Universal Financial Access is Closer than Ever Before, but What about Usage?
After Financial access, what comes next?
In 2011, 43 percent of the world’s adults lacked access to formal financial services, according to the Global Findex report. By 2017, that number reduced to 31 percent. If current projections remain consistent, we should be celebrating universal financial access by 2025.
While this is encouraging and worth celebrating, another problem has surfaced — a surge in dormant bank accounts. That is, people are opening bank accounts but they are not using them. On the average, one in five of all account holders are not frequent users of their accounts, with as many accounts being inactive for periods exceeding a year. Greta Bull, the CEO of CGAP, in this article, , pegs the total amount of inactive accounts at about 49 percent. That’s incredibly high!
For us to begin to reap the dividends of financial inclusion, those with financial access have to utilise these facilities, often. Financial access can lead to improved financial health when consumers use the tools, services and facilities provided by formal financial institutions to plan and manage their financial lives. Thus, the next priority for us in the financial inclusion community is stimulating the usage of formal financial services and giving consumers reasons to keep utilising them.
It is pertinent that as stakeholders begin to lend more of their resources and attention to stimulating usage, inevitably the underlying problems associated with the formal financial sector will come to the fore. These constraints need to be resolved to deepen access and utility of financial products and services so that we can arrive at the envisioned promised land.
In this article, we’re discussing one of those issues which is the [in]appropriateness of financial products and services.
[In]appropriateness of financial products and services
They key to unlocking the true potential of financial services lies in the ability of consumers to leverage the right financial services at affordable costs.
The slow rate of adoption of formal financial services as well as the decline in financial inclusion in recent years has spurred discussions on the lack of appropriate products and services on offer by financial services providers. This stems from the dearth of accurate insights into customers’ lifestyles, aspirations, habits and so on, therefore providers are unable to tailor their products to meet these needs.
There’s enough evidence to suggest that financial products and services would gain greater adoption and usage if they actually fit into the lifestyles of their target market as well as address their pressing needs.
The recently released Nigeria Customer Segmentation Framework (CSF) tries to address this gap within the ecosystem. One of the major paradigm shifts the CSF presented is that homogeneity does not exist within the Nigerian market. With over 90 million (bankable) adults in Nigeria, there is a rich diversity within the market, enough to bring to the fore different customer segments and their peculiar features which include their fears and aspirations, the communities in which they reside and earn their livelihood , their overall financial health as well as obstacles to financial access and usage, financial needs and literacy levels.
The CSF identifies six customer personas. While these six are in no way exhaustive, they serve as a catalyst for innovation and fresh paradigms in serving financial service customers. They are:
Lower middle-class to poor, religious, predominantly rural, with limited education. They use financial services infrequently and struggle to pay their bills. They have the lowest aspirations for the future, and are less open and consider themselves less dependable.
Primarily men, across all socio-economic groups, who are responsible for household financial decisions. Frequent savers through friends, family, and groups, they use their savings to manage emergencies. They are more impulsive than average.
Lower middle class, mostly female, with the second lowest level of education of all segments. The least impulsive segment, they rely on others to make financial decisions and for support during emergencies, yet have lower than average trust in both banks and social networks.
Young, well educated, urban, and frequent users of digital technology. They are the wealthiest segment, but have high income volatility. They are most likely to perceive their community as unequal, and believe they can trust their community but not rely on the community to invest in their business.
Middle to upper class, young, well educated, and urban, with high self-esteem and a positive view of the past and future. They are the most deliberate and open segment, with strong trust and belief in their community, and the largest users of mobile money.
Lower-middle class, rural, and older than average. They distrust banks and their broader community, and are most likely to trust only those they’ve known long. They have the lowest self-esteem but high self-confidence and sense of control. They struggle with planning but excel at savings.
Of course, these are simply snippets; the CSF report explores each persona in more detail, with eye opening statistics and narratives exploring each segment’s habits, aspirations and pain points.
As a framework. the CSF will enable providers to develop and deploy more market-centric products and services. It is a general belief within the ecosystem that consumers need savings, credit and some form of insurance. And to an extent, this is true. However, beyond identifying generic products and services, human centered design would enable providers to reverse-engineer informal solutions which underserved consumers already use, albeit with appropriate tweaks which will increase convenience and security.
This involves not only designing “bullseye” products, but providers will be able to explore alternate onboarding and delivery mechanisms for their services.
This deeper knowledge will also enhance above the line (ATL) and below the line (BTL) marketing and communications efforts, reducing the possibility that such messaging “misses the mark”. Moreso, these detailed insights can enhance development actors and policy makers in their selection of beneficiaries for programme interventions and decision making in general.
The CSF is a framework, so providers are free to tweak and test them as well as run experiments on them to arrive at their true north in terms of product design.
Have you read the Nigerian Customer Segmentation Framework? You can download it here and tell us what you think.