2021 will be a crucial year for women to build their financial resilience and begin recovering from the setbacks created by COVID-19. According to a recent McKinsey report, women globally are twice as likely to experience job loss due to the pandemic, despite making up only 39% of total employment. Low-income women who work in the informal sector are especially vulnerable to job insecurity and have few measures in place to protect them from global economic shocks. COVID-19 has illuminated the critical role financial services providers (FSPs) can play in helping women build their savings and secure their financial futures.
Women’s World Banking’s Making Savings Work for Women is a global cohort of financial services providers committed to strategizing on best practices in savings mobilization for low-income women. With support from the ExxonMobil Foundation, the Making Savings Work for Women cohort convened on November 24, 2020 for a one-day virtual roundtable to share insights on COVID-19 and its impact on women’s financial resilience, customer savings behavior, and Customer Lifetime Value (CLV).
As women around the world face the monumental challenge of riding out and then rebounding from the pandemic, cohort members Kaleidofin (India) and Finance Trust Bank (Uganda) mobilized to assess the impact of COVID-19 on the savings behavior of various customer segments. An early look at customer data pre- and post-lockdown produced some unexpected insights regarding savings behavior:
- Customer savings behavior is no longer as predictable. Financial service providers must reevaluate assumptions about which of their clients save and why. This is especially true in the context of the pandemic, where the needs of women customers are evolving rapidly as they adapt to changes brought on by Covid-19. For instance, tenure—the length of time a customer has banked at an institution—may be a reliable indicator of behavior around savings, according to Women’s World Banking research. Customers with longer tenure are less likely to skip deposits than customers without. In the context of Covid-19, however, tenure was no longer correlated with savings behavior at one institution. Data illustrates how certain financial products—in the case of Finance Trust Bank (FTB), the women-focused “Mama’s Safe” product, and for Kaleidofin, the savings account “Lakshya”—can encourage savings, even in times of crisis.
- For some women, savings increased during the pandemic. While the pandemic may have precipitated certain predictions about savings behavior—for instance, that low-income women customers would be less likely on average to save—the data shows some outliers. In India, some Kaleidofin customers who were specifically saving for emergencies were more likely to save than those whose goals were less urgent. In Uganda, FTB clients began to make more frequent deposits in their savings accounts during lockdown, albeit for smaller amounts. FTB credits this trend to merchants who were able to sell food during lockdowns in their neighborhoods. “Not only did we find that it was not unilateral that resilience decreased, but actually some customers were able to increase their resilience over this time,” noted Sonja Kelly, Director of Research and Advocacy at Women’s World Banking. “We also saw that with particular kinds of products, the nuances of the product encouraged and increased people’s savings even after lockdown.”
- Customers are safeguarding their financial security for the long term. Women are using savings accounts as a money management strategy, showing more restrained spending behavior in efforts to keep their savings stable. “They were careful about withdrawing all of their money,” said Leah Namugosa, FTB’s Manager of Product Development and Research. “Most save for the education of their children, so they didn’t want to withdraw that money because anytime the schools might re-open and their kids would have to go back to school. They didn’t know how long the lockdown period would last, and they didn’t want to deplete their savings.”
- Bundled savings products help lay the foundation for a lifelong savings habit. For women customers using FTB’s Mama’s Safe product alongside an insurance policy, average balance increased—even post-lockdown. “We found it interesting, the comparison between account holders only and those who have bundled accounts. This is giving us a way forward about how to look at our product portfolios to improve value for the bank and for the customers,” added Namugosa.
- Going digital is no longer a choice, but a necessity. Women have been quick to adapt to digital financial platforms in the context of Covid-19. “The fact that both Finance Trust Bank and Kaleidofin found that customers are willing to adapt to digital even if they weren’t willing to before the lockdown is a very strong finding,” Women’s World Banking’s Sonja Kelly stated. “It says something about how the lockdowns and the current situation we find ourselves in are somehow increasing digital financial capability, and that’s a bit of a silver lining.”
In addition to cohort members Kaleidofin and Finance Trust Bank, Making Savings Work for Women featured insights from Ujjivan Small Finance Bank (India) on the importance of Customer Lifetime Value (CLV) as an approach to evaluating the commercial viability of mobilizing savings for customers. For financial services providers, recognizing the business case for mobilizing savings for women customers is more urgent than ever. Our team has determined that CLV is a great approach to do that. Research findings from Women’s World Banking and Ujjivan Small Finance Bank provide compelling insights on the various benefits of mobilizing savings for women, as calculated through the CLV approach:
- Customer Lifetime Value helps quantify customer value around savings mobilization. The CLV approach to calculating commercial viability of saving mobilization allows businesses to quantify the value of their customers over time by identifying the key drivers of value, helping prioritize marketing and technology expenditure, and providing overall strategic direction for businesses.
- Customer Lifetime Value can demonstrate how savings mobilization increases the bottom line for businesses. When FSPs are able to take a customer-centric – and women-centric – approach to creating their products and solutions, both the business and customers benefit. By assessing business profitability through CLV, financial service providers can better understand the long-term benefits of savings mobilization and improve their products portfolios to meet the needs of their women customers.
- Saving mobilization provides long-term benefits to financial service providers. When calculating the commercial viability of savings mobilization through the Customer Lifetime Value approach, FSPs can better estimate the potential value of women customers in various business scenarios and over time. Businesses can assess women customers’ financial behavior through the years, analyze the cost and revenue per customer, better evaluate the products that are driving profitability and customer value, and make adjustments where needed. Banks can continue to grow their business while helping customers create and maintain the financial habits they need to emerge from a crisis in strong financial health, cope with future shocks and stresses, and build lifelong resilience for themselves and their families.
- When women start saving, they advocate for their families to start saving as well. Our work in partnership with Ujjivan Small Finance Bank has shown that a bundled product offering a savings account and credit can help women customers grow their resilience, while increasing the value of Ujjivan’s net income per customer. When women customers open a formal savings account and build a habit of depositing into it, even in small amounts, they also impact the savings habits of other members of their family. Now that the bank has built customer loyalty with women customers, it is in a much better position to engage with other family members, through family banking initiatives, and offer savings to family members as well.
To offer a closer look at the results of our research and case studies, please download the comprehensive report, “Her Resilience in the Face of Covid-19”. To hear insights from the Making Savings Work for Women cohort, listen to our savings podcasts on Apple, Google Podcasts, or PodBean.
*The 2020 Making Savings Work for Women participants included the following six institutions: Access Bank of Nigeria, MaTontine of Senegal, Kaleidofin of India, Banco W of Colombia, Finance Trust Bank (FTB) of Uganda, and Ujjivan Small Finance Bank of India. NMB of Tanzania, CARD Bank of the Philippines and ASA of Bangladesh are also members of the savings cohort and were invited to the event.”