Addressing Customer Needs for Full Financial Inclusion

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Addressing Customer Needs for Full

Financial Inclusion

Financial Inclusion 2020 Addressing Customer Needs Working Group

September 2013

CreditReporting

FinancialCapability

ClientProtection

Addressing Customer

Needs

Technology-EnabledBusinessModels


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www.financialinclusion2020.org

Roadmap to Financial InclusionAddressing Customer NeedsSeptember 2013

bout the FI2020 Roadmap Working Groups

Whatwillittaketoachieveastateoffullfinancialinclusion?In2011,theCenterforFinancialInclusionaskedthis

questioninaglobalsurvey,andover300practitionersgavetheirperspectivesonthekeyopportunitiesand

obstaclestofinancialinclusion.

Basedontheresponses,theCenteridentifiedfivepriorityfocusareasthatarekeytoachievingfinancialinclusion,

whichhavebeenusedasthebasisforabroadconsultativeprocesstowardaRoadmaptoFullFinancialInclusion.

Overthecourseof2012and2013,thisprocessengageddozensofexpertsandindustryparticipantsindeveloping

anaction-orientedblueprintforreachingnewandunderservedmarkets.Thefivefocusareasare:

AddressingCustomerNeeds ,chairedbytheConsultativeGrouptoAssistthePoor(CGAP),focusesondeepeningourunderstandingofclientneedsandtranslatingthatknowledgeintopracticewhile

expandingtherangeoffinancialservicesavailabletounderservedmarkets.

Technology,chairedbyVisa,analyzesthepotentialofnewtechnology-intensivechannelstoreachnewcustomers,loweroperatingcosts,increasesecurity,anddiversifyfinancialproductsavailabletolow-incomeclients.

FinancialCapability,chairedbyCiti,focusesonempoweringclientstoknowtheirrightsasconsumers,andhavetheskills,attitudes,aspirations,andconfidencetoexercisethoserights.

ClientProtection,chairedbytheSmartCampaign,outlinesstepstodeepentheimplementationofclientprotectionmeasuresforthebenefitofconsumersandstabilityofmarkets.

CreditReporting,chairedbytheInternationalFinanceCorporation(IFC),promotesextendingcreditreportingsystemsinordertoexpandaccessfornewclientswhilemanagingriskforfinancialinstitutions.

Eachofthefiveworkinggroupshascraftedaroadmapthatasks:Whatisthevisionforthistopic?Whatstandsin

thewayofachievingthevisionandwherearethegreatestopportunities?Whataretheenablingactionsand

correspondingactorswhocanadvancethevision?

The Main Idea

The frequent gapbetween access andusage of financialservices arises partlyfrom a gap inunderstanding and

addressing the uniqueneeds of BoP customers.

We already know a lotabout financiallyexcluded andunderserved people:They lead complexfinancial lives, use

diverse informal toolsand often lack trust informal financialinstitutions. Theserealities must shape thedesign, marketing anddelivery of services.

For a financial serviceprovider to becomegenuinely customer-centered, top decision-makers need to hear fromcustomers regularly, and

organizational purpose andoperations should center oncreating value forcustomers. This is not easy,particularly when thebusiness case is unproven.

Supportingstakeholders canassist providersthrough research oncustomers, as well aspatient capital and

smart subsidies thatallow providers tolearn about newclient segments.


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I.TheCaseForAddressingCustomerNeedsMoreDeeply

Oneofthedriversoffinancialexclusionandthusamissedopportunityforinclusionisalackof

understandingofthecoreneeds,aspirationsandbehaviorsofpoorpeoplewhenitcomestofinancial

services.Financialserviceprovidershaveapowerfulroletoplayinsolvingproblemsforcustomers.1

Providersandproductdesignersneeddeeperinsightsintotheirclientsaswellastheabilitytotranslate

thoseinsightsintobetterserviceofferingsandsustainablebusinessmodels.Thisroadmaphighlights

whatittakestosystematicallyuncoversuchinsightsaboutthelivesofunservedorunderserved

customersegmentsandtranslatethemintorelevantfinancialsolutions.

Thefinancialservicesindustryhaslongbeensupply-ledofferingsimple,standardizedproductsthat

areeasyandprofitabletodeliver.Whilesomefinancialserviceprovidershaveaclearclientorientation

andhavesuccessfullytranslatedthatintoappropriateserviceofferings,theindustryasawholehasnot

fullyadapteditsbusinessmodelstosystematicallymeetcustomerneedscreativelywhileretaining

profitability.Thebroadrangeoffinancialserviceprovidersthatcanreachpoorandlow-incomepeopleeitherdirectlyorthroughpartnershipscanbenefitfromshiftingtheirfocusfromatransactional

approach(i.e.,sellingproducts)toarelationshipapproach(i.e.,addressingcustomerneeds).

WhatDoesitMeantoBeCustomer-CenteredandWhyDoesitMatter?Puttingcustomersfirstensuresthatvalueisgeneratedfromtheiraccesstoasuiteoffinancialservices.

Thatiscriticalforalltypesofproviders,becauseitprovidesacompetitiveedgeandbuildscustomer

loyalty,thusfacilitatinggrowthinmarketshare.Whenprovidersareattunedtocustomerneedsand

knowhowtotranslatethemintoproductofferings(neworrefined),theycanmoreeasilytapnew

marketsegments.Offeringarangeofserviceshelpsinstitutionsreduceriskbydiversifyingacross

productsandcustomersegments.Notallthesebenefitsarerealizedintheshort-term,andtheyrequire

institutionstohavestrongmuscleswithregardtogovernance,management,systems,andstaff

capacity.Butproviderswhohavealong-termperspectiveandareabletomakeappropriateinvestments

standtogainfromacustomer-centeredapproach.

Fromacustomerperspective,usageofmorerelevantservicescanleadtobetteroutcomes.Ina

customer-centeredapproach,thecustomerisanactorwithrightsandresponsibilities.Ascustomers

startengaginginarangeofformalfinancialservices,theybuildfinancialcapabilityandreducethe

perceivedoractualrisksassociatedwithnewservices.Successfulusebuildstrustandconfidencein

providers.Helpingcustomersbuildtheirfinancialcapabilityisakeycomponentofcustomer-centricity

(seetheRoadmaponFinancialCapability).

Itishardworktopursuefinancialinclusionfromademand-drivenperspective.Thechallengeismoving

fromgoodintentionsandsnazzymarketingaboutacustomer-centeredapproachtoimplementationandthiscannotbeachievedovernight.Someemergingliteratureoncustomer-centeredorganizations

fromallkindsofsectors,includingbluechipcompanies,attemptstodistinguishtrulycustomer-centered

companieswithintheranksofthemanycompaniesthatmerelyproclaimacustomerfocus.For

instance,Booz&CompanysstudyoncompaniesinNorthAmericaandEuropedistilledkeytraitsthat

1Whilewerecognizethatshadesofmeaningexist,withinthisdocumentthetermsclient,customerandconsumer

areusedinter-changeably.


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customer-centeredorganizationsdemonstrateandfoundthatcompaniesoftenhadtoreorienttheir

operationsaroundandaligntheirvalueswiththecustomer.

Thestandardapproachforreachinglow-incomepeoplehashistoricallyfocusedonthemassdeliveryofsimpleproductsasawaytokeepcostsreasonable.Today,technologiesandbusinessmodelinnovations

allowformoretailoreddesigns.Customer-centricitydoesnotrequirethateachinstitutionprovideall

financialsolutionsforeverytypeofclientsegment.Butitdoesmeanthatcustomer-centricityin

competitivemarketsshouldleadtoanecosystemofprovidersthatoffersthefullsuiteoffinancial

services,designedanddeliveredfordiverseclientsegments.

VisionTheworkinggroupAddressingCustomerNeedsfoundithelpfultoformulatethisvisionasastarting

pointforitsdeliberations:

Allpeople,includingthepoor,haveaccesstoasuiteofqualityfinancialservices,designedwiththeir

needsandaspirationsinmind,thatcanhelpthemtomeettheirdailyandlifecycleneeds,buildassets,

protectthemfromlifesstorms,prepareforthefuture,andrealizetheirdreams.

Withinthisvision,providersneedtoensurethatpoorandlow-incomepeoplefindclearvalueintheir

financialservices,appreciatetheeaseofaccessandusabilityoftheservicesavailabletothem,andhave

trustandconfidenceintheproviders.Inthisidealstate,wecouldimagineclients,declaringthe

following:

Ihaveoptionstouseafullsuiteoffinancialservices(savings,credit,payment,insurance,andpensions)thatenablemeandmyfamilytoplanourfinancialfutureandrealizeourdreams.

Ihaveaccesstoservicesthataddressmydailyneedsaswellasmylong-termneeds.

Ihaveaccesstofinancialservicesthathelpmetoinvestineconomicopportunities. Iusefinancialservicestohelpprotectmyselfandmyfamilyandtorecoverfromsetbacks. IfindthattheservicesIuseareconvenient,affordable,andtransparent. Iamconfidentthatmyfinancialservicesprovidersunderstandmeandmychanginglifeneeds,

andtheycanprovidemewithadviceandservicesovermylifetime.

Iknowthatmyfinancialservicesprovidersarereliableandwillstaywithme. Ihaveenoughinformationandunderstandingofwhatfinancialservicesareavailabletomeand

howtheycouldbenefitorharmme.

Itrustmyfinancialserviceprovidersandtheirproducts.

Thisvisiongivesshapetotheultimategoaloffinancialinclusionfromtheperspectiveofcustomers.It

servesasaguideforwhatittakestoachievecompletefinancialsolutionsthatproviderealandlasting

valuetoclientsandsetsagoalforproviderstoaspiretomeet.Addressingcustomersneedsoften

requiresasuiteofservicesthatoneprovideralonemightnotbeabletooffer,whilearangeofproviders

mayneedtoforgemultiplepartnershipswithintermediaries,front-endactorsandback-endactorsto

offerseamlessservicestocustomers.


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II.CurrentSituationConstraintsandOpportunities

A.UnderstandingClientsWhatWeAlreadyKnowAboutHouseholdFinance Financialservicesareameanstoanend.Forindividuals,theirfunctionistohelppeopletobettermanagetheireconomiclivesday-to-dayandoverthecourseoftheirlives.Financialserviceshelpmove

moneysafelyandefficientlyoverspaceandtime.Theyhelpmeetshort-termanddailyexpenses,such

asfoodandfuel,aswellasmajorlife-cyclegoals,suchaseducation,health,businessinvestment,

shelter,andsecurityinoldage.Financialservicescanhelppeopleachievecoreneedsandaspirations,

suchassmoothingcashflowssothereisfoodonthetableeveryday,buildingassetsforinvestmentin

businessorpayingschoolfees,managingandmitigatingrisksandcreatingpeaceofmindforfuture

planning.

Understandingtheroleoffinanceinpeopleslivesrequiresknowledgeoftheiractivitiesandneeds,

notjusttheirportfolios. Evenseeminglysimilarhouseholds(intermsof,e.g.,familysize,incomeflows

andfixedexpenses)canhavevastlydifferentfinancialserviceneeds.Theaspirationsofeachfamilyare

likelytobedifferentandmayincludesendingadaughtertouniversity,providingassistancetoacousin

orrunningabusiness.Theimplicationsofthesefutureaspirationsmayrequiredifferentfinancial

choicestoday;forexample,thosewithlong-termgoalsmaywantaccesstocommitmentsavings.Risk,

uncertainty,andunevenincomeflowsarefactsoflifeforpoorandlow-incomepeople.Beyond

households,mappingcommunitynetworkstounderstandcustomershyper-localmarketsandtheir

complexsocialnetworkscanrevealpatternsofbehaviorandattitudesthatwouldbevaluableinproduct

design.

Theindustrysknowledgebasewithregardtounderstandingcustomersisquiterich.Inthemid-1990s,

theUSAID-sponsoredAssessingtheImpactofMicroenterpriseServices(AIMS)projectactivelycultivated

arenewedfocusoncustomersbypromotingclientassessmenttoolsthatrangedfromlarge-scalelongitudinalstudiestopractitioner-friendlymarketresearchandevaluationtools.MicroSave,an

internationalfinancialinclusionconsultingfirm,hasbeenworkingwithproviderssincethentobuild

theirowncapacitynotonlyforlisteningtoclientsbutalsoforoperationalizinginsightsintobetter

productofferings.Aboutadecadeago,FinMarkTrust,afinancialinclusionresearchtrust,fundedbythe

U.K.sDepartmentforInternationalDevelopment(DFID),initiatedtheFinScopestudiestounderstand

consumerdemandacrosstransactions,savings,credit,andinsurance.

Morerecently,innovativeacademicresearchandbusinessapproacheshavebegunprovidingadeeper

andmorenuancedappreciationforpoorpeopleslives.Thefinancialdiariesapproach,alongitudinal

diaryofhouseholdpersonalfinancesofthepoor,hasadvancedourunderstandingofpoorpeoplescash

flowmanagementandtheiragileuseofinformalandformalfinancialintermediation.Thereisalso

greater,morerefinedandempiricaluseofsegmentationanalysistounderstandclients,oftenbasedon

usingbigdata.Sincethemid-2000s,impactevaluationsusingrandomizedcontroltrials(RCTs)have

helpeduncoverwhichproductinnovationsanddesignswork,thushelpingtoclarifyourunderstanding

ofhowandunderwhatconditionsfinancialservicesbenefitpoorpeople.In2012,theGlobalFindex,a

breakthroughglobaldemand-sidestudyonfinancialinclusion,providednewinsightsintohowpeoplein

148economiessave,borrow,makepayments,andmanagerisk.


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Oneofthenewestapproachesusedinthefinancialinclusionspacetounderstandclientscomesoutof

behavioraleconomics,whichisbasedontheideathatabetterunderstandingofsocial,cognitive,and

emotionalfactorscanhelpusunderstandwhyandhowpeoplepoorandrichusefinancialservices.

Human-centereddesignalsoprovidesnewwaystosourcecustomerinsightsandturnthemintoproductideasthatworkwiththewayconsumersbehave,insteadofmakingconsumersadapttheirbehaviorto

theproduct.

Withthisdiversityofapproachesavailabletolearnaboutandfromcustomers,wehaveastrong

foundationofknowledge.Weknowthefollowing:

Evenverylow-incomepeopleleadcomplexfinanciallives,makinguseofavarietyofinformaland(ifavailable)formaltools.

Poorandlow-incomepeopleoftencontinuetouseinformalservices,evenwhenformalonesbecomeavailable.

Poorandlow-incomepeopleusefinancialservicestomanagemoneyday-to-dayaswellastomanagerisk,investandmeetmajorlife-cycleneeds.

Poorandlow-incomepeoplehavedifferententrypointsintotheformalfinancialsystem;theydonotuseonegatewayproductorrequireauniformoridealsequenceofproducts.

Poorpeopledosave,oftenathigherpercentagesthanpeopleinmoredevelopedcountries,buttheyneedthetoolstohelpthemsavemore,withgreaterconvenienceandease.

Poorandlow-incomepeoplecangetintotroublewhencreditisreadilyandeasilyavailable,particularlyiftheylackfinancialcapability.Theyarealsovulnerabletofraudstersandscams.

Poorandlow-incomepeoplebenefitfromformalinsurance(howeversimpleorpartial)thatcomplementsinformalrisk-sharingpractices,providedthattheygetgoodvalueformoney,easy

accessandtangiblebenefits.

Poorandlow-incomepeoplehaveperceptionsofformalinstitutionsthatmaypreventthemfromconsideringtheuseofformalservices.

Unfortunately,thiswealthofunderstandingdoesnotalwayspenetrateproviderorganizations.Weneed

toimproveunderstandingofhowdiversecustomersegments(acrossincomes,livelihoods,financial

behaviors,genders,localitiesandages)interactwithfinancialservicesandhowtheuseofasuiteof

productsmaydifferfromuseofoneproductinisolation.Wealsoneedtodeepenourknowledgeonthe

driversofusage,includingthesocial,cultural,behavioralandtransactionalfactorsinvolvedinmoving

frominformaltoformalservices.Peoplemayappreciatethecomfort,reciprocalrelationships,

accessibilityandabilitytoeasilymanageliquiditythatinformalservicesprovide.Itmaymakesensefor

providersofformalservicestotargethigh-stress,informalcopingmechanismsthatpeoplewouldliketo

changeandtofillgapsinsolutionsofferedbyinformalsystems.

Financialservicesdonotoperateinavacuum.Afinancialservicetailoredbrilliantlytomeetaspecific,confirmedcustomerneedmaynotbeusedifitisofferedinawaythatdoesnottakeintoaccountthe

totalcustomerexperienceandcontext.Theskills,capacity,attitudesandcultureofthecustomersand

ofthestaffdeliveringservicesarekey,asisthesocioeconomic-politicalcontextinwhichtheyare

delivered.Understandingtheunderpinningsoftrustisalsoimportant.Trustisacriticalelementfor

financialservices,especiallysavingsandinsurance;itisbuiltslowlyanderodedquickly.Theextentto

whichafinancialservicemeetscustomersneedsdependsonmuchmorethanfinancialtermsand


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conditions.Further,ifafinancialservicecannotbescaled,itwillnotbeattractivetoproviders.More

workisneededtobetterunderstandtherealdemandforcertainproducts.

Translatingtheincreasinglyricharrayofknowledgethatisavailableremainsastickychallenge.The

bodyofinsightsavailableisnotcommensuratewiththeactionstakenandrealchangesthatstillneedto

happen.Why?Thereareincentive,capacity,andbusinesscaseobstacles,asthenexttwosections

discuss.

B. OrganizationalDeliveryEmbeddingacustomer-centeredapproachrequiresamix

ofscienceandart.Companiesmustdevelopaspecific

definitionofwhatbeingcustomer-centeredmeansand

layoutastrategicapproachthatfitswiththeirown

marketopportunitiesandinternalcapabilities. Customer

orientationmustbeintegratedintoeverystepfrompre-

designtoexecutionandmeasurement.

Challengingaspectsofbecomingcustomer-centered

includefiguringoutexactlywhataninstitutionfocusedon

customerslookslike,howtoengineerallpartsofthe

institutionaroundthecustomerinanintegratedfashion

andhowtomanagethecomplexityneededforahigh-

value,customer-centeredapproachwhilekeepingthings

simpleforthesalesteamtodeliver.

Theoperatingmodelforcustomercentricitycoversthewidespectrumofcapacitiesandfunctions

neededforaprovidertotranslatecustomerinsightsintoproductorserviceinnovationsthatcanscale.Itincludesgovernance,seniormanagement,productdevelopment,deliverychannels,marketing,

managementinformationsystems,customercareandfront-linestaff.Mostorganizations,including

financialserviceproviders,dedicatethebulkoftheirhuman,financialandmanagementresourcesto

runningtheircoreexistingbusiness.Itcanbedifficultforinstitutionstodedicatetheenergyand

resourcesneededfordevelopingcustomer-centricsolutions.

Someprovidersmaynothavethecapacitytosourceclientinsightsdeeplyoreffectivelydesignand

implementnewproductsanddeliveryapproachesforscale.Therequiredskillsgobeyondsourcing

insightsthroughmarketresearchandbehavioraleconomics.Financialengineeringskillsarealso

requiredtotranslatecoreneedsandaspirationsintosuitableproductofferings.Smallerprovidersor

traditionalmicrofinanceinstitutionsmaylackthecapacitytodoin-housemarketresearch,rapidprototypingandinnovation,andtheymayalsolackspecializedresearchorproductdevelopment

departments.

Someproviderswhoarenewertoworkingatthebaseofthepyramidmaylackfeedbackloopsthat

allowclientinsightsfromthefront-endstafftoreachdecisionmakerswhodonotinteractwith

customersdirectly.Moreover,institutionsareoftenmarriedtotheirexistingsystems,anditcanbe

A customer-centric culture starts

at the top. Customers are the

center of concern when the

leadership of the organization

clearly cares about the customers.

With this caring firmly in place atthe top, the supporting systems

and policies come relatively easily.

Christopher Dunford, Former

President of Freedom from Hunger;

Independent Rural Development

Design and Evaluation Consultant


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painful,slowandexpensivetorewiresystemstoadifferentcustomerorientationortointroduce

innovations.

Threearchetypalmodelsemergeforhowfinancialserviceprovidersmightapproachaddressing

customersneedsandofferingamorecustomer-

centricexperience:thein-housemodel,the

outsourcedmodelandthehybridmodel.Ahybrid

modelmightbestbalancethebenefitsofthe

outsourcedmodel(highlyspecializedskills,speed

andfreshperspective)withthoseofthein-house

model(moredirectcustomerexperience,investment

inresearch,organization-wideintegrationandtaking

action).Thereare,ofcourse,costimplicationsof

eachapproachaswell.

Finally,evenwhenthereisacommitmentand

capacitytobetterservecustomers,coststructuresfor

certainproductsorhard-to-reachclientsegmentsmay

beprohibitive,andlower-costinnovationsareneeded.Innovationsindisaggregatingthebusinessmodel

arepromising;specificinstitutionscouldfocuswheretheyaddthemostvalueandhaveacost

advantagewhetherinacquiringcustomers,holdingtherisk,designingtheproduct,orprovidingthe

paymentinfrastructure.Partnershipsacrossbanks,mobilenetworkoperators,microfinanceinstitutions,

agentsandinsurancecompaniesareenablingthedeliveryofmorevalue-addedproductsatgreater

scale.Thereisalsogreatpotentialforproductivepartnershipsthatintegratefinanceintoeducation,

health,housing,communityinfrastructureandagriculturevaluechains.Thesetypesofintegrationinto

othersectorsanddevelopmentprioritiescanhelpcreatedemandandactivateusageofformalfinancialserviceswhiledeliveringhighsocialoutcomes.

C. TheBusinessCaseThejourneytobecomingcustomer-centeredmustincludeavisionofhowthebusinesscasewillbe

achieved.Inthelong-term,scalableideasthatgeneratevalueforcustomersalsoneedtogenerate

valuefortheprovider.

Itisnotsurprisingthatcredit,especiallyworking-capitalloansformicroenterprises,emergedasthe

predominantproductintheearlysustainablemodelsoffinancialservicesforthepoor.Acrossalltypes

offinancialinstitutions,creditistypicallytheprofitleader,especiallywhencomparedtosavings.

Regulatorybarriersforcreditarealsolowerthanforsavingsandinsurance.Theinstitutionalsystems,staffingandprocessrequirementsforotherservicesaredifferent,asaretheregulatorycompliance

requirements.

Establishingtheinstitutionalcapacityneededtoofferasuiteofservicesisexpensive,andnotall

institutionsfocusedonservingthebaseofthepyramidhavethenecessarilydeeppockets.Norcanall

institutionsequallyaccessthebroaderinfrastructure,suchaspaymentssystemsordepositinsurance,

Kshetriya Gramin Financial Services(KGFS)in India offers an innovative client-centered model. Front line staff members are

trained as wealth managers and launch

client relationships through detailed

interviews to diagnose a prospective clients

financial needs and offer financial advice.

Wealth managers then propose a customized

mix of financial products that address the

unique needs of each household, choosing

from an array that includes savings, credit

and insurance. Behind the scenes, KGFSs

offerings are enabled through sophisticated

analytics of local economic data.


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neededtogettoscale.Themicrofinancesector,forinstance,hastraditionallyfocusedpredominantlyon

creditbutcontinuestostruggletofindscalablebusinessmodelsforotherservices.

Forcommercialplayers,thesmallticketsizeoftransactionsforthemarketsatthebaseofthepyramidandthecostofdeliveringtomoreremoteandhard-to-reachcustomerscanbeprohibitive.Inmarkets

wheretherearestillplentyofopportunitiesforgrowthorprofits,itmaybedifficulttoprioritize

investmentstoreachthisnewcustomersegment.Thecalculationforsomeoftheseplayersmaybe

determininghowmanymainstreamcustomerstheyneedtoserveinanewmarkettoaffordtoinvest

intoalowerreturn-on-investmentsegmentthatnonethelessoffersamassiveopportunityintermsof

marketsize.

Theremaynotyetbeanactualbusinesscaseforofferingsomeproductstocertainpeople.Financial

serviceprovidersneedtodefinethelevelsatwhichviabilityisimportantproduct,totalcustomer

profitability,segment,institutionalandoverwhattimeframe.Thetradeoffofhighermarginsinthe

short-termversuspossiblylowermarginsinthelong-termischallengingforcommercialplayers,

especiallypublicallylistedcorporations.Opportunitiesforcross-sellingortotalviabilityataunitor

branchlevelmayallowproviderstocontinueofferingproductsthatarenotprofitableontheirown.

Insufficientinformationexiststodayonthebusinessresultsfromtakingacustomer-centeredapproach

infinancialinclusion.Someresearchfromthemainstreamindustryistelling,however:Elementsofwhat

weconsideracustomer-centeredapproachhavebeenlinkedtobetterlong-termperformanceas

measuredbyreturnonassets.Theseelementsincludetakingabetterbeforecheaperapproach,a

customerlifecycleviewandsolutionsratherthanproductmindsets.

Newdevelopmentsarealsobolsteringthebusinesscaseforputtingcustomersfirst.Innovationsin

technologyaredecreasingcostsandmakingaccesstoservicesmoreconvenient,helpingtoalleviate

someofthebarrierstoestablishingsustainablebusinessmodelsforreachingpoorandlow-income

peoplewitharangeofservices.Innovationsincludetechnologysuchasmobilemoneyandpaymentsinfrastructure,aswellaslow-tech,high-touchinnovationssuchassavingsgroupsandagentnetworks.

Technologyisalsohelpingtoopenupnewtypesandlevelsofinformationaboutclientsthatwillmake

tailoreddesignanddeliveryofservicesmoreefficient.

Thecombinationofrisingincomesatthebaseofthepyramid(seeGrowingIncomes,GrowingInclusion)

andtheopportunityforproviderstolowercostsbyleveragingtechnologymaybethecombinationof

driversthatfinallyhelpstiltthebusinesscasedynamicstowardcustomer-responsivefinancialinclusion.

Finally,thecustomer-focusedapproachesdescribedinthetwoprevioussectionsshouldleadtogreater

usageofservices,notjustaccess.Whenproductsaredesignedtomeetcustomersneeds,customers

usethemandgeneraterevenuefortheprovider.Whenproductsarenotdesignedforcustomerneeds

arguably,forexample,theno-frillsaccountinIndiacustomersdonotusethem,providersdonotmake

anymoneyandtheperceptionisspreadthatitisnotfinanciallyviabletoservecustomersatthebaseof

thepyramid.Designingproductsthatcustomerswillusewillbenefitthebusinesscase.


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D.TheRoleofOtherStakeholdersGovernmentshaveanimportantroleinprovidinginformationoncustomersasapublicgoodtobenefit

allprovidersandtoinformpolicy.Theycansupportcustomerresearchthroughhouseholdsurveysand

nationaldatacollectioneffortsthatincludedemand-sidesurveyswithquestionsonaccess,usageandquality.Customerresearchcanhelpuncoverpotentialmarketrisksforpoorandlow-incomecustomers

sothatgovernmentscanfulfilltheirroleofprotectingcustomers.Policymakerscanalsocreativelyuse

consumerresearch(e.g.,in-depthindividualinterviews,groupsurveysandquantitativesurveys)to

solicitfeedbackdirectlyfromcustomersandtolearnwhichfinancialservicestheyuse,howtheymake

choicesandtheproblemstheyface.Customerresearchcanhelpgovernmentscraftpoliciesand

regulationsthatenabletheintroductionofmorecustomer-responsiveproductsandservicedelivery,

thusfacilitatingresponsibleuptakeofservices.

Fundershavearoletoplayprovidingresources,facilitatingaccesstoknow-howandknowledge

management,andcreatingincentivestoadvanceadeeperunderstandingofclients.Grantfunderscan

supportpublicgoodfoundationalresearchoncustomersandmarkets.Socialinvestorscanhelpshare

theriskofenteringintonewmarkets,servinguntestedcustomersegmentsandlaunchingnewproducts.

Theycanalsoprovidethepatientcapitalandsmartsubsidiesforproviderstorewiretheiroperating

modelsaroundclients.Finally,funderscancreateincentivesforproviderstotakeacustomer-centered

approachthoughtheirduediligence,investment,andmonitoringsystems.

Researchersfromindustryandacademiaalsohaveadistinctroletoplayinaugmentingtheavailable

knowledgeaboutcustomersandhowtobetterservethem.Inaddition,researchersfromthedesign,

anthropology,sociology,strategyandeconomicdisciplinescanpartnerwithfinancialservicesproviders

toprioritizethemostmeaningfulresearchquestionsandtosharenewknowledgerelevanttoimproving

theserviceoffering.

Buildingcustomer-centricinstitutionsisanissueforalltypesofserviceproviders,notjustfinancial

institutionsthatservethebaseofthepyramid.Thetaskofrunningeverydaybusinessoftengetsinthe

way,andspecificcommitment,energyandresourcesareneededtorelentlesslyputcustomersfirst.

Beingcustomer-centricisajourney,however,andpursuingincrementalprogresscan,overtime,leadto

significantvalueforcustomersandforproviders.Thefirstsixrecommendationsoftheworkinggroup

aredirectedatfinancialservicesprovidersandtheremainingonesspeaktogovernments,funders,and

researcherswhocanassist.

III.Recommendations


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1. Build Functions for Systematically Listening to Customers

Marketresearchisagoodinvestment,asisusingthedataavailablewithintheinstitutionorwithits

partners(deliverychannelsorfront-endagents).Financialserviceprovidersmustallocatesufficient

budgetaryandstaffresourcestoenablemarketresearchtobeanenergetic,high-quality,ongoing

function.Spendingtimeup-fronttodeterminewhatquestionsneedtobeansweredisadvisablea

frameworkfordatacollectiononcustomerneedscouldbedevelopedbyindustryleaders.Ethnographic

researchandhuman-centereddesignofferintenseapproachesthatidentifyneedsandpossibleproduct

responsescustomersmaynotevenbeabletoexpress.Collectinginformationanddataisnotsufficient;

specificpeopleandunitsneedtoberesponsibleforinterpretinganddrivingconclusionsfromthe

insights.

ActionPoint:Boardmembersandseniormanagersshouldspendtimeregularlyindirect,

structuredconversationwithactualandpotentialcustomers.

ActionPoint:Createfeedbackloopsthatenableinformationfromfront-linestafftospread

throughtheorganization.Low-costtechnologymakesthiseasierthaneverbefore.

ActionPoint:Recruitfront-linestaffmembersthatareabletobuildempathywiththe

customers,whetherbecausetheycomefromsimilarbackgrounds,arescreenedforthisability

orinsomecaseareevenformercustomers.

2. Make a Strategic Decision About the Target Marke t UsingSegmentation

Fewinstitutionscandoitall.Strategyandpurposeinselectingwhichcustomersegmentsaninstitution

wantstoservecreatesfocusandtheabilitytodeliverexcellence.Beyondbasicdemographic

segmentation,providerscanexpandthelensesusedtounderstandthedistinctattributesandfinancial

servicerequirementsofdifferentcustomersegments.Financialcapabilityandbehaviorsare,for

example,usefullensesthatmayhaveasmuchormorepredictivevaluethanage,genderorlocation.

ResearchAgendaProviders

Providers


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3. Structure Operating Model Around the Customer

Customer-centricityisaboutmorethanproductdevelopment.Organizationalculture,systems,processes,

staffing,marketingandriskmanagementallhavetobeorientedtothecustomer.Modelsthathelp

diagnoseareasoftheinstitutionthatmustbechangedaswellasdemonstrationcasesthatinstitutionscan

learnfromareneeded.Operatingmodelsthatworkforcustomersarebasedonaculturethatencourages

linkagesacrossproductlinesandacrossinternalfunctionstoenableseamlesscustomerservice.

ActionPoint:Providersshouldinvestinacustomerrelationshipmanagementsystem(CRM).A

centralCRMisneededtoanalyze,monitorandtransforminformationintovaluableinsightsand

knowledge.

ActionPoint:Seniormanagementshouldactivelydrivetheculturalincentivesneededtodeliveron

anoperatingmodelstructuredaroundthecustomer.

ActionPoint:Designprocessestooptimizethecustomerexperience.

4. Adopt Methods for Rapid Product Prototyping

Theproductcycledoesnotneedtobeverylong,anditisintheinterestofcustomersandinstitutionsto

generatemanyproductideasorrefinementsfrominsights,toprototypethemandtestthemquickly,andthenfailandmoveon,ormovetotruepilotandscale-up.Throughouttheprocess,institutionsshould

thinkabouthowtheyareaddingvaluetothecurrentneedsandexistingfinancialrelationshipsof

customers.

Providers Capacity-

BuildingAgenda

Providers

5. Leverage Data

Manyinstitutionshavearichrepositoryofdatathatcanbeusedtodriveclientvaluewhilealsoincreasing

theeffectivenessofbusinessdecisions.Datawhenusedpurposefullycanhelptobetterunderstandcustomers,informproductdevelopmentandpredictbehavior.

Institutionsneednewtypesofdatasetsandskillstomakeadvancesincustomer-centricity.Thedesireto

leveragedata,however,shouldnotoutstriptheresourcesandanalyticalcapacityoftheinstitution.


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ActionPoint:Identifykeyquestionstheinstitutionhasfirst,andthendefinethedatastrategy,

includingwhatdatasetsshouldbeconstructed.

6. Harness the Power of Technology

Technologycanfacilitatetheflexibilityneededforinnovativecustomer-centricsolutions.Institutionscanuse

newtechnologiestocreateinteractive,low-costmeansofmaintaininghigh-touchrelationshipswith

customerseveninremoteareas.Tobuildtrust,itisimportanttounderstandwhereahumantouchisneeded

andtowhatextenttechnologycanmimicthat.Technologyhelpstocaptureandminedataoncustomersand,

ofcourse,candramaticallyreducethecostofdelivery,enablingfinancialserviceproviderstoofferamore

diverserangeofservicescost-effectively.Carefulinvestmentsintechnologythatkeeppacewiththecapacity

andstrategyofaninstitutionarerecommended.

Providers

Providers

7. Introduce Metrics for Assessing Progress on Customer-Centricity

Settinginternalperformancemetricsthataretiedtocustomerwell-beingandsatisfactionandallowthe

institutiontotrackhowwellitisaddressingcustomerneedsisessential.Financialincentives,including

bonusesandcommissions,canbetiedtoachievingthesemetrics.Metricsshouldalsobeputinplaceforthe

organizationalchangesneededtodeliverwellforcustomers.

ActionPoint:Metricsforcustomer-centricitymustbeintegratedintotheoverallkeyperformance

indicatorsoftheinstitutiontoalignincentives.

ActionPoint:UsetheUniversalStandardsforSocialPerformanceManagement(USSPM)asan

excellentindustryreference.

ProvidersSupport

Organizations


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8. Use Smart Subsidies that Help Institutions Put Customers First

Donors,foundationsandsocialinvestorscanprovidethepatientcapital,smartsubsidyandcapacitybuilding

neededforproviderstostructuretheiroperationstobetteraddresscustomerneeds.Theycanalsosharetheriskimplicitinreachingouttonewclientsegmentsandexperimentingwithnewfinancialservices.Funders

canmakesuretheyarefulfillingthisrolewellbyreviewingtheirduediligence,investment ,grant-makingand

monitoringsystemsthroughacustomerlens.

SupportOrganizations

9. Conduct Research on What Works to Build the Evidence Base

Specificmodels,evenifnotdirectlyreplicable,areanimportantsourceoflearningforinstitutions.Publishing

casesoncustomer-centricinstitutions,whatittooktogetthere,howtheybuilttheiroperatingmodel,their

businessperformancesandsoonwouldbeanimportantpubliccontribution.Moreresearchisalsoneededto

exploreactivedriversofbusinessaswellasthecausallinkbetweencustomer-centricityandbusiness

viability.

SupportOrganizations

ResearchAgenda

10. Create a Favorable and Protective Environment

Policymakersshouldrefrainfrommandatingcertainproductfeaturesorfinancialinclusionstrategiesthat

prescribesequencedaccesstoservices.Theycanalsokeeppacewithinnovationsinthemarketplaceand,

usingcustomerresearch,identifyriskstonewusersofformalfinancialservicesthatrequireprotective

measures.SupportfromfundersandnetworkssuchastheAllianceforFinancialInclusionmaybeusefulin

thisregard.

Regulators


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Thisworkingpaperwascreatedthroughaseriesofconsultationswithanexpertsworkinggroupon

AddressingCustomerNeeds.WewishtoexpressourgratitudetotheAddressingCustomerNeedsWorking

Groupfortheiractiveparticipationingroupdiscussionsandthoughtfulcontributions.

Wealsothankthemanyadditionalexpertswhorevieweddraftsofthepaperandprovidedinput.Finally,we

wishtothankthemanyCFIandAccionstaffmemberswhoprovidedsupportincludingAllisonBernstein,

MereneBotsio,ElizabethDavidson,AnitaGardeva,SonjaKelly,andAmandaLotz.

TheCenterforFinancialInclusionacceptsresponsibilityfortheviewsexpressedinthispaper.Thoseviewsdo

notnecessarilyreflecttheviewsofindividualworkinggroupmembersortheirorganizations.

ExpertWorkingGrouponAddressingCustomerNeeds

AlexiaLatortue,mostrecently,ConsultativeGroup

toAssistthePoor(CGAP)(Chair)

AnitaGardeva,CenterforFinancialInclusion

(Facilitator)

AsadMahmood,DeutscheBankRoyHynes,MasterCardWorldwide

OlgaMorawczynski,GrameenFoundation

CamillaNestor,GrameenFoundation

EvelynStark ,MetLifeFoundation

GrahamWright,MicroSave

NicoleZimmermann,WesternUnion


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This publication was produced by Financial Inclusion 2020:

1101 15th Street NW, Suite 400, Washington, DC 20005 USA Tel 202.393.5113 Fax 202.393.5115www.centerforfinancialinclusion.org

Addressing Customer Needs for Full Financial Inclusion

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