Institution
Best practices in big data analytics Best practices in big data analytics data big in practices Best
1 Learning 9 Themes ACKNOWLEDGEMENTS
Maha Khan wrote this Snapshot, with inputs from Marissa Dean. This Snapshot was supported by the Mastercard Foundation.
NOTES
The views presented in this paper are those of the author(s) and the Partnership, and do not necessarily represent the views of the Mastercard Foundation or Caribou Digital.
For questions or comments please contact us at [email protected].
RECOMMENDED CITATION
Partnership for Finance in a Digital Africa, “Snapshot 9: Best Practices in Big Data Analytics,” Farnham, Surrey, United Kingdom: Caribou Digital Publishing, 2017. http://www.financedigitalafrica.org/snapshots/9/2017/.
ABOUT THE PARTNERSHIP
The Mastercard Foundation Partnership for Finance in a Digital Africa (the “Partnership”), an initiative of the Foundation’s Financial Inclusion Program, catalyzes knowledge and insights to promote meaningful financial inclusion in an increasingly digital world. Led and hosted by Caribou Digital, the Partnership works closely with leading organizations and companies across the digital finance space. By aggregating and synthesizing knowledge, conducting research to address key gaps, and identifying implications for the diverse actors working in the space, the Partnership strives to inform decisions with facts, and to accelerate meaningful financial inclusion for people across sub-Saharan Africa.
www.financedigitalafrica.org
www.mastercardfdn.org/financial-inclusion-program/
cariboudigital.net
Best practices in big data analytics data big in practices Best This work is licensed under the Creative Commons AttributionNonCommercial-ShareAlike 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
Readers are encouraged to reproduce material from the Partnership for Finance tommcevoy.co.uk in a Digital Africa for their own publications, as long as they are not being sold commercially. We request due acknowledgment, and, if possible, a copy of the publication. For online use, we ask readers to link to the original resource on the
2 www.financedigitalafrica.org website. Design by
Caribou Digital Publishing catalog number CAR/016.9 What we know
The Partnership for Finance in a Digital Africa (FiDA) It’s simple: The better you hopes to catalyze digital financial services DFS( ) that know your customer, the better are tailored to user needs, varied in terms of services your product will be offered, easy for customers to use, and woven into At the end of the day, digital finance providers people’s daily lives. To be successful, providers must work to satisfy customers — if a product does not develop a deep understanding of customer needs and meet customers’ needs and demands, usage will be behaviors and the ability to engage with customers low and the product will likely fail. Most providers using technology. In this context, customer data conduct basic research on their clients — for example, is paramount to effective product development telecom providers use demographic and geographic and delivery. However, while there are emerging information to decide who to target at a macro level.1 opportunities, there are also challenges around Increasingly, digital data2 (electronic data generated collecting, maintaining, and analyzing customer on computers, phones, etc.) enables digital finance data. Organizations cannot always easily adopt best providers to overlay information from a wide range practices. Moreover, delivering financial services of sources to yield more precise, tailored insights for responsibly means adhering to practices that safeguard specific target groups. According to CGAP,3 financial customers’ privacy and security. While the space itself service providers can use digital data to: is new and evolving, best practices around big data 1 Find new customers, analytics are emerging. In this Snapshot, we discuss learnings around 2 Deepen customer relationships, and best practices for delivering the next generation of 3 Manage risks. digital financial services successfully and responsibly. Beyond generating insights, providers can also use Specifically, this Snapshot will focus on how big digital data to segment customers — that is, to divide data analytics can improve product design and the a customer base into groups of individuals that are implementation of the next generation of digital similar in specific ways relevant to financial services. financial services. Each subsequent Snapshot Refresh Customer segmentation helps providers understand within Learning Theme 9 will focus on a particular where significant proportions of their customer
Best practices in big data analytics data big in practices Best type of best practice or on a different part of the value base may be stuck in terms of their digital finance chain, such as financial responsibility practices in journey. For example, a customer at the “awareness”
delivering next generation digital financial services. stage may know about a mobile money service but may not understand how to use the service or how it can benefit them. As customers become more knowledgeable and begin to interact with the service, What we know we What they move through stages along the adoption journey, 3 as illustrated in Figure 1 below.4
1 Chen and Faz, “Hype or Hope? Implications of Big Data for Financial Inclusion.” 2 More broadly, digital data seeks to capture elements of the physical world and simulate them for technological use, for example, by storing complex audio, video, or text information in a series of binary characters, traditionally ones and zeros, or “on” and “off” values (Accion Global, Unlocking the Promise of Big Data to Promise Financial Inclusion). 3 Chen and Faz, “The Potential of Digital Data: How Far Can It Advance Financial Inclusion?” 4 Levin and Camner, “Getting the Most Out of Your Data: Segmenting Your Mobile Money Customer Base to Drive Usage.” A customer’s journey 1 in mobile money adoption
A AR A AR D R TA D D TR A
Source: GSMA, Marketing Mobile Money: Top 3 Challenges, June 2012
Research suggests that digital finance providers in In addition to demographic segmentation, low-income countries lag behind their counterparts providers are taking advantage of non-traditional, in developed economies in the systematic collection alternative data sources, such as GSM usage (SMS, and analysis of customer data. The GSMA’s “State voice) and mobile money behavior. Providers can use of the Industry 2015” report found that only 39% of this type of data in various ways as discussed in the mobile money providers track the gender of customers following section. and only 40% of mobile money providers know the urban/rural split of their user base.5 According to the Global Banking Alliance for Women (2015), the Is big data a big deal? most common reason for not collecting gender Indeed, big data is a game-changer in disaggregated data is the lack of awareness among promoting financial services to unbanked and providers of the value of such data.6 low-income populations In addition to the lack of gender disaggregated data, there is evidence that existing business intelligence According to Omidyar Network, smartphones possess metrics in the digital finance community could be more processing power than NASA had when they more nuanced. For example, the pervasive industry sent the first men to the moon.9 The data generated definition of active customers is a customer that every minute, every day, by millions of people globally has made at least one transaction in the last 90 is a massive resource to be leveraged in the push for days. However, a 30-day active rate could provide financial inclusion. Big data generally exhibits five an important benchmark for growth by allowing characteristics — veracity, velocity, volume, variety, providers to track individual customers’ breadth and and complexity.10 In the world’s six biggest emerging frequency of use in a shorter time period. This would economies — China, Brazil, India, Mexico, Indonesia, also allow providers to detect seasonal or monthly and Turkey — big data has the potential to help patterns. between 325 million and 580 million people gain access Despite these trends, some digital finance providers to formal credit for the first time.11 Further, there is have made strides in disaggregating data to segment evidence12 to suggest that big data can: customers. Earlier this year, JazzCash Pakistan looked • Bring both scope and depth to insights by aggregating specifically at mobile wallet usage data by gender and a large pool of customer data across different found that women were not using the JazzCash wallet dimensions. For example, a payment provider can at the same rate as men.7 In order to improve women’s collect a large volume of data on individuals through usage of the mobile wallet, their research partners, each of their transactions (loan repayments, savings Women’s World Banking and ideas42, conducted data deposits, etc.), which can be used to understand analysis to map clients’ behaviors. They found that customer behavior. the real problem was not usage — female customers
Best practices in big data analytics data big in practices Best used JazzCash accounts in very similar ways when • Enable products to be tailored to the needs of compared to males — but acquisition. Female individuals through customer segmentation.
customers accounted for only 15% of new account • Improve the reach of financial services by helping openings.8 With further research, the team was able providers garner the information they need without a to design solutions to accelerate the acquisition of new physical presence. female customers. What we know we What
4 5 GSMA, “State of the Industry 2015: Mobile Financial Services for the Unbanked.” 6 Global Banking Alliance for Women (GBA), Data2X, and Multilateral Investment Fund of the Inter-American Development Bank, “The Value of Sex-Disaggregated Data.” 7 Women’s World Banking, “Designing Better Digital Financial Services for Women: Lessons in Behavioral Design.” 8 Ibid. 9 Costa, Deb, and Kubzansky, “Big Data, Small Credit: Digital Revolution and Its Impact on Emerging Market Consumers.” 10 IFC, “Data Analytics and Digital Financial Services Handbook.” 11 Costa, Deb, and Kubzansky, “Big Data, Small Credit: Digital Revolution and Its Impact on Emerging Market Consumers.” 12 Chen and Faz, “Hype or Hope? Implications of Big Data for Financial Inclusion.” • Change the motivations and behavior of clients, and customer network analysis helped identify new such as using awareness of how repaying a loan can areas of strategic interest, by mapping these new areas positively affect future credit applications.13 against uptake potential variables.19 The research also analyzed the location of transactions and found that • Create and improve transparency in information. 60% of mobile money transfers took place within • Give providers the ability to collect and analyze more a 19-kilometer radius in and around Kampala. This accurate and detailed performance information and geospatial data helped Airtel Money Uganda target consequently improve performance, from supply chain their marketing efforts.20 to personnel performance. One mode of utilizing big data that has gained traction in the past few years is the analysis of usage • Improve decision-making with automated algorithms. and behavior data to determine which customers could be granted small amounts of credit (cash or airtime) Recognizing the potential of big data, some which could then be delivered to a wallet or airtime financial services providers are racing to develop account accordingly. M-Shwari, a combined micro- advanced analytics capable of finding patterns and savings and loan product that launched in 2012 through structure within th