Data in financial service provider (FSP) decision-making: Findings from six countries
Data in financial service provider (FSP) decision-making: Findings from six countries16 March, 2018 •
Do FSPs in Africa use data to drive their decisions?
While several global surveys have been conducted to determine the extent to which business executives are using data and analytics to drive decision-making (or the success they have in doing so), typically, hardly any executives from African businesses are surveyed.
In 2017, we collected responses from 333 financial service providers (FSPs) in six African countries (Ghana, Mozambique, Kenya, Rwanda, Tanzania and Uganda) to better understand their views on the use of data for decision-making. Specifically, we asked them about the ways in which financial service providers collect, store and use data in each country.
A broad spectrum of FSPs were included, namely banks (including commercial banks, post banks and government banks), SACCOs (including cooperatives and savings and loan associations), mobile money operators, microfinance institutions, insurance companies, fintechs and unregulated FSPs.
We were encouraged by finding that 93% of firms have a good understanding of the business challenges they are trying to solve with data. However, only 45% of respondents already have a specific budget allocated to data, and 56% have a dedicated data analyst. There is some way to go in operationalising against the priority.
Surprisingly, only 1% of firms indicated that they have plans to enhance the use of data for operational decision-making in the future. It is unclear whether this indicates that they are satisfied with the extent to which data is currently being used in operational strategy or whether they don’t see the value in using data in this way.
Some of the other interesting insights from this survey include:
- Almost all firms do most of their data analysis in-house. This trend is likely to continue, as 71% have plans to train staff on data analytics and 44% have plans to recruit data analytics staff.
- FSPs typically use traditional sources of data (such as transaction data or identification information) for decision-making. 73% have plans to supplement this with new alternative data sources in the future. We already see firms collecting alternative data (social media, GIS, etc.) even though they are not using it yet.
- Data is currently mostly used for internal monitoring, although other data uses such as marketing and product development are also high. 68% of firms report using advanced data analytics; however, this number is unlikely to grow significantly over the next five years, as only 20% report this as a priority. Given current and likely future changes in the financial sector, it will be interesting to see whether firms will be able to continue to solve business challenges without relying on advanced data analytics.
- Small firms are much more likely than large firms to report staff challenges, budget constraints and technical issues.
Different types of FSPs experience many of the same challenges, e.g. data being missing, the quality being poor and staff lacking the required data and analytics skills. However, the priorities and extent to which a dedicated budget allows them to pursue data initiatives differ.
Mobile money operators are the group most likely to see data as a competitive differentiator, and insurers are least likely to have a dedicated data budget. For more detail on how mobile money operators compare to banks, MFIs, insurance companies or other FSPs, look at our presentation on the overall survey findings from the focus countries, below.
insight2impact (i2ifacility) was funded by Bill & Melinda Gates Foundation in partnership with Mastercard Foundation. The programme was established and driven by Cenfri and Finmark Trust.