Welcome to DFS Lab’s first podcast! In Episode 1, our own Ben Lyon sat down with Meghan Flaherty of Women’s World Banking to discuss principles for designing digital financial services for women. Some key takeaways from the interview:
Ben: Hello and welcome to the inaugural DFS Lab podcast. My name is Ben Lyon, one of the Entrepreneurs in Residence at the Lab, and I’m glad to be joined today by Meghan Flaherty, a Project Manager at Women’s World Banking. Meghan, thank you for joining us today.
Meghan: It’s great to be here.
Ben: So some context here, and why we wanted to start the podcast, was to get some important conversations happening in the fintech community, especially related to our work supporting startups in emerging markets where we predominantly early-stage startups in Africa and Asia. One of the things we try to do in our accelerator is try and prepare startups to get their products to market quickly and really identify a path to scale that enhances financial inclusion. What we’ve recognized, and why we wanted to start this podcast and specifically have this episode, is that we are not doing it exactly correct, and so when we think about financial inclusion and wear our technology hats, we often just dive straight into the product — we carry the assumptions that we brought with us — and one of those assumptions that I know you, Meghan, have an opinion on and are going to share here momentarily is that we can just take a gender neutral lens when we’re developing products for women, and that if we just assume that we don’t put in one pronoun or another everything’s going to be fine and we can extend financial services to men and women equally. That’s wrong, and it’s a stance that I’m really excited to hear more about. So, our goal today is to introduce you and to have a quick conversation about what we can do as practitioners — and what can startups do, and product managers in startups do — to make sure that they’re developing the right products, not just for men, but also — and specifically — for women because it’s a great business opportunity, it’s half the world, and it’s the right thing to do. With that, Meghan, let me turn over to you, and if you can introduce yourself we’ll get into some of the questions.
Meghan: Great, thanks Ben. Thanks for the opportunity to join DFS Lab’s inaugural podcast. I’m very honored. So, as you mentioned, I’m a Project Manager with Women’s World Banking. Women’s World Banking, for those who may not know us, is the global leader in women’s financial inclusion. We root our work in a deep understanding of the women’s market, and we tackle financial inclusion in three interconnected ways. First, by working with partner financial service providers to develop market-driven and scalable solutions that better position those institutions to serve women. Second, through our private equity Gender Lens Investment Fund. And, finally, because we know that diverse institutions are proven to be stronger, we build institutional capacity through leadership and diversity programs targeting women leaders and the mentors and executives that can support them. Through this holistic approach and our global network of over thirty partners, we accelerate economic opportunity for low-income women and growth for financial service providers.
Ben: Can you share a little bit about your own background?
Meghan: Yes, I have a background in international development with a focus on economic empowerment of women. I’ve been with Women’s World Banking for a little over two years now, and prior to that spent some time in the Peace Corps and some other non-profits in this space and am now thrilled to be continuing that work with a focus on women’s financial inclusion because I see so much strong potential to really improve the lives of women globally through this work.
Ben: Wonderful. One of the questions we have is, where are you seeing progress? So, in your previous experience and your current role, where are you seeing progress in expanding financial inclusion for women, and how can like-minded individuals, whether they’re in startups or non-profits, any part of the enabling ecosystem, what can we do to better accelerate that progress?
Meghan: Sure, so we’ve seen substantial progress in financial inclusion, including women’s financial inclusion in the past decade. The World Bank’s Global Findex Database shows us that over 700 million people became financially included, for example got their first bank account, from 2011 to 2014, so that’s a lot of people coming into the formal financial system in a fairly short time span. However, throughout those same three years, a 9% gender gap in access to financial services persisted, unchanged, in emerging markets. This leaves over 1 billion women who still today do not have access to formal financial services. So, this tells us that, while there’s been tremendous progress, there is an even more tremendous amount of work to be done and reaching the 1 billion women who remain excluded will require a concerted effort, and a collaborative effort, from a variety of diverse stakeholders. We see roles for everyone from regulators who need to create the enabling environment for financial inclusion, role for governments who can advance women’s financial inclusion in multiple ways, for instance the development of a national financial inclusion strategy that calls out gender-specific targets, or by digitizing government-to-person (G2P) payments that often have women as their primary beneficiaries. The G2P programs in Mexico and in Pakistan are both excellent examples of that. And governments can also work to provide and support financial education for women and men. Another key stakeholder is, of course, financial service providers themselves. This includes traditional players like banks and microfinance institutions, but also new entrants such as mobile network operators who are offering mobile wallets and mobile financial services as well as fintechs offering a whole variety of financial services like the companies in DFS Lab’s partnership portfolio. So, these financial service providers need to be developing financial solutions that work for women and that meet their unique needs. And then we also see a role for, beyond just the financial services sector, for private companies in other areas such as manufacturing or fast-moving consumer goods who have millions of women in their supply chain across the globe, and they can play a great role in collaborating with financial service providers, for instance, to bring financial products and services to those women. So those are the kinds of cross-sector partnerships that we see as holding a lot of potential to really advance women’s financial inclusion in the coming years, and we also are looking to digital solutions to increase women’s opportunity to access the formal financial sector due to the lower delivery costs and greater scalability. Digital solutions also typically offer greater convenience and affordability, which are concerns that are very important to women customers, so they have the potential to address those key barriers as well.
Ben: Yeah, and I’d like to kind of dive in to convenience and affordability in a little bit, but that number — more than 1 billion women still have no access to financial services — it’s a shocking number. It’s huge. Where are these women? Is this predominantly Asia? Is it Africa? Is it mixed, or are you seeing particular concentrations where it’s acute?
Meghan: That’s a really good question. We have done that analysis using the great data provided by The World Bank as well as Intermedia and other surveying organizations and we’ve identified a number of priority markets looking, not only at where are the most unbanked women in terms of mass numbers, so those might be larger countries such as Pakistan, Indonesia, Nigeria, Mexico, Egypt, India, Bangladesh. Some of those really large countries do have high numbers of women. Some of them do have very large gender gaps, and Pakistan is one example of that. So, we look, not only at where are there the most excluded women, but where are the biggest gender gaps, where are there also larger numbers of low-income women who are unbanked, since that’s part of our mission as well. Really, they are in regions across the world. There is no one area of concentration, which is why we continue to work globally.
Ben: Women’s World Banking, right? This is a global problem.
Ben: Very interesting. And this kind of segues to my opening statement about some mistakes we’ve made, and these are kind of mistakes of omission or ignorance, I think, but what mistakes would you say we’re making as an industry? So, as the DFS, or digital financial service, industry, even kind of looking at the developed world with more traditional fintech companies, what mistakes are we making that are exacerbating this, or just not helping?
Meghan: So, I think one of the most common mistakes we see is what you mentioned in your intro about assuming that taking a gender-neutral approach will result in equal access for men and women. Empirically, that’s not the case for a few reasons. The status quo is that men are more financially included than women. They have greater and digital literacy rates. They have greater access to digital technology in terms of, particularly, mobile phone ownership — there’s still a significant gender gap there in many markets. Digital literacy rates are correspondingly also higher among men. This leaves us with that 9% gender gap I mentioned earlier, so the status quo is unequal access. That means that we as an industry of financial service providers and other stakeholders who care about this issue need to be taking proactive action to overcome that gender gap. And this matters, not only from the social perspective of wanting to achieve greater financial inclusion for women and men, but also from a business perspective and from a macro-economic perspective. From the business perspective, if a financial service provider is not actively serving women, that’s 50% — more than 50%, really — of the untapped market given the gender gap. That means women are the majority of unbanked customers who need innovative that fintech companies can develop. And, from a macro-economic perspective, when women have unequal access, communities, families, and even countries cannot achieve their full economic potential. So this assumption of gender neutral as being equal for men and women really doesn’t pan out. It’s also important to recognize that men and women make financial decisions differently and they also use mobile phones differently, and there’s research done by many other organizations on those counts. The thing to keep in mind as well, the interesting number, is research shows that women account for up to 80% of purchasing decisions globally, so by not intentionally addressing the unique needs of women, fintech companies and companies in any other sector are missing out on a potentially large share of the market and additional growth opportunities. And the last point to mention under this gender-neutral-is-equal-access assumption is that the tech industry, including the fintech industry, remains majority male. We all carry implicit biases with us that inform the way we see the world, so if I’m a woman that’s part of the identity that shapes my world view and if I’m a man that’s part of that identity among a whole host of other personal characteristics. Those biases related to gender can unknowingly be reflected in the solutions that we design unless we take proactive steps to test those assumptions, validate them, and bring in diverse perspectives. So, that key mistake of the gender-neutral approach is a core one that we see. One other mistake that I’ll mention is a failure to capture and analyze gender-based data on your customers, on your users. So, capturing in the sense that many, many fintech companies still are not asking their customers, or confirming, are you a man or are you a woman? If you’re not capturing that information, you can’t analyze that, which means you can’t do even the most basic segmentation analysis to say ‘How might the behavior of my users or the needs of my users differ by gender?’ So, failing to capture and analyze that data is really just a missed opportunity to know and serve your customers better.
Ben: I just want to repeat back one of the things you said: The status quo results in unequal access. That definitely merits repeating. Starting to focus down into the product-level, what are the types of things that we might do to correct this? I mean, you’re talking about 80% of purchasing power globally being made by women, and that’s a shockingly-large amount. That’s a lot of GDP. And so, if companies aren’t paying attention to this, it’s bad business, fundamentally, among other issues that it raises. So, if you were an executive or a product manager at a DFS company, what would you do, or what might you do, to better recognize these biases, to better recognize some of the mistakes and assumptions we’ve made so that you could correct them?
Meghan: The paradigm shift that I would love to see take place in the DFS industry, and the financial services industry more broadly, is for every single company to recognize the women’s market, including the low-income women’s market, for the incredible business growth opportunity that it is. Because if companies recognize that, they would act accordingly, meaning they would be doing everything in their power to learn more about this customer segment and the sub-segments within it, and design solutions that meet those customers’ needs, etc. So, going back to this shockingly-huge number as I think you phrased it of over 1 billion women globally, that is a market opportunity for any fintech company, and we believe that market-driven solutions have tremendous potential to scale and to bring women into the formal financial system. Treating women as a distinct customer segment is the first step towards that objective, towards that end. And this start with capturing and analyzing that consumer data that I was talking about. It also starts with conducting consumer research to get to know the needs of the specific segment of women that you want to target, so that’s the specific needs of women in a given market and then within that where are the opportunities for you in your company-specific offering and value proposition. Which needs can your company serve? I’ll give an example of an opportunity that we came across in this way. So, we were working with a partner bank of ours, Diamond Bank in Nigeria, and the bank was looking to increase its outreach to the low-income women’s market. So, we were looking for opportunities to do that. And one of the potential segments of women that we identified were a group of market traders. These were women who, in many cases, literally sat no more than 20 yards from a bank branch and yet the vast majority of them had never entered the bank branch and, of course, had never opened an account. And so, we set out to find out why. Proximity, at face value, wasn’t the issue. When we started doing research and asking these women how they currently manage their financial lives and their needs, what pain points they have, how a bank or other financial service provider might address those needs, what we found out is that these women are time-poor. They are the sole owners and managers of their market stalls, and they are busy. They are there from sunup to sundown every day. They’ve got customers coming and they don’t want to miss a sales opportunity, so they don’t have time to go walk to the bank branch, stand in a line, and meanwhile leave cash on the table at their stall. So, we worked with Diamond Bank to design an agency banking, doorstep collection service and corresponding savings product, a basic mobile account that can be accessed via a mobile phone and deposits can be made in very small amounts at the women’s location in the market by a roving sales force. So that’s an example of how identifying women as a segment, going out and understanding their needs vs. the needs of men, and then designing a solution that specifically addresses those needs is a growth opportunity for the bank. They have over 500,000 accounts now — Beta Accounts, they’re called.
Ben: And that’s just in Nigeria?
Ben: And so you have agents going around the market with a smartphone or POS device and they’re capturing deposits from the women in cash, where they work.
Meghan: Yes, exactly.
Ben: One of the things that was really helpful for the industry in general was a few reports put out by CGAP, which is part of The World Bank. They’ve been trying to define a set of design principles, really. They’ve done a review of DFS applications in India. They’ve done a specific toolkit in partnership with Karandaaz in Pakistan about how to modify and design your apps for that specific market. And then they put out this larger set of principles around designing smartphone user interfaces and experiences for mobile money. And what’s lacking, I think, is a set of design principles that are specific to women. Of course, no one rule applies to everyone. These are 1.1 billion people in tens of markets, after all, but if you were to try to abstract and create some design principles, what comes to mind?
Meghan: Yes, I’m familiar with the work that CGAP and Karandaaz did and found those principles very useful, and really some of them are very similar to some of the ones that I’ll identify here for women-specific design, or women-focused design. In my mind, four key design principles come to mind for designing fintech products for women. The first is get to know your customers. This applies to women and men, but it’s particularly relevant for women given that they remain more financially excluded, so we still know less about them until we ask. So, this means going out, doing research, talking to women in your market, understanding their financial lives and financial needs, understanding how they currently meet them, and identifying the pain points. What are the most pressing gaps she has in achieving financial health for her business, for her family, for herself. With that, you can design effective solutions for those high priority challenges, and those pain points often vary by gender. The second principle that is critical is to segment your consumer research as well as your UX testing by gender. We know that women are less likely to speak up in mixed gender groups, which risks their perspective not being captured. There are often also gender differences in financial behaviors and priorities as well as the perceptions of a user interface, so it’s important to develop a research and testing plan that enables you to capture those nuances and design accordingly. The third principle is meet women where they are and engage them in the way that makes the most sense for them. Women have many responsibilities across both business and family. She may not have time to participate in a UX testing session that is scheduled during the same hour when she makes lunch for her family. She may not be able to leave her shop unattended for twenty minutes to walk to an agent location, and that’s the example with the Diamond Bank Beta Accounts where doorstep collection was a key feature. Effective financial solutions must be designed with women’s unique needs in mind and based on an understanding of what those needs are. In most cases, we found that products designed with women’s needs in mind end up being objectively better products. Women have high standards, and so the products that work for women typically do also gain traction among men. But the reverse is not the case. The final design principle is build in opportunities in your product design to gain her trust. Women are less likely than men to trust a new digital provider with their money, and this is particularly true for low-income women who are statistically less likely to have had any previous experience with either the formal financial system or with mobile phone usage beyond red button green button usage. So, thoughtful design can help women overcome these questions and these uncertainties that might be limiting their access. For instance, you can design the customer journey in a way that allows new users to explore the interface before having to commit to put money on the table and sign up. She can explore, ask around, ask questions if there is an interface for that, that can help build initial trust. Building in transparency, including clear and upfront explanation of any fees to be charged, and continuing to build trust throughout your interaction with the user through transaction confirmations and through offering a clear and effective customer recourse channel in the event that errors do happen and questions do come up. She needs to know that she can resolve those.
Ben: Many things have jumped out in our conversation. To reiterate some of those, one was the size of the market. So, 1.1 billion women are financially excluded, which is three times the population of the United States. 80% of global purchasing power, according to World Bank estimates, is decided by women, and that’s a huge amount of money. And then there are these four design principles, which I think are really interesting. Repeating them back, 1) get to know your customers, 2) segment and capture gender-specific data and conduct gender-specific user testing, 3) meet customers where they are, and 4) build and reinforce trust throughout the user journey. Also, if you design your app for women, it will almost certainly work well for men, but not the other way around. In the last minute or two here, do you have any last thoughts for the industry?
Meghan: What I would leave the industry with, and DFS Lab is a great example of an organization that’s advancing this conversation, is to make women not an afterthought, but really a core customer segment and recognize that opportunity. Because it is a huge opportunity, both from a business perspective and a social perspective. Women’s financial inclusion is good business, and also good for the women themselves.
Ben: Meghan, we really appreciate your time. This is Ben Lyon with DFS Lab. I’ve been speaking with Meghan Flaherty, a project manager at Women’s World Banking, and if you’d like to join the conversation, please connect with us on Twitter at @TheDFSLab. Let us know what you think. Feel free to comment on the blog and let’s get this conversation started. Meghan, thank you for your time!
Meghan: Thank you.
An interview with Rose Goslinga, founder of Pula and a pioneer in the field of agriculture insurance, details the story behind the startup that is insuring small-scale farmers in Africa
Entrepreneur, Rose Goslinga, didn't just found the agriculture insurance startup Pula, she was part of the first agriculture products developed in Africa for smallholder farmers. Her journey as an entrepreneur is a unique and inspiring one. Growing up in Tanzania with her family, she never imagined she would one day be selling insurance, or a pioneer in the field of agricultural insurance. But today, she is the founder of Pula, a company using satellite data to track the rains in Africa that farmers heavily rely on, and to provide insurance for farmers when the rains fail.
Many families in rural Africa grow their own food on small-scale farms to feed themselves. Their food security is tightly woven with the weather: if it rains early and steady, families will eat; if it rains early and farmers plant their crops, and the rains stop, the crops fail. Consider the Year of the Cup, a colloquial name for Kenya’s devastating drought of 1984, when the entire harvest of that year could fit into one cup. Farmers and families had no mitigation in place for such a disaster.
Pula aims to never see another year as bad as the Year of the Cup by providing insurance to these small-scale farmers. It’s micro insurance. Instead of relying on multiple farm visits like traditional insurance, Pula uses satellite data to track the clouds, essentially tracking the rain. There is far less cost involved, making it viable to offer insurance on a small scale because it allows Pula to see when farmers might need assistance, remotely. If there are no clouds then there is no rain.
“To make insurance have a positive impact you need to think about how the user will benefit,” Goslinga said.
If farmers have a loss early in the season due to no rains, Pula gives them new seed so they can replant and have a harvest instead of waiting until the end of the season to reimburse them.
Pula makes insurance simply part of the package when farmers purchase seeds - quite literally. Pula partnered with a seed company to include the price of insurance in the package of the seed. When farmers purchase the seed packets, there is a card with a number in the package. Farmers text that number which then is attributed to a specific pixel on the satellite to determine their location. That location is monitored by satellite data to track the rain for the next three crucial weeks of planting. If it doesn’t rain, then Pula replaces the farmer’s seed. But this kind of agriculture insurance was non-existent before Goslinga.
Goslinga's first venture into the world of insurance came with her first job out of University. She was working for the Ministry of Agriculture of Rwanda from 2006 until 2008. She had no background in agriculture, having studied economics in school.
“I had this fantastic boss. I think, with your first job, it doesn't really matter what you do but if you have a great boss it's going to be a great experience.”
Her boss, the Minister of Agriculture, asked Goslinga to research insurance for the Ministry. Their work involved a lot of risk and they had no risk mitigation.
“I liked finance. I was the person in the Ministry who did the budget. I was interested in finance and decent with numbers. We would take on a lot of risk with no insurance so I started researching that. And that research led into Rwanda's first agriculture insurance pilot.”
After her position with the Ministry ended in 2008, Goslinga moved to Switzerland and connected with a foundation with plans to work on agricultural insurance. After growing this project to reach over 185,000 farmers, she decided she wanted more and intended to test her leadership skills. She left the foundation to begin Pula and has been running Pula since 2015. Just in 2016, Pula successfully insured 400,000 farmers across six countries in Africa. This success comes from Goslinga's dedication, expertise and a committed, grounded team.
“Our team brings different skill sets. Everyone has to be willing to do everything. What I love about each of my team members is we all have a hard working attitude. We're not too big to do small things like make sure all of the brochures are properly stapled.”
DFS Lab is proud to work with Pula as Rose leads her team toward creating Africa’s insured future. We have great confidence in Rose and Pula and find the insurance-in-the-background process to be a true game changer in emerging market crop insurance.
Photos courtesy, Rose Goslinga, Monsanto India, and Allan Ngenda
Contributed to DFS Lab Blog by Andrew Mutua, Founder of PesaKit
Kenya is a global leader when it comes to mobile money services. In 2007, the telecom operator Safaricom launched its mobile money service M-Pesa as a simple way to text small payments between users. A decade later, the platform enables almost 30 million people to pay for crucial services, access loans, and send money all over the world. M-Pesa has become the world’s most successful mobile money service.
Digitizing and disbursing cash is enabled by a network of physical access points, or agents. In most cases, an agent is the most convenient way for customers to deposit or withdraw cash from their mobile money accounts.
Even with the M-Pesa revolution, digitizing and disbursing cash still has inherent limitations. The majority of agents consistently turn away customers because they don’t have sufficient e-float with a mobile money provider to facilitate a deposit transaction or enough cash to facilitate a withdrawal transaction. Additionally, agents incur a high cost of maintaining liquidity during e-float top-ups and fragmentation of the agent e-float if an agent is serving multiple providers which results in increased cash-flow pressure.
In Nairobi, Kenya, there's a new kid on the block. PesaKit. PesaKit's mission is to empower every mobile money agent on the planet to achieve and deliver more.
PesaKit is focused on agents because they are a core part of the operational infrastructure of mobile money. According to the GSMA state of the industry 2016 report, agents represented 94.8% of mobile money’s physical cash-in and cash-out global footprint whereas ATMs represent just 4.2% and bank branches represent 1.0%. In December 2016, 30 markets had 10 times more active (30-day) agents than bank branches. The expansive reach of agents is a hallmark of mobile money; with more than 4.3 million, or approximately 1.2 agents per 1,000 adults, of which 2.3 million are active.
For every 100,000 adults in Kenya, there are 11 ATMS, 6 commercial bank branches and 538 mobile money agents. This prompted Andrew Mutua, Founder of PesaKit, and his team to conduct a qualitative study to examine the potential of machine learning-based liquidity recommendations to help mobile money agents manage and improve their operations.
The study conducted in May and June of 2017 begins in Nairobi's Dandora estate, a sprawling low-income residential area. It hosts the largest dump site in Kenya and one of the most dangerous informal settlements in Nairobi. We meet Tobias Okusimba, in an 18sqft partition of his 100sqft home where he runs his mobile money agency business offering M-Pesa and Airtel money services. He also vends consumer durables. He has been an agent for the past two years, open 12 hours a day, six days a week. His primary motivation to start the agent business was to earn transaction commissions.
With a transactional value of nearly Kshs 40,000 ($400) per day he has to convert cash to e-float daily. This means walking a kilometer to the nearest bank. He fears insecurity during transit to the bank and running out of e-float during business hours.
We interviewed and collected data from four more agents in Nairobi then moved to Thika and Bomet, two other towns in Kenya.
225 KMs Northwest of Nairobi is Bomet - a bustling, fast growing, rural, agricultural town. There we meet Daniel Mugambi, owner of Classic Mobile Solutions, located at the heart of the town. His shop is illuminated by the various television screens displayed on the shelves along with other electronics and telecommunication products. He says business in the area is great, especially during harvest seasons. His mobile money business is a complimentary revenue generator. However, to extend his business reach and expand his customer base, he decided to open another electronics shop and mobile money agency some 25 kilometers away in a town called Mulot. Most of his customers are residents of the larger Bomet County from the agricultural farmlands. His main setbacks are e-float management and overseeing the shop in Mulot from afar.
Through our study we aimed to understand the urban and rural agent profiles. What are PesaKit's agent training and educational needs since we are using a smartphone app which is different from the common SIM toolkit agents use? How can PesaKit resolve the agent's liquidity problems? What do they do when their e-float is depleted? How often do they use the top up and top us method? Can agents use an app to manage their operations? What is the value they see in PesaKit? Who are competitors and alternatives to PesaKit's service? How do we validate our user interface design and app experience?
In total, we engaged 16 agents. Some of the patterns we observed from our study were:
E-float data overview from some of the participating agents
Source: Compiled by the author (2017)
Transactions and e-float relationships
E-float after withdrawal transactions:
When the agent performs a customer withdrawal transaction, the rise in e-float value indicates the amount being withdrawn or sent by the customer from their mobile money account into the agent's account and in return the agent gives the customer cash.
E-float after deposit transactions in June:
When the agent performs a customer deposit transaction, the decrease in e-float value indicates the cash being deposited, or given to agent, by the customer to top up their mobile money account and so the agent's e-float is deducted and sent to the customer's account.
The graph below shows the changes in e-float as the agent performs withdrawal, deposit and e-float top up transactions during the month.
The graph below shows the transaction points where e-float is affected.
We observed one of our agents for three months (June, July and August) and witnessed similar patterns. Her e-float went below Ksh 1,000 (Approx $10) 97 times.
What is PesaKit?
PesaKit is an AI powered digital/robo assistant for mobile money agents. It helps agents to know, manage, and control their liquidity (e-float and cash) through predictive analytics by forecasting their inventory needs for the next hour, day, week or month.
PesaKit also assesses an agent's creditworthiness and creates a score, where it previously didn’t exist, to enable the agent to borrow e-float when it's required or based on recommendations and insights.
The robo assistant sits on top of PesaKit's cloud platform that is currently connected to e-float lenders, mobile network operators and digital merchant service providers. The cloud platform interconnects all services to enable the agent to get liquidity recommendations, borrow e-float and sell value added services and products.
At the moment, PesaKit's merchant integrations, “Sell” feature, allows agents to sell digital airtime top ups for Safaricom, Airtel, Telkom, yuMobile and Kenya Power postpaid electricity tokens. Plans to add more products and digital financial services to the platform are underway.
The agent's experience
90% of the mobile money agents that we interviewed get their e-float depleted daily and have to turn away customers. This is an inconvenience to the customer, and a missed revenue opportunity and reputational risk to the agent.
We shared the PesaKit app prototypes with agents showing the different features available. Most agents liked the simplicity and intuitiveness of the app. They requested a Swahili version of the app. Two features dominated most of the conversations, the robo assistant and borrowing e-float.
All the agents loved the robo assistant with its various recommendations or insights. The recommendations are simple text styled messages, like how much e-float or cash an agent needs, projected customers and much more. They also appreciated the interactivity; being able to ask questions and getting advice in real time.
From the study, 70% of the agents said they would consider borrowing e-float from PesaKit. They appreciated PesaKit scoring and seeing the amount they qualify to borrow. This gives them peace of mind knowing they have e-float on-demand. They loved that the fees are clear and easy to understand.
Creating value through data
PesaKit's ability to continuously transform mobile money agent data points to valuable and actionable insights will enable the agent to improve their operations, reliability, credit-worthiness and profitability resulting in enhanced convenience, better financial services and lower costs for unbanked poor and under banked low income earners in urban and rural areas.
To learn more about PesaKit, visit www.pesakit.co.ke or email; email@example.com
PesaKit’s study was aided in part by Digital Financial Services Innovation Lab (DFS Lab), a Bill & Melinda Gates Foundation-backed accelerator that supports fintech startups in the emerging markets of South Asia and sub-Saharan Africa.
An interview with Inclusive’s founder and CEO, Paul Damalie, details the motivation behind the creation of Africa’s identity verification API.
It is no secret that there is a growing supply and demand of digital financial services and that the focus is on African fintech startups. This makes sense as Africans are one of the fastest growing adopters of digital connectivity technology. But when it comes to inclusive mobile banking, there is an obstacle that cannot be avoided for many: identity verification. Many remote Africans are left out of the financial services world due to the traditional model for banking which requires customers to verify their identity in person. On the surface it appears that anyone with a phone has access to digital financial services, but the truth is, without digital identity infrastructure, there is no widespread access.
The challenges associated with identity verification are not new to Paul Damalie, founder and CEO of Inclusive Financial Technologies, a company connecting unbanked Africans to the global economy through a single identity verification API. With years of experience in finance, banking, and insurance, Paul has come to recognize the importance of identity verification.
“Digital identity infrastructure is critical. It is the underlying framework for digital financial services to be provided,” he said.
Paul worked at Ecobank, one of Africa’s largest banks, where he saw one out of every three customers who applied for a bank account turned away due to lack of identification.
“At the time, there was very little you could do about it and at that point, I didn’t understand the problem in that sense. I just thought of it, well, it’s just the situation. It just happens.”
After leaving Ecobank and running Loystar, a mobile loyalty app company, the impacts of identity verification became much more pronounced to Paul. Customers wanted to redeem their reward from a loyalty program which required them to verify their identity, but without identity verification infrastructure in place, this proved challenging.
Paul started considering a solution to the lack of identity verification infrastructure in Africa by spending time with industry leaders to understand the technical challenges around identity verification. However, the event that inspired Paul and his co-founder, Jonathan Ayivor, to actually start developing a product to solve the problem was more personal.
The scene of inspiration takes place late one night outside a club in Ghana. Paul and Jonathan went out for a drink, both of age. The catch? Paul looks of age, Jonathan doesn’t. And there was no way to prove that he was of age - no trusted identity verification system. The lack of trust in Ghana’s national ID system and the in-person registration process for ID cards has compromised the success of this attempt at identity verification. In some situations, like outside the club, presenting an ID card means very little.
Paul commented, “I mean, you can show your card, but people don’t trust it. You need a system that people trust to prove you are who you say because right now, it’s left to the discretion of whoever is at the door.”
Paul and Jonathan have worked together on multiple projects before, having built the POS system for one of the biggest food retail chains in Ghana. They were confident that, together, they could lay the foundation for identity verification successfully. Paul’s background and his robust network in the financial services industry and Jonathan’s technology development experience and skill gave them the ambition to create a Pan-African product.
In December, 2016, they began developing what is now Inclusive, an identity verification API that works to onboard, verify, and monitor financial institution’s most remote customers through USSD, mobile and web channels.
USSD (Unstructured Supplementary Service Data) allows users to access their bank account from their mobile phone without internet connection. Users simply dial a number code from the mobile phone registered with their bank and they can manage fund transfers and other banking essentials.
It is the most common system because anyone with a phone has access to USSD, but when it requires customers to come into a physical branch to verify identity before getting an account, the access stops there. Imagine a farmer, miles away from the nearest branch and without transportation. They might have a phone that has access to USSD but when they get a message telling them they must stop into a physical bank to proceed, the access is gone. Inclusive aims to bridge that gap by building an identity verification system that allows any USSD based system or mobile banking product to be able to verify customers when onboarding them without having them come into the physical bank.
“Now more than ever is the time to focus on building the infrastructure so that many innovators can build all kinds of financial services on the top of that underlying digital infrastructure for Africa,” Paul said. And he and Jonathan are doing just that with Inclusive.
DFS Lab has recognized the potential for this fintech service and is excited to support Inclusive with expert advice, mentorship and funding as Paul and Jonathan further develop their product. Working together, Inclusive and DFS Lab are changing the way banking works in Africa.
In 2010, lax regulation and an oversupply of microfinance loans led to a credit crisis in Andhra Pradesh, India. The “AP Crisis” sent shock waves through the industry, forcing providers to re-focus on consumer protection and instill a duty of care throughout their organizations. They learned the important lesson that the health of their businesses were tied to the health of their borrowers.
There has been an explosion in recent years of new services offering digital credit to borrowers in East Africa, many charging 100%+ effective interest rates. One credit originator alone, M-Shwari in Kenya, has disbursed more than $1.3 billion in loans since it was formed in 2012.
These loans solve real problems for many people in East Africa, where formal credit is sparse and local moneylenders can be dangerous. However, there is a dark side to this trend. Unless digital credit providers start providing better credit, not just more loans, East Africa may be at risk of its own credit crisis. And unless governments and providers start protecting consumers better, this trend could damage consumers’ financial lives, and tragedy could follow.
These are the four trends we at the DFS Lab observe that may be driving toward a credit crisis in East Africa.
1. An explosion of digital credit providers
When M-Shwari launched in Kenya in 2012, it was rightly celebrated as a breakthrough. Nearly anyone in the country was soon able to access credit in minutes. They didn’t need a bank account, a credit score, or even a smartphone. All they needed was a SIM card from Safaricom (the most popular cell-phone service in the country), an active M-PESA account (Safaricom’s mobile money service), and minimal digital savings. Today, there are more than 15 million M-Shwari accounts in a country of less than 50 million people.
Now, there are at least 20 of digital credit providers in Kenya alone, each competing with one another to offer faster loans with fewer conditions (e.g. many no longer require borrowers to save before borrowing). And Kenya is not alone. Similar services are now live in Rwanda, Tanzania, Uganda, and elsewhere across Africa, Asia, and Latin America, driven by a mix of banks, mobile network operators, and startups.
Accessing digital credit in Kenya today is almost trivial. If you have an M-PESA account, a phone and, in some cases, an active Facebook account, you’re only a few taps away from securing an instant loan ranging from $5 — $500.
While we at the DFS Lab celebrate the expanded access to financial services, there is some chance that these loans will create financial exclusion.
For example, there are now more than 400,000 people in Kenya who will have a harder time accessing future credit because of unpaid mobile loans of less than KES 200 ($2). These people may have to pay 10x the amount of their loan to get a “clearance certificate” from the credit reference bureau, in order to get them back into good standing.
By making it easy to access credit, some of these companies may be encouraging over-indebtedness among their borrowers, which could lead to more unpaid loans and more problems in the future.
2. The return expectations of venture capitalists
We believe in the power of markets at the DFS Lab, and we work with our portfolio companies to help them secure institutional investment to get the resources they need to succeed. That said, we’re also cognizant of the all-too-common dissonance between the return expectations of venture capitalists and the nuances and realities of our target markets. If not properly managed, the push for rapid growth can lead to unsustainable business models, “down rounds,” and tremendous damage to economies and to people.
Since 2015, a handful of digital lending startups in Kenya have raised over $50 million in venture capital. While this funding has enabled them to serve millions of low-income customers, delivering a lifeline in times of need, it also comes with the expectation to “10X,” or return that capital in a liquidity event like an acquisition or IPO at a multiple of ten. That means that VC firms are hoping to be paid back $500 million in the next few years from some of these digital credit companies, which creates tremendous pressure for providers to grow their loan books and tolerate ever-increasing risk.
3. Lagging infrastructure
While innovation around digital credit has been moving at an impressive clip, the regulatory and institutional framework surrounding credit has not had time to catch up. Regulators are often stuck in legacy systems with manual processes that are unable to keep up with the pace of innovation.
Unless these regulators modernize their systems and digital infrastructure, they will be unable to prevent over-indebtedness and systemic risk. For example, with so many digital credit products on the market, consumers will be tempted to partake in risky behavior like “loan cycling,” where one digital loan is used to pay off another.
To prevent this kind of behavior, regulators should invest in better digital asset registries and digital identification systems.
Credit bureaus will need to be updated, too. For example, most traditional credit bureaus operate on “negative” data, where consumers are blacklisted for taking out loans they cannot pay back. Today, digital tools make it possible for credit bureaus to take positive data into consideration, too. For example, borrowers could use their history of paid utility bills or rent as a way to access better credit.
4. The rise of sports betting
Whether you’re in Dar es Salaam, Kampala, Kigali, or Nairobi, you’re never more than a few kilometers from a sports betting house. And with the rise of sports betting apps, you don’t even need to leave your living room to place bets anymore. According to Safaricom CEO Bob Collymore, sports betting “has now absolutely overtaken everyone else.”
Sports betting is so profitable a leading firm, Sports Pesa in Kenya, recently sponsored the Hull City Tigers, an English Premier League football team. The Tigers described the deal as “the most lucrative in the Club’s proud 112-year history.”
The problem is that customers often borrow money to place bets. We don’t have the numbers to weigh the extent of this problem, but we’ve now heard this concern from every digital credit provider we’ve spoken to as well as management at Safaricom M-PESA. One of our portfolio companies, Pezesha, a peer-to-peer lending marketplace in Kenya, has observed this as well. They note that for borrowers with moderate or high gambling use “repayment is significantly worse.”
Most digital credit providers are able to see their customers’ transaction data, which means they should know when borrowers are taking loans to place bets. We hope these providers will take a more active stance on this issue.
Digital credit in East Africa has helped people start businesses, buy productive assets, and cover unexpected life events. Many digital credit providers should be applauded for their work expanding access to financial products and services to many more people.
However, more lending is not necessarily a good thing. “Africa does not just need more credit,” according to FSD Africa, “it needs better credit.” People need more flexible loans that work with their incomes. As people pay back the money they owe, they should qualify for lower-cost loans, not just bigger loans. And competition generally should bring down the effective interest rates, where people can take out the loans they need without getting stuck in a cycle of over-indebtedness.
Regulators should update their systems, too. New digital registries should prevent loan cycling and other risky behavior. Consumers should be protected from unscrupulous lenders with disclosure and transparency requirements. Lenders should have the incentive to offer more responsible credit, instead of just bigger loans. And credit bureaus should update their systems, to allow for new data sources and better data sharing.
Responsible credit can make an enormous difference in people’s lives. But if consumers aren’t protected, these loans can also create tragedies like the ones seen in Andhra Pradesh.
By Bennett Gordon & Ben Lyon.
3 major trends for developing market startups from China’s fintech revolution
Imagine the ideal backdrop for a fintech revolution. What are the perfect conditions? Here’s a list many of us would come up with:
At this point, many of us are thinking Silicon Valley, so let’s add another condition:
In 2017, the streets of Shanghai, not Palo Alto, are at the center of fintech. China isn’t experiencing a fintech revolution, it’s living in a post-fintech society.
Among digitally active users, fintech adoption is more than twice as high in China compared to the U.S.
In term of growth, mobile payments over China’s leading service providers WeChat and Alipay reached USD $2.9 trillion (RMB 20 trillion), a 20 fold increase in four years.
Meanwhile the U.S., a country that arguably ticks off 3/4 of the above conditions, is seeing mobile payments struggle to gain traction, especially at points-of-sale. Adoption has plateaued and only a small fraction (~5%) of users in a recent mobile payments survey use the leading services (Apple, Android, and Samsung-Pay) once or more a week. Fintech’s growth in China is not limited to payments. Even though P2P innovators like Lending Club were stars in Silicon Valley just a few years ago, China has shown it has a much larger appetite for P2P lending.
At DFS Lab, we work with the best fintech entrepreneurs and investors in Sub-Saharan Africa and South Asia. However, Silicon Valley’s influence is never far with constant mentions of a new venture being the “Lending Club of Pakistan” or the “Affirm of Kenya.” What we don’t often hear are entrepreneurs looking to be the next Alipay or WeChat Pay. Up and coming Chinese startups ushering in the next wave of fintech like Qing Song Chou (轻松筹), a crowdfunding platform that is integrated into WeChat, are relatively unknown to the entrepreneurs we talk to.
Qing Song Chou is an especially good example of the missed opportunity to learn and adopt. With a $20 million Series B round of funding, the startup is cracking the challenge of digitizing informal lending based on social relationships. It’s an unsolved challenge often discussed in our sector and there’s a team in Beijing solving it for tens of millions of people who we aren’t talking about.
Obviously, there are major differences between markets. China has a higher GDP per capita and literacy rate than countries in Sub-Saharan Africa and South Asia. More distinctly, it has a centralized government that invests in digital infrastructure and protects nascent companies. These elements are difficult to emulate. However, it would be foolish to ignore the power shift in fintech from West to East and there’s certainly a lot we can learn. Here are three major trends from Alipay and WeChat that we should keep an eye on:
1. Apps as the internet
The next billion to come online will see Facebook, WhatsApp, WeChat or an equivalent as the internet. In Myanmar, DFS Lab’s Ben Lyon saw mobile phone dealers pre-loading Facebook contacts onto <$30 smartphones because customers demanded it. The debate of designing for web vs. mobile is over.
2. Apps within apps
If you’re going to become the internet, you have an opportunity to cater to the long-tail of consumer demand. WeChat has responded to that opportunity and is now described as the “one app to rule them all.” It has set an example of how a messaging app can evolve and much of its success can be attributed to its “app-within-an-app model.”
WeChat offers access to over 10 million smaller apps in its ecosystem. Each can be officially authorized to access WeChat APIs for payments, location, direct messages, voice messages, user IDs, and more. The smaller apps run like a full web experience without ever leaving WeChat itself which means users do not have to download anything new and developers do not have to worry about compatibility across mobile operating systems.
The New York Times produced a great video highlighting some of the smaller apps within WeChat and how they benefit each other by keeping the user within the larger app. It also touches on privacy concerns that shouldn’t be ignored as we consider how others will try to emulate this trend.
It’s not surprising that Facebook’s plan for Facebook Messenger focuses on a creating a central directory for businesses and chatbots, keeping users in the app by integrating third-party services into the conversation, and the use of QR codes to interact with the physical world — it’s right out of Tencent’s WeChat playbook.
3. Finance in the background
In 2015, more than 1 billion “red envelopes” were sent over WeChat Pay during Chinese New Year. In the following year, the number grew eight fold to over 8 billion red envelopes sent over Chinese New Year. In comparison, PayPal had a total of 4.9 billion transactions in all of 2015.
The feature spawned from WeChat’s own team who wanted an easier way to pay small monetary bonuses around Chinese New Year as part of a broader tradition to give out red envelopes to family and friends during the holiday. They wanted to remove the pain of the financial transaction while highlighting the joy around the tradition. This resulted in a WeChat feature that allows users to send red envelopes in group chats which grew into a social phenomenon that jump started WeChat’s mobile wallet WeChat Pay. It continues to be popular with 88% of users citing it as a use case.
Designing experiences around users’ lifestyles and minimizing finance into the background is not only good practice, it’s at the core of how China’s fintech leaders see themselves. To add a new service in WeChat, users add them using the same process they use to add their (human) friends. Alipay describes itself as a “global lifestyle super app.” A 2016 Alipay promotion video highlights the app as the first stop for not only payments and investments, but also for dining, leisure, and transportation. Finance itself becomes a seamless process in the background for services that matter more to users.
At DFS Lab we advise our entrepreneurs to consider these lessons. Teller designs chatbots for financial service providers, preempting the “apps as the internet” role we think messaging apps will serve for new mobile data users. Utilizing a hybrid of hyper-local satellite and ground-based data sources, Pula will offer timely and personalized advice to farmers while providing crop insurance and other financial services as a seamless background feature.
The success of fintech within our markets in Sub-Saharan Africa and South Asia will not exactly mirror China’s fintech expansion. However, the major trends we can observe from a market onboarding hundreds of millions of new digital finance users tell us a lot about what a leapfrog in financial services looks like.
We are already seeing China’s fintech giants look to expand into markets outside of the mainland. Alibaba’s Ant Financial has invested in HelloPay in Southeast Asia, Mynt in the Philippines, Paytm in India, and most recently, put in a $1.6 billion bid to purchase MoneyGram in the U.S.. WeChat has expanded into Europe and is taking on WhatsApp in South Africa.
It’s likely that the mass adoption of digital financial services in Nigeria or Pakistan will look more like Alipay and WeChat than ApplePay or PayPal, and we’ll be paying attention.
Eight startup teams joined us for a week to tackle some of the most difficult problems in fintech — here’s what we saw.
We landed in Sri Lanka really excited about the week ahead. Against the background of the country’s western shore, eight incredible entrepreneur teams were about to embark on a design sprint to prototype and test their fintech concepts. The teams were excited to get going — there was the possibility of up to $100,000 in funding and a spot in our next cohort, a 6-month accelerator where startups would gain access to a network of world-class mentors and additional advisory from the DFS Lab team.
DFS Lab’s first bootcamp attracted strong fintech entrepreneurs and now a year into building the Lab, we were lucky enough to garner interest from an even larger pool of talent. Out of hundreds of applicants, eight teams were chosen to hit the ground in Sri Lanka ready to work with the Lab to bring their concepts to life:
We use a modified Design Sprint methodology for our bootcamps. Teams move rapidly from mapping the problem, to sketching possible solutions, to deciding what to test, to building a prototype, to validating with real customers. They landed in Sri Lanka with a startup problem and leave Sri Lanka with customer feedback on a solution — all in a week’s time.
Our bootcamps is the last step of our selection process prior to our investment committee. Teams are not competing with each other during this phase, but instead are working with us in a mutual due diligence process — we want to know how well they fit with DFS Lab and they want to know what we can offer. Throughout our selection process, we noticed some interesting trends in the sector:
1. The rise of digital financial service marketplaces As more digital financial service providers enter the landscape and offer a larger menu of choice to customers, the need for DFS marketplaces grows. Consumers need marketplace comparison apps to discover, filter, compare, and connect with the myriad of services. We’ve seen a number of such marketplace startups apply, and we invited one of them, Bloom Impact, to join us in Sri Lanka.
2. Insurance startups are becoming more common
We think there is a huge opportunity in insurance startups and insure-tech. This cohort is the first where we’ve seen a rise in promising applicants try to tackle insurance. Offering health insurance through remittance products was a trend. Pula, another one of our bootcamp participants, is revolutionizing crop insurance with their seeds that insured against drought.
3. Ingredient branding matters
More and more, we are seeing startups looking to improve the current DFS experience for low-income users. Some, like Pula mentioned above, hope to define their own brand in an industry where distribution is dominated by global seed giants. Others, like My Oral Village, want to extend existing DFS products to innumerate users, but risk a complete disconnect from their end-users unless they can brand themselves separately from financial institutions and mobile operators. We referenced the “Intel Inside” case study frequently during this bootcamp.
4. Chatbots get attention
It is always interesting to see how our bootcamp startups interact with each other and what they look to learn from each other. We invited Teller, a startup that creates AI banking assistants, to the bootcamp because we wanted to drive innovation around chatbots to developing economies. During the bootcamp, the Teller team was anointed resident messaging platform and chatbot experts by teams and mentors alike. There’s some straightforward value that chatbots bring to DFS providers by alleviating some customer service costs, but they are also a very interesting channel to increase customer engagement through messaging platforms many customers are familiar with and use everyday.
5. The continued explosion of alternative credit
Alternative credit continues to flourish and was the most represented type of startup during our application process. Direct to consumer models, now a bit more mature thanks to the teams like Jumo, Saida, Tala, and Branch have given way to a flood of MSME lending ventures. We’ll continue to experiment with alternative credit models to better understand what works, but are certainly now more cautious than ever about the dangers of such a unchecked expansion of credit.
We’re excited to see our bootcamp startup teams continue to grow and will be announcing the teams joining DFS Lab in its second cohort shortly. You can follow us @theDFSLab on Twitter and at www.dfslab.net for more about our startups, our future bootcamps, and more about our work in fintech for developing economies.
Thanks to Ben Lyon and Arunjay Katakam.
The DFS Lab team is excited to announce the nine incredible entrepreneurial teams that will attend our second Design Sprint bootcamp in Sri Lanka. These teams are coming to us from India, Canada, Kenya, Ghana, and Nigeria. Meet the companies and team members who will be participating below!
I’m going to violate Betteridge’s law and come right out with it: The answer is yes, probably.
If we look at the current state of FinTech and fast forward 3–5 years, it’s likely that we’ll see a few emerging trends become commonplace:
So what’s behind these emerging trends? In a word, economics.
Savvy FinTech startups have succeeded in bringing new distribution methods, models, and user interfaces to market where traditional financial services providers have historically fallen flat.
Take Square, for instance, which flipped the merchant acquiring industry on its head by enabling anyone with a smartphone and 3.5 millimeter headphone jack to accept card payments via a simple, beautiful app. Square may have sprinted out of the gate, but competitors caught up quickly, replicating its innovation from Kenya to India to South Africa (not to mention its home turf, the US). Today, with a swarm of competitors on its heals, Square is increasingly focused on extending its moat via value-added services and loans (see Square Capital).
Another example is Lending Club, an early pioneer of the marketplace lending model. Lending Club leveraged a simple asymmetry: Credit card issuers often charge APRs in excess of 20% and deposit taking institutions pay APYs well under 5%. By giving retail investors an efficient way to diversify small investments across multiple borrowers, Lending Club gave investors a better return and gave borrowers lower rates. But Lending Club’s ‘secret sauce’ wasn’t enough to keep competitors at bay, and its model has now been replicated by banks and startups across the globe. Lending Club has responded by focusing on new verticals like auto loans, but the defensibility of these new verticals remains to be proven.
Competition validates that the early FinTech pioneers were on to something (and they were), but it also leads to thinning — if not vanishing — margins. And that begs the question: Who makes money in a world where transaction fees approach zero?
Why? Because at their core banks are just payments companies with deposit-taking and lending licenses, which gives them the ability to cross-subsidize lower-margin services like payments with higher-margin services like loans. And when it comes to lending, you can’t beat a bank’s cost of funds.
Just look at Equitel in Kenya, the mobile virtual network operator (MVNO) run by Equity Bank on Airtel’s mobile network. It only costs Ksh 60.5 (~$0.59) to transfer Ksh 35,000 from Equitel’s MyMoney to an M-PESA account, whereas M-PESA charges Ksh 187 (~$1.82) to transfer Ksh 35,000 to an M-PESA account. Equitel has opted to forgo transaction revenue in order to source new accounts and grow its loan book.
FinTech pioneers aren’t oblivious to where this all leads. In fact, more and more are beginning to talk about acquiring banks or banking charters. In a recent episode of ACCION VentureKast, Kopo Kopo CEO Ken Kinyua said:
“There is a point where we’ll be struggling with how to maintain competitive margins for the business, which brings you to a very interesting conversation: What is the cheapest way to get funds? And that is to take public deposits… Do you not then convert and become a bank?”
(Disclosure: I’m a shareholder in Kopo Kopo.)So, my title and opening sentence might have been a little dubious. It’s not that banks will destroy FinTech startups; it’s that FinTech startups are either going to partner with, be subsumed by, or become banks.
Will banks win the FinTech race? Yes, probably.
Once it’s just banks competing with banks, won’t the margins in lending disappear too? Yes, probably. That’s the subject of my next post.
In October 2016, we launched the first DFS Lab Fintech Bootcamp in Dar es Salaam, Tanzania — a one-week event where a diverse group of innovators came together from around the world to try and crack some of the toughest fintech challenges in their markets.
After an extensive search that included hundreds of potential candidates, DFS Lab selected a handful of exceptional entrepreneurs to join us in Dar es Salaam. We had a diverse group including former startup founders, the CEO of a mobile money company, heads of mobile for major banks, engineers, UI/UX (user interface and user experience) designers, and even a Tanzanian television star — all with the ambition to create the next successful fintech solution.
We were also lucky to have enthusiastic participation from great mentors such as Nick Hughes (co-founder of M-Kopa and M-PESA), Matt Flannery (CEO of Branch.io and co-founder of Kiva), Peter Zetterli (CGAP) and Dennis Ondeng (CTO of Kopo Kopo), among others.
We quickly decided to structure the week around running several design sprints for each team and each individual entrepreneur who would join us. It is a methodology we used to great success within our own team before and knew it would help us get to know our bootcamp participants quickly.
Our goal was two-fold: (1) to help our participating startups and entrepreneurs successfully prototype and test new concepts, and (2) to work alongside potential DFS Lab portfolio companies as a final stage in our selection process.
What did we learn about running design sprints?
1. Context matters but also limits
We had entrepreneurs from around the world working on startups that not only spanned geography, but also industry, language, culture, and regulatory environment. However, we were all working in the same conference hall in Tanzania.
Our participants came from emerging startup communities where entrepreneurs are excellent at zeroing in on local issues and solutions. This spirit of focusing on the real customer at the end of the day was never forgotten throughout the week but something special happened when we mixed everyone together — the limits that come from a hyper-focus on local constraints started to dissolve.
Over breaks and meals, morning walks and evening drinks, the cross-pollination of ideas was inevitable. A mobile money CEO from Sierra Leone brought incredible perspective to teams looking to attract and partner with mobile money operators in their own regions. Digital credit pioneers from Pakistan pointed out barriers for others looking at the potential of alternative credit scoring. These collaborations flowed all the way down to the sketches that were imagined during each team’s design sprint.
2. Running multiple design sprints in one room stimulates ideas and keeps the energy going
Just like the mixing of ideas during downtime, we tried our best to encourage sharing during the sprint too. We turned the team-only “art museum” to one that was more public — at least being open to the other attending teams. Obviously we were only able to do this because none of the teams saw each other as market competitors.
During points in time where there was work that was being displayed (after sketches are complete, after customer testing notes are put up, etc.) we set aside some time for teams to take a walk around and check out the gallery of ideas stuck to the walls. These breaks sparked conversation and “ah-ha!” moments. When teams reconvened, there was a renewed excitement and an injection of even more ideas. As a side note, these compare and contrast sessions also helped people place a bit more trust in the process, having seen the similar results of others’ creative struggle.
3. Remote testing can be extremely powerful
With customers who were thousands of miles away, many teams looked into remote testing of their prototypes. The DFS Lab team had actually tried this methodology during our own design sprint to prototype a mobile money concept in Tanzania while sitting in our offices in Seattle. We used InVisionto create our app mockups, Lookback to record remote interactions and facial reactions, and hired a local consultant to help us carry out the tests.
Testing with the right customers, even when done remotely allowed our participants to create realistic mockups that they could pick back up after their flights back home. In contrast, the non-Tanzanians who were unable to test remotely back home found that they had to quickly adapt their thinking and prototypes after settling back into their local markets.
Even though the feedback from our participants was really positive, we did make mistakes, and we want to continue to get better at running sprints. We’re figuring out the optimal size for each team we bring, how to more quickly zero in on the right issues to tackle, and better ways to evaluate entrepreneurs while they work with us for the week.
We’re excited to support entrepreneurs around the world to push the boundaries of fintech and we know the design sprint methodology will continue to be an important tool for our teams.
Interested in our next fintech bootcamp?