Can Funders Expect Any Returns in the Fintech Space?
There may be a lot of potential gains by providing patient funding to Fintech companies exploring innovative products, even if they do not achieve success overnight. The Consultative Group to Assist the Poor (CGAP) piloted 18 Fintech startups throughout South Asia and Africa over the past couple of years. While the majority of these companies concentrated on credit and payment products, there were some that attempted to come up with ideas for pensions as well as ways of making farm and health insurance more accessible to excluded communities. Making products like these work for customers with lower incomes can be challenging. At first, the economics may not make sense, their value may not be clear, and there may be regulatory hurdles to overcome. Some of the CGAP pilots simply did not achieve the desired results. Nevertheless, the projects were successful overall in terms of learning how products may be reworked to become more suitable and effective.
People’s Pension Trust (PPT)
An excellent example is the People’s Pension Trust (PPT) project in Ghana. The PPT product was a pension into which customers could make deposits through an agency or digital payments. Once PPT's management realized that customers were reluctant to pay into a pension because of a lack of knowledge and trust, it began offering instructions and incentives on how to use the service across digital channels. The assumption was that digital payments are more convenient and faster and therefore would be more attractive to rural customers. CGAP and PPT encountered disappointing results, however. After conducting a range of tests with around 1,600 customers, digital nudges such as phone calls, SMS messages, contests, and goal setting were found to have only marginally increased payments made into pension accounts. In fact, very few customers were willing to make digital payments. Even with attractive financial incentives offered to those who use their digital wallets, only 7% made the shift from cash to digital payments. Although this pilot may be deemed a failure based on low numbers, CGAP and PPT believe that the insights gained from it were invaluable.