Financial illiteracy and not having access to banking services affect a significant proportion of Latin America’s population. Some of the proposals to make finance more inclusive and accessible to everyone include initiatives such as gamification and very simple, intuitive digital services.
Almost a year after the outbreak of the pandemic, it is clear that the use of digital services has been a lifesaver for many sectors and for users around the world. Where the finance sector is concerned, there has been an increase in downloads of financial applications, with global growth rates from 24% to 32%, according to the ‘VI Report on financial inclusion‘ by the Latin American Federation of Banks (FELABAN).
However, if we leave popular mobile apps to one side, the situation in Latin America was problematic prior to coronavirus as there is a lack of access to financial services. As the OECD report ‘National strategies for inclusion and financial education in Latin America and the Caribbean: implementation challenges‘ points out, this affects half of the population.
How can that gap be eliminated, at a time when the availability of these services is more essential than ever? Alongside open innovation and fintech initiatives, there are different digital solutions within the BBVA Open Innovation ecosystem whose aim is precisely that – to improve the levels of financial inclusion and equalise opportunities.
The first barrier to financial inclusion is insufficient knowledge of the ecosystem itself and lack of education, according to FELABAN’s V Report on financial inclusion. “The main problem is financial illiteracy. In some countries the level is as high as 80%. These levels are the main barrier for people in their access to these services”, indicates Víctor Morales, CEO of Alfi, the startup that won BBVA Open Talent in 2019.
Their project, which already has some 200,000 users, supports financial education through gamification, using technologies like artificial intelligence (AI) and machine learning. “At Alfi we began fighting financial illiteracy based on how users make decisions within a gamified environment, where they can play at being a banker or an investor”, explains Morales.
At Alfi they don’t believe that this gamified process should stop at a simple observation of user behaviour, rather they highlight the importance of categorising users, something vital to ensure that the gamification method is personalised and works. “Many studies have been carried out on attempts to gamify finances, but they didn’t make progress because they didn’t know how to profile users and boost their engagement”, says Morales.
In addition, to enhance its usefulness, such gamification and simulated decision-making should be based on real data. “Along the way they realise that those decisions are made with real information”, indicates Morales, something that will go on to help them in everyday life too.
As well as illiteracy, the second barrier to financial inclusion is the way in which the services themselves are offered, which is sometimes not easy to understand. “In my view, the real challenge in financial inclusion lies in how much these products are used”, says Nicolás Rodríguez, Country Manager of Mexican startup Openpay, which was acquired by BBVA in 2018.
Openpay, which offers online payment services and other functionalities for businesses, offers an intuitive experience that facilitates the buying process. “With our users we promote the creation of very clean and simple experiences, so that they don’t get lost whilst selecting a product or service”, Rodríguez indicates.
It is a concept that should also be updated and redesigned based on user feedback. At Openpay they are aware of this: “All requests are collated and we organise them so that we can prioritise and see which ones can be delivered to as many of our customers as possible, generating a positive impact on their user experience”.
However, no matter how intuitive and easy the purchase process is, if it is not secure then it will be impossible to build the trust needed to raises usage levels. “Through certifications such as PSI (Level 1) and ISO 27001 it is possible to store card data securely – a process that is known as card on file – and therefore be able to offer more straightforward purchasing experiences”, notes the expert.
Businesses also have an important role to play in financial inclusion, since they are a driver of onboarding for digital services. For them, a user-friendly design is also decisive when it comes to guaranteeing their operational processes. Openpay offers tools based on big data technology, such as dashboards, which allow businesses to check all their sales from any device in real time. Such visibility helps both the business and its users.
For other initiatives to become a reality in the future, it is important to develop a public and private collaborative ecosystem that underpins their creation and implementation.
From the public sector in Latin America, government subsidies are being offered that have improved access to the digital banking system, particularly during the pandemic. “The circumstances have made governments and banks treat access to banking – and that basic product, a bank account – as vitally important” states Morales. Initiatives including the Coronavoucher programme in Brazil, Solidarity Income in Colombia and Emergency Family Income in Argentina offered help if users had a bank account open.
Private financial institutions are also looking to join efforts for financial education. BBVA, with its goal of facilitating financial investment for all entrepreneurs in the region who have scant resources, created the BBVA Microfinance Foundation. The Foundation has already provided more than five million entrepreneurs with a loan volume of more than $14.5 billion (around €12 billion).
Now more than ever, the creation of this open, collaborative, inclusive ecosystem that fosters financial literacy and equal opportunities in access to digital financial tools is needed.