How can fintechs form effective partnerships with social and community lenders to support financial inclusion and what are the key issues and opportunities facing potential collaboration?
This rapid report introduces a set of primary and secondary research and insight, to better understand and categorise the landscape, and explore opportunities for better crosssectoral collaboration between social/community lenders and fintechs to support financial inclusion.
Although there are pockets of good practice, the fintech sector has not yet engaged with credit unions (CUs) and community development financial institutions (CDFIs) at scale and, overall, challenges exist in applying disruptive technologies in ways that improve the lives of those who are excluded from the current system.
This work researches and documents the issues and potential solutions underpinning the narrative of financial inclusion. The focus here is to bridge the gap between digital providers of financial services (fintechs) and social and community organisations working with financially excluded groups.
The report offers six specific areas where technology could help social and community lenders to grow and have a greater impact:
- Frictionless workflow – Creating products with a more streamlined experience. For example, allowing faster decision-making and smoother ‘onboarding’ of new customers, while reducing drop-offs along the way.
- Customer/member acquisition and management – Using digital marketing tools and approaches such as customer relationship management systems, search engine optimisation and segmentation to cost-effectively target and reach new customers.
- Scalable solutions – Approaches that could lower transaction costs, such as shared platforms or blockchain/distributed ledger technology-based systems. This could involve consolidation and/or new approaches to payment processing, e.g. where back-end technologies are shared across multiple smaller organisations to achieve better economies of scale for all.
- Digital experience (UI/UX) – Offering greater immediacy, personalisation and a better customer experience through simpler, cleaner, and responsive design (that works well across mobile devices).
- Integration – A recurring criticism we heard about the existing systems credit unions use was the lack of integration with other third-party systems, such as open banking, payroll and benefits systems. Better integration could help credit unions (CUs)/Community Development Financial Institutions (CDFIs) verify customers’ identification, inform lending decisions or offer automated payments through employers’ payroll.
- Analytics/Artificial Intelligence (AI)/data science – Although CUs/CDFIs generate a wealth of potentially insightful customer data, fintech partners could potentially assist in turning this data into actionable insight. This might be through improved verification, decision-making analytics, or automated AI/chatbots to improve customer journeys and user experience.