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When Banks Ignore Women, It’s not Just a Morally Bankrupt Move: It’s Expensive Too
By Anna Gincherman, Vice President, Strategic Partnerships
Imagine what would happen if a bank received the following proposal: Take all the potential new clients in your market, and all the profits you stand to gain, then cut those numbers in half. Leave all that money on the table for your competitors to grab. Sound enticing?
While it might appear absurd for a financial institution to make a decision like this, a surprising number of banks already do. By ignoring or vastly underestimating the women’s market, those financial institutions do an enormous disservice to themselves, not to mention their potential customers. They also make it much harder to shrink and eventually eliminate the financial inclusion gender gap.
The decision to disregard a vast, untapped market of clients might seem mysterious, but many banks have what they believe is a sound rationale for doing so. Ask finance executives why women make up such a small percentage of their institutions’ clients, and you’ll hear at least one of the following reasons: Women don’t make enough money to save; women keep lower balances; women transact more often but in smaller amounts, so they don’t justify the cost of investing in them. If those assumptions are correct, any outreach to the women’s market would be filed under “corporate civic responsibility”: a public relations and philanthropy play instead of a business strategy.
The problem is, those assumptions are wrong, and they’re costing financial institutions worldwide millions in unrealized profits or expanded market share. Investing in women is not charity: It’s smart business.
Women, it turns out, display nearly identical transaction patterns as men do once they’re on-boarded at a financial institution and are comfortable using its platform. But because most financial institutions don’t disaggregate data by gender, they have no way of seeing how closely women’s and men’s banking behavior matches up.
While it’s true that banks also ignore women because of a number of actual impediments that have traditionally made it difficult for women to use them—including a lack of time or money to travel to a branch—those issues are presenting less of an obstacle thanks to digital financial services (DFS). DFS are enabling institutions to reach millions of rural unbanked women who could never before access formal banking.
While more intangible issues that impact women’s financial activity—such as a distrust in banks and a hesitation about revealing confidential information—are yet to be resolved everywhere, they’re less of a prohibitive factor with the rise of digital banking.
Women’s World Banking has been at the forefront of this movement. One of the most influential advances in digital financial services is the project we began with Nigeria’s Diamond Bank in 2013, when we developed the BETA Savings product for low-income women entrepreneurs. BETA agents meet women entrepreneurs in person at the markets where they work, and handle all transactions digitally, building trust and removing transportation-related obstacles. With support from Financial Sector Deepening Africa (FSD Africa) funded by UK aid from the UK government as well as the Bill & Melinda Gates Foundation, we’ve since iterated on this innovation, adding products such as Target Savings, Kwik Loan, and Yello, all designed to eliminate the financial and logistical hurdles that keep women from using formal banking.
In Nigeria, the latest data should help overturn any bias, conscious or otherwise, about women’s value as clients. An analysis of non-outlier banking clients from 2013-2016, conducted by Women’s World Banking in partnership with Diamond Bank, shows that women keep higher bank accounts than men on average: ₦1407 for women, ₦1306 for men. Women also deposit and withdraw the same number of times annually, about 28, as men do. The data also shows that women deposit in amounts roughly identical to men: ₦5382 on average for women, only slightly lower than the ₦5512 figure for men. Women and men withdraw similar amounts too: an average of ₦17,663 for women compared to ₦18,286 for men.
The data paints a clear picture, but nonetheless, false perceptions that women keep lower balances, and transact more often but in small amounts, are ingrained even among experienced agents—and even among women agents. So Diamond Bank, for one, is actively putting the findings to use in combating gender bias among its agents, as demonstrated in this simple but impactful data analysis. Using data to train agents on the importance of reaching out to women is crucial and profitable, not just for women but for institutions and their agents too.
Women’s World Banking’s partner institution in Pakistan, the telecom provider JazzCash has found a similar trend in their data: once women were on-boarded to the product, their transactional behavior was very similar to men. This helped focus JazzCash’ efforts towards client acquisition, as they begin investing more significantly in the women’s market
Until recently, women made up only 12 percent of its clients. Research conducted by Women’s World Banking showed that referrals from existing clients are a key motivator for women to sign up. As a result, JazzCash is using new strategies for improving referral and onboarding methods: One is to train agents in methods for drawing women clients and converting them into active members, and another is to facilitate ways for women clients to invite friends onboard. The percentage of JazzCash clients who are women is now 18 percent and rising.
Figuring out how to target women more effectively—a challenge that varies region by region—has the added bonus of helping institutions kill two birds with one stone. The data shows that when financial products and consumer marketing are designed to work for women, men display a high uptake rate too. The reverse, however, is not true: Products designed with only men in mind tend to fall flat with women.
Now that the latest data is in, there’s never been a more urgent time for financial institutions to build on the ways in in which innovators like Diamond Bank and JazzCash are growing their businesses while serving women better. It’s simply too costly not to.