Key ways to increase financial inclusion in Africa

At the fourth MasterCard symposium, CNBC Africa's Nozipho Mbanjwa sat down with Saugato Datta, Managing Director at Ideas42, to discuss the key ways banks can increase financial inclusion in Africa by leveraging the vast amount of behavioral data they possess. Datta highlighted the significant expansion of financial services for poor individuals over the past decade, especially with the rise of mobile money and technology-driven solutions. While access to these services has improved, the challenge now lies in promoting actual usage and optimal financial management. Behavioral insights play a crucial role in understanding why people make certain financial decisions and how to guide them towards more beneficial choices. By utilizing behavioral science, banks can enhance their product design, marketing strategies, and customer interactions to drive better outcomes for their clients. Datta emphasized the importance of behavioral economics in addressing usage and uptake issues within the banking industry. To make behavioral science more accessible, Datta shared practical examples of their work with banks in Nigeria and FinTech companies in Africa. In Nigeria, they are implementing simple SMS testing to encourage account holders to save by highlighting how their savings compare to others. This subtle framing technique has shown to be highly effective in influencing financial behavior. Additionally, their collaboration with a FinTech firm focuses on optimizing app features and messages to prompt users to explore more functionalities, ultimately increasing usage and engagement. Datta underscored the significance of leveraging data to conduct quick tests and measure the impact of behavioral interventions. By analyzing customer behavior and response data, banks can continuously refine their strategies and drive long-term improvements in financial inclusion. The ongoing experimentation with different behavioral nudges aims to gradually address usage challenges and enhance the overall effectiveness of financial services. As the banking sector in Africa embraces behavioral science principles, the potential for driving positive financial behaviors and promoting inclusive growth becomes increasingly promising. By bridging the gap between behavioral insights and practical applications, banks can unlock new opportunities to empower individuals, especially those underserved by traditional financial systems.