Does Financial Inclusion Need to Be More Customer-Centric?

> Posted by Tanaya Kilara, Financial Sector Analyst, CGAP

Customer-centricity is about providing solutions based on a deep understanding of customer needs, preferences, and behaviors. This is a concept that is easy to agree with but difficult to implement. Financial service providers serving base of the pyramid (BOP) customers struggle with generating customer insights, but more importantly, with translating those insights into better products and services for BOP customers. In a recently released CGAP Brief, Beth Rhyne and I explore the relevance of customer-centricity for financial inclusion.

Our starting point is that BOP customers differ significantly from their wealthier counterparts. They have informal, irregular incomes, different spending and consumption patterns, different relationships with financial institutions, and need different consumer protection measures. Developing this understanding of customers and their differentiated needs is the first step in serving the BOP market with relevant financial services. Many financial service providers presume that this market can be served by the same products as those of higher income customers, or at best, that they can treat this entire market as a single segment. Providers need to recognize different needs and segments and therefore provide different financial solutions that cater to this market.

We argue that just developing an understanding of customers is not enough. Customer orientation needs to permeate the entire organization in order to deliver an experience that helps customers solve real-life challenges. Top-level leadership drives a change in culture. Customer advocates, the finance team, and operations staff all have to work together to assess the consequences of new offers for staff efficiency, IT costs, and revenue so that an effective business model emerges. Providers need to actively empower customers to choose and use products, recognizing that financially capable customers will be more active users.

And finally, the million dollar question: is there a business case for a customer-centric approach at the BOP? We posit that there is. There is research from other industries showing that a customer-centric approach generates superior returns over the long-term, and we believe that this also applies for low-income customers where margins are thin. Customer-centricity resolves a key challenge that providers of financial services to the poor face – the access-usage gap. For providers to serve the BOP market profitably, they need customers not just to sign up for products, but to consistently use products over time. This involves building a long-term, deep, and loyal relationship with customers. Customer-centric providers, by focusing on the ultimate customer experience, equip themselves to acquire and retain profitable customers, successfully penetrating the BOP market.

Image credit: Gates Foundation

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