COVID-19 exposed the gender gap in banking customers

Women who have access to bank accounts, saving mechanisms, and other financial services are better placed to control their earnings, and undertake personal and productive expenditure, said Swati Chowdhary, Director - Network and Development, India at Women’s World Banking (WWB), at the BFSI Leadership Summit, hosted by YourStory and EnterpriseStory on July 16.

Watch the BFSI Leadership Summit 2021 themed ‘Banking On The Future’ here.

In a fireside chat with Priya Sheth, Senior Anchor, YourStory Media, Chowdhary said that financial inclusion reduces exposure of households to income shocks and improves growth. There is more sustainable and equitable development, Chowdhary added.

Chowdhary has an astute understanding of this because the organisation she represents, WWB, is a non-governmental organisation that helps marginalised women. In India, WWB has partnered with leading public sector banks to design women-centric financial products, and develop commercially-viable solutions to further the financial inclusion of women.

Shaktikanta Das, Governor of Reserve Bank of India, recently said the central bank has decided to create and periodically publish the Financial Inclusion Index. Needless to say, financial inclusion is key in making sure that the nation sees balanced economic growth.

Given that financial inclusion is the need of the hour, Chowdhary talked about how women have been creating new business for the banking and financial services sector. As such, it is widely accepted that better and relevant financial initiatives help reduce gender inequality. The existing gender gap has been exposed by the pandemic.

In the past six years, India has taken significant strides in widening the scale and impact of financial inclusion networks owing to the Indian government’s Pradhan Mantri Jan Dhan Yojana (PMJDY). Chowdhary pointed out that there are 425.9 million PMJDY account-holders, of which more than 55 per cent are women.

While this is a significant improvement in terms of access, there is a crying need for a sharper focus to improve engagement of women account-holders with the banking system. Less than 33 percent of the women account-holders use banking services, Chowdhary said.

Though data suggests that women have lower access and usage of formal financial services than men, Chowdhary noted how studies have shown that the same number of women are able to use their savings judiciously during a financial crisis as men.

But while women evidently represent the largest market, they remain overlooked and underserved in the financial industry, Chowdhary said, attributing it to financial services’ tendency to create generic products and customer segments.

She touched upon the challenges faced by the financial inclusion movement, and cited the example of financing small businesses, where there is no specific consideration given to gender.

“Products get designed without thinking of women because the financial services sector is not thinking of women from the start, or as a core segment. Thinking of women as an after-thought furthers their exclusion,” Chowdhary said.

During the session, Chowdhary also said social norms in India are an impediment in financial inclusion of women. “The complicated reality is that the social norms exert a powerful influence on women's empowerment,” she said.

Women’s economic empowerment is going to take more than just bank accounts, she said “because while these can be powerful tools in the hands of women who are determined to take more control over their lives, the social norms can restrict their ability to access and benefit from financial services.”

Women as BFSI customers

Chowdhary cited a recent example of WWB collaborating with a public sector bank, where a savings scheme was specially designed for customers, especially women, to save regularly with the bank for potential access to emergency credit.

While this was well received by both men and women, 32 percent of the women stayed committed to the savings scheme compared to 25 percent of men. Further, men grew their balances by 24 percent over five months, as against 36 percent growth by women in the same period.

Talking about the nuances, Chowdhary highlighted that women have a higher usage rate after they become more comfortable with a banking product.

“Women ask a lot of questions, and are slow to adopt. But once satisfied, they become a loyal customer base,” Chowdhary said. "They use fewer providers, which results in the same or lower customer-acquisition cost and higher customer lifetime value."

As loyal customers, women also double up as cost-free brand ambassadors by bringing in more business, as they are more likely to refer to other customers. "As women-customers process information in different ways, they are more likely to act on a recommendation if it comes from a trusted source," Chowdhary said.

Chowdhary also pointed to global data, which suggests that women are better borrowers. Further, institutions that have a better female-clientele tend to have a lower portfolio at risk ratio. A strategic focus on women has the potential to expand markets, expand economic progress, and improve health and education outcomes, she asserted.

Digital inclusion of women

Approach is key for this segment, Chowdhary said, reiterating that products need to be designed to cater women instead of just building women’s financial capabilities to access these services.

According to the Mobile Gender Gap Report for 2021 by London-headquartered Global System for Mobile Communications Association (GSMA), 25 percent of Indian women reported owning smartphones in 2020, compared to 14 percent in the previous year. And, 30 percent of Indian women reported using mobile internet, compared to 21 percent in 2019.

While both ownership and access to smartphones for women has increased, it is important to also focus on enablement, Chowdhary said.

“It is important to build their digital confidence and create facilities where women can learn about online financial services,” she said. “It is also important that service providers share words of caution about how they use online services because it helps women build greater trust in financial service providers,” Chowdhary added.

For example, new customers of online services need to be informed about the risks of sharing devices, which is a common practice—and the privacy concerns. Banking and financial services companies must also design for network connectivity, which can be slow, intermittent and unreliable.

Chowdhary said celebrating early wins is crucial because it often builds women’s confidence. She also suggested incentives to onboard more women.

Banks often look at both men and women collectively when they design products. This leads to a poor understanding of the specific and varied needs of women.

“To change this, we need to change the way we think. First, analyse gender-specific data to understand the unique needs in usage and preference of women customers,” Chowdhary asserted. Reach out to women customers and welcome them, so that they can understand how formal banking can help them.

Watch videos of all the sessions from the BFSI Leadership Summit 2021 here.