to increase deposits. For micro-entrepreneurs, the learning curve begins with creating the habit of record-keeping, or with separating personal and business finances. Over time, micro-entrepreneurs learn how to use digital tools and integrate more fully into the financial institution's system and the digital world. Our partnership with Strive Community aims to foster micro- and small businesses’ resilience and growth by incentivizing them to better use digital financial services and build responsible money management habits.
For Jessica Eting, Flourish Fi co-founder, the increase in the number of micro-entrepreneurs during the pandemic has made the gap in financial management habits more apparent: “When we talk about micro-entrepreneurs, we are talking about those whose business is their main family income. The majority did not have an opportunity to learn how to structure their business and finances at a business school. We see our technology changing behavior and helping individuals get comfortable with digital finances across the Americas. We understand the potential that Flourish Fi, in partnership with Strive Community, has to help those businesses to be financially sustainable.”
By leveraging the knowledge we’ve gathered from increasing good personal financial habits through previous partnerships we’ve built with financial institutions, we are well positioned to design similar personalized financial journeys for micro-entrepreneurs, especially those in remote areas in Latin America, who have had to learn in the past two years how to digitalize their business and how to navigate the financial system.
If you’re interested in learning more about how to empower people to have better financial habits while increasing engagement and loyalty, follow Flourish Fi on LinkedIn.