In a context where many low income customers are unable to access financial services, don't open accounts, don’t use them, or don’t take full advantage of what is on offer, CGAP is interested in learning more about customer empowerment and what drives customers to become more empowered – especially when it comes to using digital products. At the core of this idea of customer empowerment is the ability of a customer to make good choices and effectively use financial services. It also means that customers have a voice to ensure services meet their needs, assert their rights and find effective recourse when things go wrong.
To better understand customers’ perspectives on empowerment, CGAP commissioned research in the Philippines, Cote d’Ivoire and India, where we asked 50-60 customers from different contexts to rank their confidence as consumers. It was striking that most seemed to feel confident about their ability to choose between services and providers and use the services that they access. They feel empowered about the services with which they are familiar, but does this mean that they are making effective choices and making the best use of the available products and services to manage their financial lives? One customer, a driver in Delhi, ranked himself in the middle of the scale despite being knowledgeable about financial services. He was confident in using familiar products, however, his lower ranking resulted from knowledge that there were many products and services that he didn’t know how to use. He understood that he still had a lot to learn. Many other customers did not have this recognition.
The research highlights customer empowerment as a process that is influenced by life events, friends, family and providers. This perspective is important in identifying opportunities for providers to support customers’ learning by doing at different stages of their journey.
Many customers access financial services through necessity – such as opening an account to receive a grant or salary. There are psychological and physical barriers in accessing formal financial services for the first time. Some customers are passive, delegating a husband or employer to take decisions on their behalf; they do not evolve into more confident users over time. Others take the guidance of friends, family or other people and make initial choices amongst providers and products that are physically close and familiar.
To continue as active users, trust needs to be established, and the need to be treated respectfully was found to be a major consideration by interviewees in the three countries. Whilst a positive experience is valued, the research highlighted the impact of negative experiences in influencing choice and blocking on-going use.
Over time some customers become confident in their use of these familiar financial services – for example self-help group members in India told us how much they valued having their own bank account separate from those of their husbands. However, we heard that even these more experienced customers are limited in their knowledge and often don’t fully understand the terms of contracts. They also have low expectations of providers and accept poor levels of service such as biometric technology failure in India or lack of agent liquidity in Cote d’Ivoire.
What is acceptable now, may not be acceptable in the future, and through learning by doing, customers become more familiar with the options available, confident in their own knowledge and abilities and more demanding in their expectations. For example, in the competitive Philippines loan market, customers are quick to move between providers if they feel the service is not good.
These ‘levels’ of empowerment have implications for the segmentation of customers by providers. Just as marketing theory talks about early adopters and laggards in the uptake of new ideas or products, we noted very real differences in customer’s interest and willingness to move to new or unfamiliar products or providers and to take risks. Some customers are more open, risk-taking and entrepreneurial. Others need more guidance and are reluctant to move beyond what is familiar.
The personal aspects of empowerment seem to be very influential in empowerment as a customer. Segmenting customers by personality as well as the conventional aspects such as gender or education levels may well be a valuable distinction for providers to make in thinking about how to support the customer journey towards empowerment.
Ultimately customer empowerment aims to create a two-way relationship where a customer and provider are accountable to and respectful of each other. The research shows that we are a long way from this.
In this research, there were almost no examples of dialogue between customers and providers. Mostly customers we talked with do not complain even if they may have reason to, and none of the customers interviewed had any sense of providers’ openness to dialogue.
In sum, customer empowerment is a complex interplay between personal disposition, life experience and engagement with financial services that drives the specific choice, use and voice for customers. While there is certainly a role for providers in supporting these steps, the process is not straightforward, and there are opportunities both to support and block customer empowerment. Empowerment is a process that takes place over time and through multiple touch points and channels. Providers have an opportunity to engage with customers on this journey to facilitate awareness and learning by doing and allow customers to co-create the tools and services they need to manage their money.