Watching the face of a rural woman as she signed for a bank card with a biometric fingerprint reaffirmed for us not only that poor people want to be part of the 21st century, but that participating fully in 21st century amenities is empowering. But it is not enough simply to access this new financial service; it is also important to recognize its potential benefits. For example, if a woman receives a government cash transfer as a direct bank deposit, but withdraws all the money immediately because she had never used a bank and does not understand how it works, she is denied the full advantages of having a bank account. Leapfrogging this divide offers the potential for mass financial inclusion, but achieving this goal requires specific actions to ensure the fullest use of digital finance.
A new approach is needed to ensure the successful use of digital financial services—one that is more customer-centric. Integral to this refocus is encouraging customer empowerment and enabling a more dynamic customer-provider relationship in which customers are no longer viewed as passive but are seen as actively engaged. For both customers and financial service providers (FSPs) this is a win-win—a positive customer experience, higher levels of loyalty and usage, and a better bottom line.
Leveraging FSPs to support customer empowerment
Ultimately, customers are responsible for their own empowerment. However, FSPs, in their capacity as facilitators, can support a more activist role for customers by leveraging the interactions between customers and institutions.
What actions can FSPs take to facilitate customer empowerment? First they must listen to their clients. Then they must choose among options — some big actions, some small. Here we highlight three broad areas of activity.
1. Ensure a positive customer experience. Fundamental to sustainability and scale is brand loyalty. Offering added value for the customer and a positive transactional experience contributes to the achievement of these goals. Achieving this means understanding how people use money and identifying the attributes of products and services that are a priority for their market and that positively affect use and the customer experience. The most important factors to date are timeliness, convenience, cost to the customer, and risk of a loss.
Engaging customers in the product design process helps ensure that these factors are considered when developing products, and that customers receive timely and clear information with which to assess their options. The approach departs from FSPs’ previous operating premise of “open the doors and they will come,” a process that forced customers to figure out the suitability of products on their own, with no frame of reference and no input into suitability.
The Kshetriya Gramin Financial Services (KGFS) Model in India sought to address this weakness by working closely with households to customize financial advice, based on the household’s balance sheet and its exposure to risks. Underlying KGFS’s approach is the premise, which we share, that the provider’s role in building financial capability is not limited to the disclosure of product features only, but includes developing financial expertise among customers. The expectation is that customers will make the right choices on their own.
2. Enable learning by doing. In their capacity as enablers of customer empowerment, FSPs can encourage the customer to exercise agency—that is, the capacity to act freely and to make their own decisions. Customers also need time for trial and error so trust and confidence can be built in these new delivery systems. Giving customers greater control over their finances results when the conduct of transactions is intuitive and easy to remember, and when behavioral constraints to access and use — particularly literacy, psychological, and social barriers — are addressed. FSPs can encourage new behaviors by offering incentives and tools using information and communication technology, such as Short Message Service (SMS) messaging, and games.
Automated conversations-based engagement platforms are being used as a tool to build trust and confidence among customers. An early innovator, Juntos Finanzas, a Silicon Valley-based company whose mission is to design tools that empower users to save and build confidence in their financial lives, created an algorithm for a two-way conversation between customers and the Juntos platform. Communications are based on text messaging. The text message data are continuously used to fine-tune the messages. Results so far have been encouraging. A pilot with a Colombian bank addressed two themes: financial product attributes and managing customers’ financial lives. This approach built trust in both the bank and the product, as well as a sense of security that someone is always there to support them. This in turn drove up usage rates. After three months, customer activity rates increased by 33 percent and average bank balances in accounts increased by 50 percent.
3. Respect customers and listen to them. Empowerment is possible only when the environment permits openness, transparency, and constructive feedback, and allows for effective and “just-in-time” recourse mechanisms. FSPs are responsible for implementing structures and providing information that will allow customers to exercise their rights and commitments; customers are responsible for being informed about both their and the FSP’s rights and obligations. However, new practices will be exercised only if they are seen to be actionable and able to generate acceptable results for providers and their customers. Juhudi Kilimo (JK), a Kenya-based provider of finance and technical assistance to farmers, uses technology to listen to its customers and provide opportunities for its customers to exercise voice along an expanding number of touchpoints between the institution and the customer. JK equips field staff with tablet PCs that allow them to personalize profiles of individual farmers and provide the farmers with accessible account information in real time. The web-based platform enables field staff to communicate with rural smallholders in multiple ways: free SMS texting, free airtime (an incentive to encourage farmers to respond to surveys or other communications), alerts and reminders that can be easily scheduled, and tracking systems that can be set up. The platform is used to design and conduct surveys, provide easily viewed real-time results, and receive client-initiated communications through an inbox.
Customers need time for trial and error so trust and confidence can be built in new digital financial products and services. Inevitably, this process will involve changes in operations, customer capabilities, and products, some of which are not even on the drawing boards yet. With collaboration between customer and provider, and each reaching out to social networks, the resulting products and services should add value to the user and meet the sustainability and scale goals of the provider. We are currently at the beginning of this journey. As good customer empowerment practices emerge, we will document them.