Last fall, I was honored to join leading researchers and practitioners at a symposium at the University of Michigan to discuss one of the greatest drivers in financial services for the next decade: behavioral finance.
Behavioral finance is the study of the impact of behavioral biases and tendencies on financial decisions, and in turn how those decisions affect financial markets. For an organization like ours, dedicated to making financial services work for women, this field of research adds an important new tool in helping the industry see women (and low-income women in particular) as a viable market segment.
At this symposium, I shared Women’s World Banking’s approach to using behavioral finance to help financial service providers augment their products and services to reach unbanked and underbanked women.
What works for one group may not work for another
Male and female consumers engage with financial institutions, products, and other resources differently. Yet, financial institutions rarely consider these differences in serving them. As a result, they do not adequately design products tailored to women, or do not properly train client-facing staff to serve women with these products, thus making financial services inaccessible or off-putting to women.
The problem isn’t just the product
Women throughout the world consistently report similar barriers to inclusion. One factor is physical distance. In many countries, women typically spend more of their day closer to home than men do and place a higher premium on convenience. Financial service providers need to seek new ways to connect with women and bring banking services to them.
But physical distance isn’t the only barrier women face—many women experience an “emotional distance” when interacting with financial institutions as well. Women frequently report that their local institutions do not sufficiently represent their interests, making them less likely to engage with these institutions.
Designing programs around behavioral barriers
Women’s World Banking’s partnership with the Pakistani mobile network operator Jazz provides a good model for bridging this distance. Its mobile money product, JazzCash, is a bank account that can be operated through a mobile phone to send and receive money or to make deposits or withdrawals. JazzCash is designed to break down the barrier of physical distance by allowing women to conduct typical banking services with their mobile phone.
Nevertheless, women’s usage rates remained low with the program. Jazz asked Women’s World Banking to help them determine why. We looked at the company’s customer onboarding process and found that the principal way JazzCash acquired new customers was through an agent network. Most of those agents were men, and signup required the customer to provide the agent with personal information, including a phone number—something Pakistani women were uncomfortable doing, thus exacerbating the sense of emotional distance.
We’re working with Jazz to activate a network of women retail agents called Guddi Bajis in partnership with Unilever to make women feel more comfortable opening accounts, as well as testing incentives and women-centric messaging to encourage referrals—women’s preferred channel for onboarding with the Jazz account.
The JazzCash experience vividly illustrates how minor tweaks in what behavioral scientists call “choice architecture” can have big differences in the ways individuals interact with financial institutions and the success of a financial product.
There’s an exciting market opportunity for financial service providers that take a women-centered approach when designing and marketing products for women. Behavioral finance can point the way to success with often simple, common sense modifications to “business as usual.”
This article was first posted on LinkedIn.
Behavioral Finance Symposium September 14-15, 2017. Ann Arbor, Michigan co-hosted by the University of Michigan Center on Finance, Law, and Policy and ideas42