It is our great pleasure to present this summary of our second annual MasterCard Foundation Symposium on Financial Inclusion. We find ourselves at a unique time, as new technology, new models and industries converge to expand the potential for financial inclusion to help fight poverty. That is why events like these, which attract such a diverse array of practitioners, influencers and thinkers can play a key role in building a bridge for a more client-centric approach to financial inclusion.
This year’s Symposium, once again, explored the theme of "Clients at the Center" by focusing on the "Client Journey." The Foundation and the Boulder Institute of Microfinance wanted to increase awareness of how clients experience products and services, from the first time they hear about a product, to the point where they become regular users―and to look for clues about how we can improve what is being offered.
We structured the event to pool the deep experience acquired from all over the world and to stimulate new ways of thinking. We invited new players in the marketplace, as well as experts from allied sectors to help lay the groundwork of a more client-focused industry.
Over the next three years, we will continue to instigate important conversations and provide the fertile ground needed for participants to share ideas and examples of how they are introducing a more client-centric approach to financial services for the poor. We look forward to our next gathering and are eager to hear success stories from organizations taking the lead in this journey.
|Ann Miles||Robert Christen|
|Director of Financial Inclusion||President|
|The MasterCard Foundation||The Boulder Institute of Microfinance|
The Symposium focused on five steps clients take on their journey to financial inclusion. We looked at how institutions engage with clients, how clients already manage their money, why they buy new products and services, and what activities and product designs prompt them to use financial services effectively, share their experiences with others to build trust, and then regularly use these products and services over the long-term.
Reeta Roy spoke of the need to build trust in order to expand the gains made in financial inclusion at the community and household level. Mainstreaming these gains, she said, can only arise from cultivating increased levels of confidence with institutions and clients. Only a concerted effort to reach excluded populations by understanding their needs can help build these relationships. This is client centricity. This is, she said, the industry “daring to trust clients.”
“The theme of this year’s conference is game-changing. At its core, placing clients at the center of business strategy and operations, and providing them with products and services that respond to their needs, behaviours and aspirations... It will require a mindset shift, but the rewards will be great. Getting it right for clients will instill their trust and confidence in the formal financial system, which simply does not exist today.” - Reeta Roy
Bob Christen said that it is time to enter a new phase. We are more conscious about how the poor arrange their finances to achieve their most important family goals, and with new technology we can now handle transactions that are smaller than before. Much of the financial inclusion space is about a general population getting connected to the financial system. The challenge that brings us together is how we can reach poorer clients with better services in a viable way.
He highlighted three ways we can improve on client-centric financial services by: (1) generating efficiencies in what we already do but in a more client-sensitive way, (2) being cognizant of the varying financial needs and goals that clients have during the different stages in their life-cycle, and (3) including new market segments such as farmers, day laborers and lower-level salaried employees.
Mr. Christen said that it is easy to get on the bandwagon of client-centricity, but the question is not whether we currently have clients. The question is "are we maximizing value for our financial services to clients while still making business sense for us?"
“We have spent 20 years putting the architecture in place with a very limited set of financial products that have been good enough to get to 200 million clients, providing a valued service... There is a feeling out there that it may be time to enter a new phase. We are ready to start to look at our business models and figure out a way that we might satisfy a much broader range of [client's] goals and their ability to manage cash flows." - Bob Christen
As we look forward to next year’s Symposium, we took stock of the big themes emerging from this year’s keynotes, panels, debates and workshops. Some of the key takeaways include:
1. We need to know more about clients' lives, their goals, and their needs to design better products and services. Poor households continue to improvise creative, but imperfect, solutions to their financial needs, such as borrowing from family and friends. We also know that village-based savings groups often satisfy basic needs for savings and credit. While these solutions work at a subsistence level, their exclusion from the formal system makes them more susceptible to risk. Service providers need to develop client-centric products at the intersection of what is 1) desirable for people, 2) viable for business, and 3) feasible from a technological and regulatory point of view. This means understanding what clients care about (e.g. simplicity in messaging, trust, convenience, affordability), while also remembering that customers and the business environment are constantly changing.
Strive Masiyiwa of Econet Wireless explained that understanding client needs and building trust was essential to how his company’s mobile and financial inclusion products and services adapted to reach poor clients weathering the turmoil in post-conflict Burundi and Zimbabwe’s inflation crisis.
“When people are seeing the value of cash disappear overnight… trust in any form of institutions is hard to come by.” - Strive Masiyiwa.
Working to build that trust requires doing much more than simply rolling out a new service or product. Leslie Witt of IDEO, for example, advised that the sector look deeper into the behaviours of clients and design experiences that can provide a tangible sense of delight while exceeding their expectations.
Part of this work will involve grappling with an explosion of information. Symposium attendees heard about opportunities for using both new and static data sources, including data held by telecommunications firms, utilities companies, information from wholesalers, government data sets, publicly-available financial inclusion benchmarks, such as those provided by Finscope and The MIX Market, as well as the information financial institutions already have about their existing clients. Where possible, building in-house research capacity, although expensive, is crucial to continuously gaining client insights. Since the data mostly already exists, the challenge is how best to organize and use it, making it more easily accessible for data analytics. Sorting through these sources requires “a clear sense of the business problem you are trying to solve,” noted Daryl Collins of Bankable Frontier Associates.
The Symposium series hopes to inspire practitioners to explore the needs of population segments underserved and not well understood by the financial inclusion sector. We need to explore how to better assess the impact of providing financial services to groups such as smallholder farmers, young people and the chronically poor. It is important to dig deeper to uncover and synthesize research and testimonies from the people served.
2. Leadership is key to reorganizing an organization toward client-centricity. Attendees eagerly examined the practical implications of “daring to trust clients,” looking at everything from leadership to business processes and change management. Leon Lourens of PEP, Africa’s largest retailing brand, shared his company’s experience in making it a mission to serve low-income clients with goods and services. In the early 1990s, PEP met a business downturn by reorganizing its business—from its negotiations with suppliers, to its front-end customer service—with the explicit purpose of making its clientele and its employees feel empowered based on their core values of dignity, respect, and growth. The company eliminated formal job titles and encouraged all staff to adopt simple rituals of respect. For example, every PEP employee can give anyone else, no matter how senior, a friendly high-five. The lesson learned was that employees—how they are trained, treated, and encouraged—play a critical role in achieving client-centricity.
Mark Flaming of MicroCred Group noted that client centricity means embracing new business approaches while acknowledging how it can be difficult for organizations to implement change where priorities are often in competition. Michael J. McCord of the MicroInsurance Centre and Lorenzo Chan of Pioneer Life also shared a success story in adopting a customer-centric approach. They expanded their customer base among poor clients in the Philippines despite the higher cost of insurance following Typhoon Haiyan in 2013 and clients understood the value of that service.
We know that the industry needs to hear more of these stories in order to build the necessary systems and workplace culture to deliver on the promise of client centricity. Over the course of this year, we will gather more examples from the field, to show how client-centric practices are both improving the lives of clients and the bottom lines of the institutions that serve them.
3. We need new business models that better serve those living in poverty. Mobile Network Operators, commercial banks, traditional microfinance organizations, and other new entrants are bringing different capabilities and strengths when it comes to serving the poor. Greta Bull of the International Finance Corporation noted that “this is an industry in need of disruption.” While Safaricom and M-Pesa have provided insight into the possibilities of mobile money, she said, they don't offer a template that is replicable across all markets. To achieve the real dream of financial inclusion, new models and partnerships will need to be established. In this continually evolving ecosystem, there is a role for MFIs and other players. Mobile money is a platform on which people can deliver financial services.
We also need to know more about who is bringing what to the table, and what trade-offs are involved. Kamal Quadir of bKash, a Bangladesh-based mobile financial service provider, reflected on his company’s explosive growth among the poor. “Customers are ready to adopt new tools,” Mr. Quadir said. "But, is access to these types of services true financial inclusion?" Proper product design is key to reaching a certain market segment, but we need to be conscious of the unintended consequences products may have on people's lives. Quadir noted that bKash worked "too well"; one customer had complained that, because of the mobile money service, her family did not travel to see her in the village as often as before. The sector is only in the early days of comprehending the impact of new technology on people’s lives.
Stephen Peachey of the World Savings and Retail Banking Institute (WSBI) noted that "our competition is not other banks. Our competition is informal, in cash ... we have to look at the way people handle cash, move it around. Seventy percent of the money in a Kenyan village moves within a kilometer ... you can't move that on mobile money." He also focused on the mutual benefits of financial inclusion to institutions and to the poor and urged attendees to appreciate the economic potential of working with them. He noted that “the amount that many poor people save in various mechanisms could help many financial institutions double their balance sheet,” while allowing the poor to earn interest on their savings for the first time, and so creating real benefits to households.
This potential should serve as a catalyst for new and existing players to work together. The Symposium series will continue to generate new knowledge about the state of the industry, best practices and issues to consider as these new models come to market.
What does client centricity look like from the perspective of practitioners? What models of service is the sector gravitating towards? What are the available tools, techniques, technologies and learned wisdom that will guide product delivery in the future?
This year’s Symposium allowed attendees to explore the “nuts and bolts” of expanding financial inclusion. Workshops covered a host of topics, including the application of human-centered design, understanding different types of clients through segmentation, how to find and interpret client data and how to effectively deliver digital-based financial services.
For example, the workshop conducted by GSMA aimed to demystify data and look at how telecommunications companies can use data to understand and better serve clients. Participants discussed core questions around product usage and patterns, user segmentation, user experience and agent capacity to deliver services.
Dalberg, in their workshop on human-centered design, delved into what it takes to make it work in financial inclusion. They used the example of a recently launched mobile money product by a bank in Indonesia that had accumulated a lot of dormant users despite initial uptake. Through a step-by-step process, participants tried to understand the underlying causes of the dormancy, identify assumptions that may have led to the issue and come up with small/incremental ideas to address the problem.
In addition, the workshops explored new models for financial services and products as well as new kinds of customer markets, like finance for smallholder farmers or comprehensive insurance packages. To learn more about these workshops, please visit:
The MasterCard Foundation and The Legatum Center for Development and Entrepreneurship announced two new competitions designed to encourage and recognize new ventures and new approaches for delivering customer centricity in financial inclusion. The MasterCard Foundation announced a new prize to reward demonstrations of client-centric practices in financial inclusion. The prize will be open to organizations of all sizes, operating anywhere in the world. In addition to cash, the prize will assign the winners with a dedicated learning partner to study and share how these practices work. In addition, The MasterCard Foundation & The Legatum Center announced the $200,000 Zambezi prize, to be awarded annually. The prize is designed to raise awareness of entrepreneurship and financial inclusion, encourage the flow of capital to financial inclusion ventures, and advance entrepreneurship and financial inclusion to fuel broad-based prosperity. For more information, visit: http://zambezi.mit.edu
At #SoFI2014, CGAP unveiled a new virtual community of practice for the financial inclusion sector called the “Customer at the Center WorkSpace.” More than a website, the WorkSpace is envisioned to be an open platform for collaboration between financial inclusion practitioners, policymakers, donors and providers. Learning from past work in building online tools for the sector, CGAP, in partnership with The MasterCard Foundation has built an easy-to-use and intuitive platform for users to get insights through collaboration on best practices, latest research and lessons learned from putting clients at the center. To see what’s already happening, visit: http://workspace.cgap.org
As financial relationships become more digitized, an existing debate within the financial inclusion sector takes on more urgency. Do financial service providers deliver the right set of services based on the right set of priorities in order to achieve financial inclusion? Are they too focused on minimizing organizational risk? How innovative or disruptive to financial inclusion priorities are the new mobile channels that deliver credit, savings and insurance to customers?
What is gained and what is lost in this new paradigm? Kim Wilson of Tufts University moderated a debate on the following proposition: The future of financial services for the poor will rest primarily in highly automated, low-touch models for reaching clients.
Arguing for the low-touch approach was Eric Muriuki Njagi of Commercial Bank of Africa (CBA). In conjunction with Safaricom, CBA launched M-Shwari, a paperless banking service that provides M-PESA subscribers savings and short-term lending services that has achieved impressive numbers in a few short years. Seconding him was Katie Nienow from Juntos Finanzas, which won the G20 prize for financial inclusion in 2012. Juntos Finanzas builds personal finance tools for cash-based households that are accessible on any mobile phone via SMS.
Arguing for the high-touch approach was Andrew Youn of One Acre Fund. One Acre Fund serves 180,000 farmers in Burundi, Rwanda, Kenya and Tanzania through a value chain approach that provides farm inputs on credit, training and harvest sales support. Seconding him was Bindu Ananth of IFMR Trust which promotes Kshetriya Gramin Financial Services (KGFS). Each KGFS entity caters to a population of 5 million people through a branch-based model that delivers rural households with a customized portfolio that includes credit, insurance, savings and remittances.
A low-touch approach of automated, technology-driven products, Mr. Njagi and Ms. Nienow argued, has achieved tremendous scale over a short period of time. Mr. Njagi challenged the audience to consider that customers may well be agnostic about who is delivering products and services, and to consider what
solutions new and old financial products offer―at the low cost needed to reach the 2.5 billion people who are unbanked. He quoted Bill Gates who said, “banking is necessary―but banks are not.” Ms. Nienow highlighted that this is an argument about efficiency and how to create access to financial services, that technological improvements allows financial service providers to develop true and deep relationships with clients. Juntos Finanzas' experience is that a highly scalable, low-cost, efficient model that provides value to clients is possible.
Arguing in favour of the high-touch approach, Mr. Youn and Ms. Ananth urged attendees to think beyond the impressive outreach targets of new technologies and consider what real impact these large scale outputs are having on people’s lives. They stressed that not all financial services are transactional; for example, credit and insurance often require a more high-touch approach to ensure impact. They emphasized that financial access alone is not the end goal - actual outcomes are more important than the number of clients reached. The team also pointed out that high touch means taking responsibility for what is happening with the customer. There is a need to address their financial problems more directly and bridge the gap between intention and action. The high-touch argument ultimately shifted the audience's perception and Mr. Youn and Ms. Ananth were voted the debate winners.
Main take-away: High touch doesn't necessarily mean high cost, low touch doesn't mean low engagement. The ultimate goal should be to use technology to scale customer-centric financial services, and to reach scale with the appropriate impact.
We look forward to next year’s Symposium, where we will further examine and debate how we can best serve the Client Journey and provide "how-to" examples of profitable models. We will include more voices from the field of practice, both from practitioners and the people we serve. In the meantime, we will be gathering insights and research to strengthen knowledge about client centricity in financial inclusion in order to develop a thought-provoking agenda for 2015.
As we go, we encourage you to visit the workspace we launched with our partners at CGAP: http://workspace.cgap.org
We invite you to share any suggestions or feedback by contacting us at [email protected]