> Posted by Bhuvana Ramakrishnan, Daniella Llanos Flores, and Singyew Foo, Credit Suisse

The Financial Inclusion 2020 project has been talking to the experts lately to get their views on the main recommendations that came out of the 2013 Roadmap to Inclusion process. A group of Credit Suisse Virtual Volunteers conducted interviews with various experts within Credit Suisse. Insights from those conversations helped shape this post.

What can a new shampoo formula teach us about financial services? Quite a bit, as it turns out.

Procter and Gamble (P&G), one of the world’s largest fast-moving consumer goods companies (FMCGs), has an annual research and development budget of $2 billion – with nearly a half a billion going towards consumer research. In emerging markets, this money funds field research that aims to identify how existing products are used and how a new product could become a part of someone’s daily routine. In China, P&G has a simulated Hutong (a typical Chinese home) where researchers can observe consumer behavior and make on-the-spot modifications to product prototypes. They have sent teams around the country to observe how women wash their hair. Such research yielded a shampoo that suds and washes out with little water – a response to the shortage of water and privacy in the villages visited.

In India, Nestlé sent local staff to 1,500 homes to better understand how people cook and eat. The insights gained during this five year project, titled Project Epicure, were used to fuel product innovation and development. As a result, Nestlé reported a 20 percent increase in sales and a 9 percent increase in its net profit during the following quarter.

Beyond understanding product-related needs, FMCG companies also work to comprehend how consumers spend their money, especially in resource-constrained households. For example, many FMCG producers have introduced cleaning and cooking products in wallet-sized sachets for only a few cents, to align with customers’ spending behavior.

In order to reach full financial inclusion, it is crucial that financial service providers scale up their efforts to understand the unique set of needs and behaviors of their customers. Providers must strive to pull in customers rather than push out products, and the only way to do this is to grasp what will pull them in. In this case, it won’t be a quick-bubbling chemical or a certain spice, but rather financial services that create value and foster financial capability.

A transformation of a Peruvian bank’s branches illustrates both the importance of addressing customer needs and the business incentives of doing so. In 2013, Interbank, one of Peru’s largest banks, partnered with IDEO, a design consultancy. In Peru, a country where only about 20 percent of the population has a bank account, addressing customer needs began with understanding why most of the population prefers under-mattress money savings to formal savings accounts. A large-scale assessment revealed that many Peruvians did not understand the benefit of banking and were too intimidated to talk to tellers at existing branches. On top of that, lines to access banks and financial products often wind around the block.

To combat this stereotypical banking experience, Interbank opened up an Interbank Explora branch, which brought financial products and tellers into the center of the store. Additionally, the Explora branch eliminated lines through a digital queuing system, incorporated social learning spaces where customers could browse products and consult with staff, and also encouraged electronic and digital banking to minimize wait times.

Interbank opened the first Explora branch in Lima, Peru on May 3, 2013 and experienced an immediate shift in demand. Customer satisfaction nearly tripled, jumping from 33 to 84 percent. This satisfaction was paired with a reported 138 percent increase in non-interest income activities and a 200 percent increase in sales in its first 60 days. While the initial transition required up-front investment, Interbank managers state that the cost of running the more interactive Explora branch is exactly the same as normal operations costs. By cutting costs on procedures that often pushed customers away, Interbank created a more inclusive environment that pulled in customers.

Interbank’s experience serves as proof that the customer matters. Whether the product is shampoo or a savings account, creating value for the consumer is the only way to create value for the company. In order to do so, companies should strive to operationalize customer centricity. FI2020 suggests that “companies (…) develop a specific definition of what being customer-centered means and lay out a strategic approach that fits with their own market opportunities and internal capabilities.” The result will be a win-win for providers and consumers.

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