Photo by Md. Mahabub Hossain Khan, 2016 CGAP Photo Contest
Business and Markets
Banks going digital. Tech giants integrating payments into their platforms. Off-grid solar companies offering mobile education loans. Every year, the digital economy is spurring new business models and attracting a wider range of players to the financial services industry, including non-traditional actors like fintechs and social networks. This diversity of providers and business models has enormous potential to advance financial inclusion and contribute toward achieving the Sustainable Development Goals (SDGs). CGAP’s research sheds light on promising business models that leverage digital technologies to design and deliver financial solutions for low-income customers. Our work also demonstrates how increased connectivity, facilitated by tools such as interoperable payments schemes and open APIs, can make it easier for innovators to offer useful, affordable financial solutions.
By developing business models that leverage digital technology and by building the right connectivity through strategic partnerships, financial services providers can sustainably reach more low-income consumers with useful financial solutions.
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Millions of low-income households in emerging markets rely on micro and small enterprises (MSEs) to pursue economic opportunity and build resilience.
While a few platforms have experimented with offering financial services in partnership with fintechs and other financial services providers, this remains a largely unexplored area. CGAP is currently working with several platforms and their partners to pilot embedded financial solutions for platform workers.
In the context of global development, asset finance is about much more than enabling consumers to purchase expensive goods: it’s about helping people to afford the tools they need to improve their lives.
Cash-in/cash-out agent networks are key to extending digital financial services and ultimately financial inclusion. Providers have struggled to extend these agent networks in rural areas, where sparse populations lead to lower transaction volumes and weaker financial incentives for businesses to serve as agents.
While many fintechs claim to advance financial inclusion, the link between specific innovations and financial inclusion is often assumed rather than proven. The reality is that it is hard for funders, investors and social entrepreneurs know which innovations matter for low-income, underserved customers.
Global development challenges intersect with the financial lives of low-income people: where they get their money, how they manage it, whether it unlocks services that help them build sustainable livelihoods. CGAP research shows there are promising ways for digital finance to address these challenges.
Digital financial services providers will find here information to help them decide whether open APIs make sense for their business and, if so, how to implement an open API strategy.
CGAP's interoperability work seeks to help low-income users transact more easily across digital financial services networks. Exchanging payments is about much more than simply building the technical connections. Interoperability also requires effective governance, clear operating rules, and business agreements on how to support safe and reliable connections.
With vast amounts of revenue and data at stake, merchant payments are widely seen as one of the key battlegrounds in the struggle over the future of digital financial services (DFS).