Data Protection for Finance in Guatemala: A Crucial Step Towards Economic Empowerment

The State of Financial Access in Guatemala

Guatemala’s economy faces significant challenges, including a high poverty rate and limited financial access. Despite substantial remittance inflows making up 18 percent of the GDP, this has yet to translate into meaningful reductions in poverty.

• Only 35 percent of adults have access to formal bank accounts.
• The gender gap is six percentage points, with women having lower account ownership rates than men.
• Many Guatemalans rely on informal lending sources.

Research Highlights

A recent customer market research study conducted by the United States Agency for International Development (USAID) in partnership with DAI’s Digital Frontiers and ConsumerCentrix aimed to provide concrete recommendations on how the Guatemalan financial sector could leverage digital financial services (DFS) to positively impact financially underserved populations.

Key findings include:

• Low-income communities are not treated as strategically critical customer segments by banks, which mainly offer OTC services.
• A widely-held assumption that limited education and confidence are the primary barriers to access and use among low-income individuals is not backed by evidence.
• Latent demand for formal finance exists, and there is awareness of and openness to using digital channels for financial transactions.

Targeted Consumer Segments

The research identified two consumer segments with the strongest opportunities for DFS:

• Domestic remittance senders and recipients
• International remittance recipients

These groups have regular income flows, a capacity for aggregation, and potential use cases that can be tailored to create a critical mass before reaching out to those most in need.

Prototype Testing and Future Developments

Prototype testing of a potential solution is underway. A full Digital Financial Services Market Assessment Report outlining these DFS opportunities in greater detail is expected in spring 2023.

Opportunities for Economic Empowerment

The Guatemalan financial sector has an opportunity to leverage DFS to provide economic empowerment for low-income and vulnerable populations.

• Tailor products to the most viable segments.
• Create a critical mass before reaching out to those most in need.
• Address issues such as poor customer service and stringent requirements for accessing credit.

By doing so, the sector can help manage variable cash flows, mitigate risks arising from climate change, and access more economic opportunities.