FinTech has been lauded as a game-changer in nearly every sense of the word, but can it also revolutionize the way banks serve women?
Right now, women clients are finding that FIs simply aren't meeting their specific needs. In fact, a BCG survey of more than 12,000 women from 21 countries found that of all the industries that affect their daily lives, women feel most dissatisfied with the financial services industry, both on a product and service level.
The surveyed women also reported a strong willngness to switch to a provider that would understand them better. This translates to real costs for banks failing to deliver an empathic understanding of women's unique situations and needs in running their homes and businesses (oftentimes happening simultaneously).
After all, we're talking about 50% of Earth's population here, and that's no small change - particularly when it comes to women who run their own business. Women entrepreneurs represent a very profitable and financially engaged segment with an even more specific set of needs that have traditionally been ignored. According to a 2014 Goldman Sachs report, woman-owned SMEs represent an untapped potential market for banks of approximately $235 billion!
So why, in so many aspects of banking, haven't women's needs been prioritized? And how can FinTech help the financial services industry cater more effectively to women entrepreneurs?
How banks can serve women entrepreneurs better
Instead of listing more ways women's needs aren't being met (read the Boston Consulting Group report here), let's focus on practical solutions that FIs can implement today to make banking more inclusive and convenient for women who run SMEs.
Women's World Banking, an NYC-based nonprofit that promotes financial inclusion for women worldwide, was recently tasked by the European Bank for Reconstruction and Development to come up with a set of global best practices for provide guidance for banks seeking to capture this significant and easily addressable market.
At Strands we agree with these best practices and want to share them with you here, since they are aligned and resonate well with both our company values and product value proposition. Here's what WWB came up with, immediately followed by how FIs can leverage FinTech to realize these best practices:
- Disaggregate your data by gender.
Banks are sitting on a treasure drove of data that they rarely make use of. When it comes to gender, most FIs can't even tell whether their customer is male or female, especially if that customer is a business!
So the first step here is to collect, analyze and then segement customer data - by gender, in this case - and then create compelling value propositions for women clients. After that, it's important to monitor performance using data-driven technology. A good business financial management solution will provide the necessary monitoring and analysis tools in the form of a powerful back-office that banks can use to glean relevant, actionable insights from this crucial data.
- Know your market and customers.
Invest in market research to assess the size of the opportunity in your local market, the key constraints facing female entrepreneurs (e.g., social or cultural biases, property or inheritance laws, relative lack of business acumen or managerial expertise), and then segment your customer base accordingly.
Data insights gained from using FinTech tools like business financial management (BFM) enables FIs to know their market and customer much more deeply, thanks to the data-driven insights described above. However, this doesn't mean your work is done if you've put the user interface in pink and relied on other (stereo)types of condescending “feminine branding.” Use technology to segment your customer base according to their actual online behaviour and incorporate that feedback into new releases in order to better meet women's needs.
- View women-led SMEs as a distinct group.
Research shows that women SME owners place high value on being treated with respect as businesspeople and that they view their banking business beyond just transactional terms. Tailoring your brand strategy to resonate with women-owned SMEs is a key strategy.
Offering digital products and services that are algorithmically targeted to specific segments based on user behaviour is a great way to do this in practice. WWB found that women want to experience banking in relational terms, which is exactly what financial management applications do by taking an inscrutable mess of transactional data and transforming it into actionable insights that are relevant and personalized, making financial data easier to understand and much more useful for both the user and her bank.For example, presenting incomes and expenses in the form of a calendar or heat map is a much more visual and intuitive tool than a messy list of transactions. Or, a user's savings goals can be customized beyond meaningless numbers to reflect her actual life events or business milestones.
- Build internal capacity.
Buy-in from the board and C-level executives is imperative. So is training your customer-facing staff to be effective brand ambassadors for the women’s market.
Technology can be an ideal vehicle to train customer-facing staff to become better brand ambassadors. As an all-in-one, easy-to-use dashboard for business financial management, BFM can serve as a practical tool to develop bank branch employees into more effective ambassadors for the women’s market. Again, presenting data in a more personalized and accessible way makes it easier to teach and learn how to manage business finances.
- Offer women a comprehensive mix of FinTech products & services.
When women trust an institution, they are often eager to place more of their business, both personal and enterprise, with that organization. Banks who win their loyalty can successfully cross-sell.
Providing a holistic suite of services such as platforms for both personal and business financial management makes it easier and more convenient for women to manage their finances in one place. This in turn increases the chances that the service provider FI will become the "primary bank" for their women customers, whose increased loyalty makes them more open to seeking additional services.
- Adapt product and service delivery models accordingly.
Some of the banks have branches with staff focusing specifically on women customers. Others accept household goods or jewelry as collateral. Banks that have not previously focused on serving women clients may wish to rely on a mix of standardized measures, such as credit scoring, along with relationship-banking approaches.
FinTech tools can reinforce these relationship-banking approaches by providing a tailored, data-driven analysis of SME track records and future projections, in order to help FIs assess risk and opportunities more accurately.
Author's note: On October 1st, The Global Banking Alliance for Women is holding its annual summit Sao Paulo, Brazil. Moderator Matthew Gamser, CEO of the SME Finance Forum, will lead myself and fellow panelists (including thought leaders from McKinsey and Microsoft) in a discussion to explore the future of digital finance and how banks can collaborate with FinTechs to create stronger value propositions for women. Learn more about the 2015 GBA Summit here.