> Posted by Monique Cohen, Independent Advisor, Founder and Past President, Microfinance Opportunities
Martyn Parker, Swiss Re; Michel Khalaf, MetLife; Alexia Latortue, U.S. Treasury
Addressing client needs, delivering appropriate products, ensuring consumer protection, and building people’s financial capabilities were themes repeatedly heard during FI2020. Taken together they represent important progress in the discourse around financial services for the poor. Not so long ago the mention of clients was limited to statistics; in particular, numbers of accounts. If you were in luck this data was differentiated by gender.
This new recognition that our clients are active not just passive players in our industry marks an important step forward. The concept of active clients emerged in numerous sessions during the FI2020 meeting. Alexia Latortue, formerly of CGAP, began by noting that designing products that would help clients mitigate shocks and loses is very important. For the poor to cope effectively with risk, physical presence, timeliness, and proximity to financial services is vital for enabling access. In one of the final sessions of the meeting, Innocent Ephraim from Vodacom echoed statements by others noting that listening to the clients is critical. Not doing so can be costly. He had been involved in launching a product based on what the provider thought was useful. The product bombed, forcing his team back to the drawing boards and to the identification of a product which made sense to the consumer because it reflected both their contexts and priorities.
While the client agenda in financial services is not new, it has only recently gained real traction. Despite the new thinking on this topic, the industry is still searching for common ground about what to do to become more client focused. Currently the stakeholders are struggling to define a common phrase book; our lexicon of many of the terms continues to be a work in progress. Everyone has her/his own meaning for financial capability and financial inclusion. The result can be confusing.
Yet, there are also areas of growing consensus: a client perspective to the delivery of financial services means starting from where the client is. For most poor people, a key driver and context surrounding financial decision-making is managing endless shocks. Adoption and usage of new products and delivery systems must pass through a series of filters. When the fit between a new product and its intended market is not good, the innovation fails to work for the clients and potential clients and they are likely to opt out. Martyn Parker from Swiss Re noted that successful insurance translates into responding to individual’s product needs, providing easy access, and the means to address claims quickly.
Moving a client centric financial services agenda forward requires a multifaceted approach. Awareness campaigns by regulators and central bankers are one avenue. One participant observed that in his experience newspaper campaigns by local providers have proven to be very effective. The jury seems out on the role of text messaging. Others referred to soap operas and street theatre, all intended to familiarize large numbers with new financial offerings. In their eagerness to promote technology based financial services, the innovators tend to emphasize the benefits as seen through their eyes. In the process, they fail to recognize that the client’s perspective may be different from theirs. For many low-income populations, digital money is seen as both risky and later as a risk management tool. We need to remember that what may seem advantageous to one may be seen as risky for another.
This enthusiasm for a more client centric approach to financial inclusion comes with the acknowledgement that the “client matters”. However, what needs to be avoided is the tendency among some to assign the blame for operational weaknesses to the clients, “to see the problem as the client.” But are only the clients at fault? When it comes to uptake and usage of new products and services, low-income populations may initially lack the behaviors to play fully in the digital space. But, this can be learned. Trust in the provider institution and confidence in one’s ability to transact successfully can be learned relatively quickly. It will work best if we keep both the knowledge and the operating requirements for the clients simple, and empower them to push for their self interests.
Image credit: The Center for Financial Inclusion
Have you read?
Alexia Latortue: The Case for Financial Inclusion Now
Innocent Ephraim: On Mobile Money Innovation to Catalyze Inclusion
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November 21, 2013 at 1:36 pm
The Microcredit Summit Campaign
Reblogged this on 100 Million Ideas and commented:
Sure, a client centric approach is more difficult, but it is also more rewarding and will help avoid product flops.
“In one of the final sessions of the meeting, Innocent Ephraim from Vodacom echoed statements by others, noting that listening to the clients is critical. Not doing so can be costly. He had been involved in launching a product based on what the provider thought was useful. The product bombed, forcing his team back to the drawing boards and to the identification of a product which made sense to the consumer because it reflected both their contexts and priorities.”
November 23, 2013 at 9:05 am
John Gitau
While this post captures and emphasizes the importance of the belated client-centricism, it mentions one important element that can make a whole difference between financial products uptake or rejection. It goes ‘ For many low-income population, digital money is seen as both risky and later as a risk management tool”. My question is, why must the risk management tool benefit element come later and not kick off from the onset? The “later” suggests an after-thought benefit or a value that surprises the product designer, yet that which appears to work as a surprise derivative needs to be the driver of the product uptake as a pre-meditated value.
In her latest paper ” From Insight to Action- Building Client Trust and Confidence” the author is more graphic with an example to explain this point of digital money being seen “later” as a risk mitigator with an example of Mpesa being seen as a tool that can source money quickly in case of an emergency. This means that for an Mpesa account holder, it is not necessarily the Mpesa liquidity in the phone that is counted on ( in most cases, there is no money as everything gets cashed out the moment it is received) to help in the case of emergency but the ability to call in help from far which comes through Mpesa. Therefore, an Mpesa account holder can feel secure, even when penniless.This is a mental dynamic associated with digital money that can be difficult to explain, leave alone to capture as data.
How can the “later” ( derivative surprise benefit) be made “now” so that the digital product can be taken up without potential of failure? My take is that product developers must be upfront in how consumers of the intended product would perceive the product from many angles. This entails almost getting into the minds of the target customers and teasing out the mental frameworks that govern desire and pursuit of needs satisfiers and unearthing the underlying fears that come along the pursuit of the satisfiers. People are known not to jump at new products or ways of doing things however good they appear. They first want to weigh the downside, and if they read risk, then uptake is compromised. This means that a product designer who is upfront would want to first address the likely risk perspectives that potential consumers are likely to entertain. So, in the case of Mpesa, the product should have been sold as a tool that gets one money in the event of an emergency. That is different from selling it as a tool that helps one store money to cater for emergencies. The first perspective represents abundance in possibilities( I can call my son, I can call my neighbor, I can call my auntie, to send me money). The second perspective leads the mind to say ” why have mpesa and I have no money to keep in it?” This is a limit mentality.
Financial institution have so far failed significantly to attract the savings from the poor because what they sell as value to them does not resonate with how they think about savings. Banks sell the value of safety and security of the money but the poor quietly respond by saying they know how to keep their money safe. Then the banks come with the good interest value proposition and the poor say, they know how to make more with their little money doing their small economic activities.
So, if financial services providers sell digital money with the same lazy value proposition mentality, then digitization will still fail to accelerate financial inclusion. The advantage of starting to package a financial product by working on the downside first is that the product developer captures the hard cores first and the rest who “go for” join the bandwagon easily all the way to success.
This brings us to the two ways that people are inclined to act, confronted by a new idea or product. There are those who will go for those positive elements highlighted by the marketer. On the other hand, there are those who will be busy running away from the perceived risks associated with the product. Therefore, the product designer who focuses or assumes that potential consumers will only go for the positive benefits of a product, will likely lose those who run away from the products perceived risks. It is said the later are more than the former, yet financial product developers don’t seem to realize this truth and they end up creating products with disappointing uptakes.
In conclusion, a digital product developer should ask two questions almost simultaneously before even getting to designing: What would the consumer go for in this product? What would the consumer run away from in the product, which I need to convert into a go for?
December 12, 2013 at 6:14 pm
Monique Cohen
John: Thanks for your endorsement of this approach and taking some of the key issues one step further. Too much of the outsider’s understanding of client preferences are strongly influenced by their own thinking. What they see as the benefits of mobile banking may not be the benefits the user first sees. For many low income people whose ‘lives are one long risk’, the positive value of the product may only come with familiarity and usage. This takes time. We need patience. As John notes this can be encouraged by providers by painting a more realistic picture of the product – the good and the bad – from the beginning. For those wishing a copy of the paper ‘From Insights to Action’ referenced by John Gitau above, please contact Monique.cohen08@gmail.com