How analytics drive innovative financial services

The fourth MasterCard Symposium on Financial Inclusion in Rwanda served as a platform for industry experts to delve into the realm of data analytics and its impact on driving financial inclusion. Herman Smit, the Technical Director at The Centre for Financial Regulation and Inclusion, sat down with CNBC Africa to shed light on the critical role of data in revolutionizing the financial services landscape. Throughout the interview, Smit emphasized the need for tailored credit scoring models that cater to the unique contexts of developing markets like Africa. Unlike the US and Europe, where formal employment and asset registry systems are well-established, African economies lack such infrastructures. This disparity necessitates a shift in how financial institutions assess creditworthiness and validate identities. Smit highlighted the importance of leveraging alternative data sources, such as social media profiles, to complement traditional methods of identification. By harnessing the power of data analytics, organizations can generate insights that enable them to better serve underserved populations and enhance their financial literacy. In essence, data analytics serve as a catalyst for bridging the gap between financial service providers and low-income customers, paving the way for more inclusive and sustainable financial ecosystems. One of the key challenges facing the African financial services sector is the limited presence of individuals in credit bureaus. According to the World Bank, only 7% of Africans have any form of credit history recorded, underscoring the inadequacy of current credit assessment mechanisms. Smit advocated for a reevaluation of the reliance on credit bureaus and proposed the establishment of centralized data repositories to streamline information sharing and decision-making processes. By empowering regulators to oversee the generation and utilization of data within supervised entities, a more cohesive and efficient market environment can be fostered. The conversation also touched upon the cost considerations associated with investing in data architecture. Smit emphasized the importance of aligning data collection efforts with the specific business challenges that institutions face. By developing a targeted data strategy that addresses the unique needs of low-income customers and inexperienced financial services users, organizations can optimize their operational efficiency and reduce costs. Ultimately, the key takeaway from Smit's insights is the transformative power of data analytics in reshaping the financial inclusion landscape. By leveraging data-driven approaches and fostering collaboration among stakeholders, the industry can unlock new opportunities for sustainable growth and development. Harnessing the potential of data holds the key to driving innovation and fostering a more inclusive financial ecosystem in Africa and beyond.