NB Financial Health
Most Influential Post Nominee: A Week at the Cutting Edge: Eight Insights into Emerging Market Fintech
Editor’s note: As part of our Most Influential Post of 2016 contest, we are re-publishing the most popular articles from each month over the past year. This article, which originally appeared Dec. 5, 2016, was the most-viewed post on NextBillion that month. To see all 12 posts, click here. To vote, scroll to the bottom. (Balloting ends today; the winner will be named Jan. 4.)
We recently launched the first DFS Lab Fintech Bootcamp in Dar es Salaam – a one-week event where a diverse group of innovators came together from around the world to try to crack some of the toughest fintech challenges. Here, we summarize the outcomes from the event and some of the trends that emerged showing where fintech in developing markets is going.
The objective was simple: Bring together top innovators from around the developing world to intensively prototype and test new fintech ideas. We used the Sprint Methodology developed by Jake Knapp at Google Ventures – an intensive, structured process to go from a big idea on Monday to a prototype you test with clients on Friday. In addition to being a great experience for the teams, they also had the chance to win entry into the DFS Lab where they could get up to $100,000 and six months intensive support and collaboration from our team.
After an extensive search that included hundreds of potential candidates, DFS Lab settled on 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 deployment, 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 and co-founder of Kiva), Peter Zetterli (CGAP) and Denis Ondeng (CTO of Kopo Kopo), among others.
In just five days, entrepreneurs created realistic prototypes and got actual user feedback. Through this unique crucible, most of the participating startups changed a significant part of their model and pivoted in a new direction. In many cases, they homed in on a more specific client segment or use case to drive initial market entry. Others pivoted even more sharply to a new credit model or completely new product.
Where is the cutting edge?
Coming out of the bootcamp there were several interesting trends highlighting where the cutting edge of the market is going in African and South Asian markets. Some ideas we found circulating:
- Cheaper is not enough. Even low-income consumers need more from products than simply being cheaper; your products must provide convenience and a thoughtful user experience, and empower consumers to realize other forms of value.
- The mass market is complex. A long-term vision to serve a broad base of lower-income users is admirable, but never paint customers with broad strokes. Make sure to target a small and well-defined segment need. For example, among the micro-segments targeted by various teams were prepaid electricity customers looking for convenience, Uber drivers who want their own auto-rickshaw, and households paying for regular milk deliveries.
- Identity continues to be critical. Knowing your customers is critical for financial applications. In countries where they exist (e.g. NADRA in Pakistan, Aadhaar in India), teams relied heavily on the digital national ID systems. We hope donors and governments will continue to invest in these systems. On the other side of the spectrum, some teams were happy to rely on one-time PIN via SMS, even to the point of forgoing the more cumbersome username and password. Additionally, several models relied upon Facebook and other social media as ID surrogates.
- Design for the mobile future. Smartphones are now 46 percent of connections in the developing world, up from 20 percent just three years ago, per the GSMA. They are forecast to increase to 63 percent in 2020 – most of them Android. Most people will be using smartphones – even those in lower income groups. Sure, where feasible, it’s worth developing USSD interfaces for non-smartphone users, but recognize that Android is the future.
- Show value ASAP. We encouraged all the teams to find creative ways to give clients what they want up front before asking them to fill in personal details or complete other menial tasks that result in drop-off. For instance, some focused on the amount that would be gained or saved in a year, others even gave confirmation of loan eligibility based on analysis of phone records before entering details.
There were also some observations about gaps in the entrepreneurial ecosystem:
- Mentorship vacuum. There isn’t a true mentor class accessible to entrepreneurs in developing country ecosystems. There have been only a few early successes to create mentor heroes and the culture of “giving back” so critical to startup ecosystems.
- Global viewpoint. Most of the entrepreneurs in the cohort expressed how valuable it was to learn what was going on in other markets. More broadly, it’s difficult for most to develop a strong sense of the global technology frontier, the history of the industry, the global landscape of failures and successes and the lessons that those elements of a “global viewpoint” bring to navigating key strategic decisions.
- “Hacking it ’til you make it.” Most early entrepreneurs are not used to “hacking it ’til you make it.” We showed the teams things like the Startup Toolkit and encouraged a willingness to put out prototypes with Excel spreadsheets and manual processes on the back-ends for pre-pilot customer tests. Fail early, fail often and take notes.
How can I get involved?
The inaugural Fintech Bootcamp was a great experience and brought out several innovative ideas and trends. We found it was a great way to get to know our potential lab members and, going forward, we expect to conduct more of these events. Sign up on the DFS Lab webpage and follow @theDFSLab on Twitter to hear about the next one.
Photos courtesy of Caribou Digital