From Access to Active Use: The Need for Customer Empowerment

The growing number of mobile accounts opened by low-income people is impressive. Unfortunately, so are their dormancy rates. The GSMA estimates that in 2013, more than 70 percent of mobile money subscribers were inactive, having transacted less than one time in a 90-day period. Many customers who sign up for digital financial services fail to actually use them for a variety of reasons. Complicated interfaces and lack of relative benefit compared to alternative financial products are common deterrents. Inactivity is not only an issue for mobile accounts. Five retail banks in Colombia, India, Kenya, Mexico and South Africa – among the largest in their markets, collectively serving 77 million customers - reported dormancy rates ranging from 20 to 90 percent, with a median of 50%.

These high levels of inactivity are among the challenges facing financial service providers (FSPs) seeking scale and sustainability of digital financial services. If success rests on the premise that customers find an FSP’s services to be useful and feel they add value to their lives, what needs to be done to increase activity?

The first step is the need for providers serving low-income users to become more customer-centric. This means understanding customers’ needs and preferences, delivering solutions that match these requirements, and ensuring that the customer’s experience interacting with a digital financial service provider is positive. This new focus goes beyond assessing the suitability of the product or quality of service to enabling customers to see themselves as active “agents” rather than passive and dependent players in the financial system. Customers should feel empowered to exercise choice and voice.

What is an empowered customer?

Enabling customers to empower themselves calls for a more interactive and dynamic relationship between provider and customer and an empathetic environment supported by all stakeholders. FSPs can facilitate the empowerment of customers at multiple touch points in the process of moving from access to use of digital financial services. Providers can support empowerment by customizing solutions that address the needs of diverse market segment and ensure a more open environment, transparency of operations, and greater respect for and listening to the customer. Customers should be encouraged to experiment and learn, and to provide constructive feedback.

There are encouraging stories about how customers empower themselves. And as customers become more confident and trusting, they are able to make smarter choices and take greater control of their financial lives. But providers and other stakeholders can use incentives and tools to facilitate the empowerment process.

For example, the Lista Initiative, introduced by the nonprofit organization, Fundación Capital in Latin America, has a mobile education initiative for enhancing financial capabilities. They provide women with tablets loaded with the LISTA application which enables women to teach themselves about financial matters and monitor their progress. Results of a pilot in Colombia showed that customers who received tablet-based training and complementary mobile-based "nudge" messages increased their knowledge of the formal financial system. Participants were also able to identify the advantages of saving in formal financial institutions and demonstrated increased confidence in executing transactions. This example not only demonstrates that providing people with information can be empowering, but also that customers “learn by doing” from intuitive solutions using motivating, gamified teaching platforms.

Hurdles to empowerment

Customer centricity builds customer trust and confidence in FSPs— behaviors that are basic to effective partnerships—and permits customers to exercise choice and voice. Without a supportive environment, customers face numerous hurdles. They include:

• Lack of information and awareness. The information gap not only makes it difficult for customers to understand the services offered, but puts the onus on the customer to seek out information necessary to make informed choices. Low levels of functional literacy, information overload, and limited financial capability make it difficult for many customers to follow instructions or identify misinformation. In India, for example recipients of conditional cash transfers withdraw all the money received on the day it is deposited. The belief is that the government will withdraw the money if it is left in the account.
• Leapfrogging without space for failure. Too often new technologies and delivery channels are introduced with only limited explanation and opportunity for “learning by doing.” The assumption is that customers will move seamlessly from using informal to formal financial services, and from a cash environment to operating in a digital setting. For many people the opposite holds true. Uncomfortable with and fearful of using these new technologies, this leapfrogging can be very challenging. For example, the card of a Pakistani woman who tried to use an ATM to withdraw her government benefits was swallowed up after three failed attempts to withdraw the money. She entered her PIN code as appropriate for Urdu, a language that reads from right to left. However, the ATM required entering numbers from left to right.
• Weak or nonexistent recourse mechanisms. In the absence of an effective and timely complaint and dispute resolution mechanism, customers can quickly learn to distrust FSPs. CGAP research in Ghana and Kenya encountered several people that had been confronted with a failed transaction for which they were charged. They did not know where to lodge a complaint and did not believe that the problem would be resolved in their favor. As a result they not only stopped using the account, but also told friends and family about the problem, which negatively affected the provider’s business. This was also one of the insights that resulted from human-centered design projects.
• Lack of respect by frontline staff or agents leads customers to avoid formal providers. The combination of superior provider attitudes and customers’ limited confidence can leave customers feeling they cannot demand better and rely on others as research by Grameen Foundation and Intermedia illustrated. Gender bias, lack of cultural sensitivity, or a perceived lack of safety in transaction spaces may constrain customer engagement.

Digitization and technology offer many opportunities for the unbanked and can help empower customers to become informed financial decision makers. However, financial products must meet customers’ needs in order to reach scale. FSPs will have to overcome several hurdles in order to convert inactive users of mobile money to informed customers.