The Decade of the Client

Every time I learn a new word, suddenly it is everywhere. On billboards, coming out of the TV anchor’s mouth, and sometimes even on the back of the box of my favorite cereal. This is exactly what is happening to me now with “clients.” Of course, I’ve known what the word means for a long time. But all of a sudden, everyone is talking about putting clients first, making sure we have client focus, and being client-centric.

This is true not only in my professional world—financial inclusion. I am also seeing this client focus appear in articles about shoes at Geox and in TV ads from Charles Schwab promising that if you signed up to them, they would start with your specific needs and aspirations, not a pre-determined menu of products. Social psychologists would say I suffer from frequency illusion or the Baader-Meinhof phenomenon.

So, “clients at the center” is clearly en vogue. That’s good news for access to finance for poor and low income people, right? Well, yes, though I’d say that for an industry that makes an implicit connection between putting clients at the center and good value for clients, the waters are actually a bit muddy. Let me explain.

I want to bet that Geox is quite clear about why it is intent on understanding clients’ needs – it wants to sell more shoes. In my world, getting to one clear answer about why it is important to hone in sharply on clients—their needs, preferences, and behaviors—is far more difficult. It’s easy to get agreement on the big picture. But try to get two or three sentences beyond that, and the views of people working on financial inclusion are likely to differ. These differences might be slight and some would say inconsequential, just a question of emphasis. But these differences might also unmask more divergent views about the role of mainstream financial institutions in serving the bottom of the pyramid, the appropriate place for regulation, and even the role of finance in people’s lives.

Simply put, I think that it will not be easy to reach agreement among those who work on financial inclusion on two seemingly simple questions:

1) What do we mean by client-centric financial inclusion? – Can we visualize what success looks like and if we have achieved our goal?

2) Why is it important to achieve client-centric financial inclusion? What will be the benefits to clients, the institutions that serve them, and the broader industry? And without razor sharp answers to these two questions, it will likely be even harder to answer a third question:

3) What does it take to concretely achieve client-centric financial inclusion? Do we understand the pathways to getting there…what is needed from all the different stakeholders?

Difficult does not mean impossible. Especially if we – all those of us who work on financial inclusion and care to join the collective “we” – agree that precision is important. We should not assume we all know what we are talking about. We cannot simply assert our new vocabulary word with more and more conviction, and hope that this will be sufficient. We need to get more precise.

In the journey for more precision, I still have more questions than answers. Below are the top six issues currently on my mind with regard to client-centric financial inclusion.

• Is it good to be all things to all people? There are so many impact expectations of access to finance, it’s dizzying. It is not just that microcredit was overhyped—people expected it to deliver on everything from women’s empowerment, to jobs, to better nutrition and schooling for kids. The plus side is that it was easy to rally supporters, energy, and resources to access to finance. The down side is that it is harder to actually define what success look like, and to then work backwards with relentless focus to increase the chances of achieving success. (see my question 1 above.)
• Political economy matters. It’s not just governments that operate within a political economy that needs to be understood, offers some opportunities, and also imposes constraints. All actors involved in financial inclusion have their own political economy. Even if we all agree on what it means to be client-centric and the roles of each actor (provider, government, funder), then reality will kick in. The donor whose main instrument is foreign currency debt will have a hard time not prioritizing providers that can deliver on a growing loan portfolio. Providers that manage to gain deep insights’ about their clients may face pressure from a Board to generate short-term profits to the detriment of developing and testing new products. Governments may be swept up in election fever and expedient solutions rather than laying the long-term foundation for a vibrant, inclusive financial sector. Understanding the political economies within which we all operate and the extent to which they shape our respective incentives seems critical.
• The multiple roles of academic research. I’d say that providers are in the front seat when it comes to putting clients at the center. Their front-line staff interacts with clients everyday and often has a deep understanding of clients and their needs. Yet, the research community also has an important role to play. There is lots of pressure to make academic research on financial inclusion as practical and actionable as possible. I often sympathize with that view, but think we need to be a bit careful. There are at least four different roles for academic research. There is need for research at the “front end” to help develop the understanding of clients that is a public good and provides an important context for the more granular and market-specific insights providers can then layer in. There is also a need for research at the “back end” to help us understand the impacts of our interventions, whether a new policy, product or simply a tweak to a product feature. While academic research needs to be relevant, there should be space for knowledge exploration that is not readily applicable and may only become relevant to industry years later. This leads us to the two additional roles – foundational research and research that explores the unknowns beyond the imagination of current practices, thus pushing the frontiers.
• Financial services and refrigerators, two peas in a pod? We can learn a lot from industrial design and should not reinvent the wheel. Major industries have figured out processes for sourcing insights “getting to the aha moment” to translating them into a viable service with the appropriate delivery channel and all the parts of the organization that need to come together for the “so what moment.” Yet, is all the learning truly translatable? To what extent can innovation techniques for mass retail products be applied to financial services? As an intangible service, where relationships and trust are at premium, selling financial services and fridges might not be exactly the same thing. In addition to industrial design, perhaps we should also look closer to home – to mainstream financial institutions.
• Working on demand in isolation of supply and the policy environment is futile. In my opinion, one of the successes of microfinance has been its focus on building institutional capacity—the supply side. There is now welcome focus on finding a more just equilibrium between demand and supply. The swing of the pendulum is quite hypnotic; yet, speaking about the demand side without understanding and forging the links with the supply side and the policy environment would be counterproductive at best. Without a robust supply, the most effective and well-understood demand will remain, well, understood but not served. Ultimately we need the demand and supply market forces to be in equilibrium within the context of a sound policy environment.
• The client knows best…? Yes, but how exactly can we best bring clients’ voices directly into the conversations, into the decisions that ultimately will affect them? There are romantic notions that clients, given a chance, will best be able to define their needs. Yet, major forces who changed the world as we know it, like Steve Jobs, caution us that the customer will always mislead. Behavioral economists warn that humans are irrational, and that we do not always make the best decisions or act in our self-interest. There is a school of thought that argues not for directly asking clients what they need, but rather for upfront and close observation of their lives, habits, and preferences. This is often a controversial and loaded discussion.

An exciting dialogue is underway that is leading to a collective agreement that putting clients at the center of all decisions is key. Importantly, we are starting to add texture and detail to what this means. The stakes are high. If we get it right in financial inclusion, perhaps, 10 years from now, the 2010s will be described as The Decade of the Client.