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  • Writer's pictureMatt Wallace

Digital financial literacy doesn’t matter

Updated: Sep 19, 2023

Fintechs and financial institutions are being lazy

You’ve probably heard it often: the pandemic was helpful in pushing all things digital to the forefront world wide. And it’s mostly true. Especially for businesses, digital became core to how we reach our customers, how we manage our operations, how we handle our finances. Anyone who was stubbornly sitting back in the analog world was either rocketed into the digital world or faced a sudden and dramatic end to their business.

For all of us working in underserved markets, where digital adoption (especially digital financial services adoption) had historically been sluggish, this was an amazing opportunity. So much of the effort we had been putting into creating systems to support the uptake of digital was suddenly reaping great rewards.

But for some reason, everyone in the development world forgot some of the key lessons we had all been learning for years. Helping someone go digital isn’t about telling them things; it is not about information. It is about opportunity.

(By the way, it certainly IS NOT useful for MSMEs. Read here for an effective approach to supporting small and micro enterprises to succeed and grow!)

Literacy is a bad word.

In the mid 2010s, the financial inclusion community realized that literacy is a bad word. For decades we had thought that poor communities just needed to know the basics. Teach them to budget. Teach them to save. Surely they just don’t know, we all thought. The issue was seen primarily as a problem of information transfer.

This was proved over and over to be wrong. Instead, we needed to be focusing on financial capabilities.

“Going digital” began to be viewed in the same incorrect manner. In the same conversation–in the same breath–you can hear someone talk about the need for “Financial Capabilities” (yay!) and the need for “Digital Financial Literacy”. Wait, what?

Not wanting to miss the “Go Digital” boat during the pandemic, development finance institutions wanted to push more and more programs to move people into digital financial services. Standards of quality disappeared, any organization promoting a “digital financial literacy” component was approved without question, and the experts went relatively silent in the face of crashing waves of money.

Unfortunately, most of that money has been wasted.

If we are back to thinking that literacy is the only constraint to digital financial inclusion, and that the core problem is simply one of information transfer, we have missed the point again.


Supply-siders vs Demand-siders

Digitization is understandably a process that must be designed, but unfortunately far more attention is paid to the supply-side than the demand side of the equation. Financial technology is extraordinarily robust, and implementation plans are tailored to each financial institution’s needs.

But building technology for an enterprise implementation is far different than building for the consumer end user.

Demand side programs need to be designed in ways that are just as intricate. Consumer needs are vastly different from enterprise needs. If your fintech provider is focused on your financial institution’s technology implementation needs, they’re probably not a good fit to deliver educational services to your customer. And they probably don’t grasp the nuance of the loan officer — borrower relationship. And when someone doesn’t really understand, they tend to lecture. And lecture must die.

In 2020, I was part of a conversation by FinEquity to explore “Digital Financial Literacy” and its key enablers. Reading through the conversation (check out the full synthesis here!), you can see that literacy is consistently being de-emphasized by the experts, in favor of discussing “design” and “capabilities” and “access”. If you read carefully, you can tell that “literacy” is only a small part, and maybe the smallest part, of the equation.

Promoting digital financial capabilities is not all that difficult conceptually, but in execution most training programs fall on their face, to the detriment of the “trainees”. The idea that you can put 10 or 100 or 1000 people in a room and just tell them about DFS completely misses the point. And it is a bit offensive. The fact that they are called “trainees” and “beneficiaries” is a hint that we’re off base.

Who cares if they have received digital financial literacy training? That results in no measurable real world difference.

Your financial institution may feel better that you provided “training”, but you should feel bad that you’ve wasted people’s time. Yes, I get that you’re really busy and operating on a shoestring budget with tight margins. That doesn’t give you permission to harm your customers.

Yes, that is what bad digital financial literacy training does. It harms.

Instead, let’s honor the people we serve, and;

  • expect that if we have designed our services well,

  • engaged them emotionally with ideas that matter,

  • provided them with opportunities to apply those ideas in the real world

that they’ll be ready to take up and use digital financial services.

Thinking that your 10 minute lecture about password use is helpful to a microfinance borrower is wrong, and a bit offensive. Instead, let’s do better.

Back in 2019, motivated by the belief that a sound framework for promoting digital financial capabilities was needed, ONOW released a white paper available on the FinDev Gateway which describes our methodology. We continue to follow the same framework, and find the results continue to be amazingly effective.

We know that for many who are new to the field of building financial capabilities, the nuance behind the differences in literacy and capabilities may be lost. But we believe strongly that if you are in the industry, it is time to improve your understanding and your execution. Stop force-feeding information to your customers. Respect them and provide them with opportunities to be delighted by great design.


Who is ONOW?

ONOW enables female migrants in Southeast Asia to become empowered entrepreneurs who are financially capable. ONOW’s platform helps a woman:

  • Connect to formal financial service

  • Become digitally capable

  • Validate her business idea

  • Find capital

  • Launch the business

ONOW supports these businesses for up to two years through individualized coaching and problem solving. Since 2012, ONOW has helped more than 1,000 people launch enterprises, and has coached more than 10,000 households. ONOW’s digital platforms have reached more than 300,000 users, and have connected more than 30,000 to their first formal financial accounts.

ONOW is a member of the Aspen Network of Development Entrepreneurs, Youth Business International, and an alum of the Miller Center GSBI Social Entrepreneurship at the Margins Accelerator.

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