Credit and the human connection
- Andrèe Simon
There’s a lot of buzz in the finance industry right now around responsibility and transparency, and I think one area that poses a big risk is digital. Digital is seen as a replacement for one of the most expensive elements of traditional finance, namely the human connection. The sense of social responsibility from a lender’s perspective that comes along with making credit available can disappear along with that human connection.
There’s also a risk, as we’re focusing so much on the digital side of service provision – particularly with a lot of attention right now being on consumer debt – that we could potentially make some people worse off. This could either be by not serving customers who aren’t profitable, or by providing them with credit that ultimately isn’t directed at productive use. One focus at FINCA Impact Finance is to make sure that digital financial services work for everyone.
When you’re dealing with vulnerable populations, it’s not enough to provide someone with access to credit. You also need to help people use that access in a way that creates financial value for them and, to some extent, coaching them through the responsibilities and opportunities that come along with credit.
I’m really pleased that we’re now able to engage customers in some countries through digital communication such as SMS messaging and apps to provide easy-to-access information about what good financial health looks like. This is so valuable for coaching them along but we still – as an organisation and as an industry – haven’t fully cracked this. It’s not enough to just give people clear terms and conditions that can be difficult to muddle through, particularly for those who struggle with literacy.
We have a challenge as an industry to think through how we shape the interaction with a customer, especially when it’s being done remotely. Each interaction should assure us that everyone – and particularly vulnerable customers – fully understands the risks that they're taking on. We need to make sure that they’re receiving sufficient support to be successful, and that improved efficiency and interest rates don’t come at the cost of better financial health.
Read more from Andrée Simon in the ‘Inclusion gets personal’ article on pages 14-16 of the summer 2021 issue of Chartered Banker magazine.