A refugee settling in a new land, a family buying a home, a farmer nurturing her crops — every person has different financial needs — and loans, savings, and payment services should help them solve the challenges in their everyday lives. This year, European Microfinance Week focused on the heart of inclusive finance — understanding and interpreting customer needs. I joined hundreds of attendees from dozens of countries in Luxembourg for the three-day event, and took advantage of the opportunity to attend a wide selection of talks and panels on topics from financial inclusion for refugees, to managing political risk in developing economies, to bringing financial services to farmers.
Financial services providers often make decisions to use a specific technology or product feature, without sufficiently verifying whether it is suitable for its target customers. To pursue financial inclusion, the products and services we design must align with the specific dynamics of the target market they are intended for. Loan services for rural crop farmers, for example, are only useful when repayment terms are specific to growth and output cycles.
During a presentation on microfinance for housing, Frank van der Poll, CEO of First Microfinance Bank Afghanistan, emphasized the importance of using a customer-centric approach to help people fund their housing needs. He underscored that not all customers are the same — everyone has unique needs. We have to take time to understand those needs by dividing customers into segments with similar dynamics, and then we can tailor products and services accordingly.
There’s no one-size-fits-all approach to segmentation, but financial services providers can start by looking for natural separations between different lifestyles, personalities, occupations, and behaviors within a target market. Within the financially underserved population, for example, the needs of urban retailers of consumable goods may be grouped separately from those operating within the service industry. This is because the differences in the way they live their lives may constitute different financial needs.
This customer-centric approach isn’t just key when designing new solutions — it’s also imperative for refining existing products and services. During a session on using digital and consumer-centric solutions to improve digital financial services, Etienne Mottet of Business and Finance Consulting stated that “Pilot projects must be flexible and the teams operating them willing to pivot on the back of new insights learned during the course of their implementation.” Even when institutions conduct thorough initial research, they still need to perform periodic reviews to measure performance accurately. Projects should be able to alter from their original trajectory based on these evaluations. In doing so, financial services providers can confirm or invalidate assumptions made during planning and development and continue delivering value to their intended market.
The overarching message from the week was clear: a detailed and accurate understanding of customer requirements must be at the forefront of all products and services if we hope to achieve financial inclusion.