> Posted by Monique Cohen, Independent Advisor, Founder and Past President, Microfinance Opportunities
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
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