What to consider when building fintech solutions for financial inclusion
With the wide range of digital solutions on the market and smartphone penetration at an all-time high, financial exclusion ought to be a thing of the past. But adoption rates of such solutions amongst women in rural communities still aren’t high enough to make a real impact, despite countless applications promising to digitize cash-based economies, bank the unbanked, and encourage saving.
The primary institution tackling global financial inclusion is Women’s World Banking (WWB), a non-profit organization founded in 1976 to serve women who have been left out of the formal banking system. It is the largest network of microfinance institutions in the world and has broadened its scope to include policy advisory, investment, and consultancy on digital financial products.
The current WWB President and CEO, Mary Ellen Iskenderian, has held the position since 2006, overseeing the rollout of countless digital solutions in the years since. Jumpstart spoke to Iskenderian at RISEConf 2019 to learn more about introducing and optimizing fintech products in developing communities.
A complicated tapestry
“One big takeaway, that is absolutely consistent across pretty much every market we’re working in, is that the relevance to women really has to be proven. You can’t assume that what is relevant to men is going to be relevant to women,” says Iskenderian.
WWB takes a behavioral approach to how they look at financial products, as countless implicit cultural factors can affect the adoption of new technology. This lesson was reinforced in a recent case study on engagement strategies for women in Nigeria. WWB worked with mobile banking vendor Diamond Yello to acquire and retain more female users of the service.
In the early stages, it was clear that the onboarding process was reasonably straightforward, and the company didn’t encounter issues in this area. The problem was the number of dormant accounts, as women weren’t finding any relevant use cases that encouraged them to continue using the app.
“The women would say, My husband and I divide up the things that we pay for. He pays utility bills, and I pay school fees,” says Iskenderian. “If there were a way for them to pay school fees digitally, we would’ve had a different story.”
A similar project in Pakistan with mobile wallet vendor JazzCash yielded different, but equally telling results. The acquisition of female customers stalled because of one major, easily-overlooked problem: a male-majority agent network.
“If that intrepid Pakistani woman went into that male-owned shop, she then had to give her cellphone number to him […] which in that culture, was just really, really difficult,” says Iskenderian.
Technology offers new avenues
Many traditional financial institutions still don’t see a business case for serving women. Iskenderian believes that this is an opportunity for fintech startups to grab a slice of the pie, and data from past efforts has highlighted that it’s quite a sizeable pie.
“Women are better repayers, and they’re stickier savers. In both developed and developing countries, women buy more insurance than men do,” Iskenderian says. The problem is that in many formal banking systems, women are treated as second-class citizens.
In India, for instance, much of the resistance to banking stems from unpleasant experiences of being treated poorly, or not understanding how to use ATMs and other services. But once they were shown how to use the products and services, and it was demonstrated that they would work reliably every time, women became some of the most loyal customers.
“Women have done very well with peer-to-peer lending platforms, and anything that allows women to overcome barriers like collateral for lending, or additional sources of information that get fed into a credit score. If your fintech is disrupting these processes, it can be a real opportunity to serve women,” she says.
Catering to female users
While the number of digital solutions is increasing in leaps and bounds, more needs to be done to reach women and provide a relevant enough service to retain them. World Bank data from 2014 to 2017 on select Asian and African countries shows stark discrepancies in adoption rates and the type of products that succeed among women.
For instance, Ghana, Kenya, and Zimbabwe showed much higher adoption of digital payments and mobile money accounts than South and Southeast Asian countries. Comparing the lowest and highest numbers, 0.8% of Pakistani women and 69.4% of Kenyan women used mobile money accounts in 2017, representing a 64% decrease in Pakistan and a 26% increase in Kenya.
That said, digital payments (isolated from mobile money accounts) have grown exponentially in South Asia; the number of digital payments made and received by women in Bangladesh increased from 4.3% in 2014 to 21.2% in 2017.
WWB’s projects around the globe have uncovered many unquantifiable insights about women’s financial behavior, and the complex dynamic between married couples in countries where many important monetary decisions are still reserved for men.
For example, in cases of employed women who were previously paid in cash and are now paid directly to their bank accounts, their husbands are no longer able to access their hard-earned money. There is an understanding that money in a formal institution should be treated with respect, and this, in turn, is having a positive effect on the way women conduct themselves.
“Any time they have a greater sense of control over their resources, you really start to see that take shape in their sense of self-esteem, their sense of decision-making power in the household, or at least their voices being heard,” says Iskenderian.
Women’s unofficial role as household ‘risk mitigators’ is showing through in WWB’s research. The availability of digital credit and mobile money has uncovered a unique trend: while convenience is still important to women, they also appreciate having a separate account that makes it harder to access their money. This belief of keeping savings inaccessible is characteristic to women, and a preference that WWB has never heard from a man.
Although WWB’s roots lie in their microfinance network, technology has allowed the organization to partner with an ever-widening spectrum of companies, ranging from banks and insurance companies to telecoms and retailers. In fact, in some African countries, retailers like grocery stores are some of the foremost providers of financial services.
WWB’s commitment to technology can also be seen in their position as a founding partner of Facebook’s Libra, the social media titan’s offering to the digital assets space. Combining Facebook’s formidable reach with WWB’s client base–most of whom are the world’s low income and underbanked–could be a golden opportunity to boost inclusion.
As the case for financial inclusion becomes stronger and the benefits more tangible, it can be expected that the explosion of fintech products will narrow down to address specific problems in innovative ways. With new technologies, a greater understanding of the issue amongst policymakers, and better availability of data, there may be a key to unlocking the barriers holding the world back from greater inclusion.