A household budget, saving for a business investment, or managing an unforeseen emergency can cause stress in the most adept household, let alone those experiencing the vulnerability and volatility of poverty. Learning to navigate financial systems and products is a long-term endeavor.

Building financial capability — that is, the knowledge, skills, attitudes, and behaviors needed to make sound financial decisions to support well-being — can take time and creativity. The ultimate goal is to equip all people with the skills to navigate financial services safely and effectively and allow them to accrue their benefits. For poor and rural communities, this can mean increasing resiliency and reducing exposure to economic shocks, improving income growth and investment, and promoting more sustainable and equitable development. And for women, in particular, the accrued benefits can mean navigating financial choices with confidence, seeing themselves — and being seen — as financial clients, and accessing and using technology with ease.

While overall progress has been made in advancing financial inclusion, progress for women continues to lag. Globally, <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">male ownership is likely to be higher than female ownership of accounts</a>, with a gap of nearly 7 percent, which has persisted despite the overall rise in account ownership. The gender gap is much worse in some countries, where <a href="https://www.cgap.org/blog/how-social-norms-men-restrict-womens-financial-inclusion" target="_blank" rel="noopener noreferrer">social norms govern financial access and decision-making</a>. For instance, in Pakistan, while account ownership doubled since 2011, most of the growth was driven by accounts owned by men. Similarly, in Ethiopia, account ownership by men increased by roughly twice the size of the increase among women since 2014.

We must invest in building women’s financial capability to close this gap and make meaningful progress in women’s access to and usage of financial services. Doing so will require a deeper understanding of the economic and social constraints women face in accessing financial services. Yet existing tools for building financial capability have a mixed track record and there is scarce evidence on which approaches and delivery channels are likely to produce lasting impact.

This publication examines how best to share information, build capability, and enable lasting behavior change in a context in which women may have limited say in their own economic choices or require additional support or flexibility to overcome trust and care responsibilities. We examine the characteristics and success of existing approaches to building women’s financial capability and find a gap in programming that sufficiently accounts for women’s preferences, which are largely influenced by gendered social norms.

Readers of this report will come away with:
<ul>
 	<li>a stronger understanding of the role of gender norms that constrain women's financial capability</li>
 	<li>an overview of current women's financial capability initiatives, including classroom-based initiatives, technology-led financial education, and high-touch financial capability approaches</li>
 	<li>recommendations on how to ensure women are meaningfully and successfully engaged with financial services.</li>
</ul>

Building Women’s Financial Capability: A Path Toward Transformation

<em>This post originally appeared on the <a href="https://www.accion.org/four-reasons-focusing-on-financial-capability-is-good-business">Accion</a> website.</em>

If you’ve never used financial services in the past, you’re going to encounter a significant learning curve when you finally get access. That’s why more institutions are rolling out products to support first-time clients and equip them with actionable tips and tools to simplify their experience. These new services aren’t just good for customers, they’re good for business. By helping consumers attain the <a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-catalogue-of-innovations-in-financial-capability">knowledge, skills, attitudes, and behaviors</a> necessary to make sound financial decisions — what we call financial capability — customers can become more informed and engaged. In other words, they become better customers.

For any financial institution interested in increasing customer loyalty, building better financial capability is crucial.

<a href="https://www.centerforfinancialinclusion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion">As we work with MetLife Foundation</a> to expand financial capability through customer-centered innovations, we’re excited about the potential benefits for both customers and institutions. Here are four reasons why helping clients build their financial capability is a win-win:
<h2>1. Financial Capability Drives Active Use of Financial Products</h2>
Products that help increase financial capability, <a href="https://www.centerforfinancialinclusion.org/financial-capability-building-practices-in-mexico">drawing insight from behavioral science</a>, can encourage customers to use products more often, which translates to higher profitability for providers and greater usefulness to customers.

Take the case of <a href="https://www.grupobancolombia.com/wps/portal/personas/productos-servicios/cuentas/ahorro/transaccional/ahorro-a-la-mano">Ahorro a la Mano</a>, a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">nudges</a> to remind users to put money into their savings.

Bancolombia worked with <a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3">Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named “<a href="https://www.centerforfinancialinclusion.org/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines-2">Emilia</a>,” that could point out opportunities to use the product and makes special offers to encourage transactions within the first month. Because they provide individually tailored messages in a friendly, personal voice, Emilia’s nudges and reminders build trust with clients, and they become more likely to act on her suggestions.
<h2>2. Customer Loyalty Increases</h2>
As customers use their products more frequently, they are likely to become more loyal. Most financial service providers’ balance sheets and product viability calculations do not figure long-term customer loyalty into their calculations, but customers that stick with a provider over time are important to business success.

In September 2017, BBVA launched <a href="https://www.bbva.com/en/bbva-opens-its-banking-app-in-spain-to-accounts-and-products-from-other-providers/">Bconomy</a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month</a>.
<h2>3. Capable Customers Use More Products</h2>
Part of the accepted definition of financial capability is a person’s confidence in using a wide range of products to meet their financial needs. Savvy institutions that promote financial capability also build appropriate follow-on products for customers. Institutions that ignore this strategy may see their first-time customers move on to other providers as they become more comfortable with formal finance.

<a href="https://acreimex.com.mx/">Acreimex</a>, a savings and credit cooperative in Mexico, has incorporated savings into payroll loan repayments so that customers who opt in can save painlessly while they repay their loans. Savings discipline is a key attribute of financially capable people, and automated savings is a tool that assists people to stick to their best intentions. Acreimex built this option by combining its two most popular products. It merged its payroll loan and savings services by rounding up repayment installment amounts and automatically depositing the excess amount into clients’ savings.

The combination of products resulted in significant increases in savings activity and balances. An evaluation showed that participants made about <a href="https://optixproject.org/acreimex/">twice as many deposits and saved 30 percent more</a> than those who didn’t participate. Additionally, <a href="https://nextbillion.net/stealthy-saving-building-on-payroll-credit-to-automate-savings/">96 percent of savers chose not to withdraw the balances</a> from their accounts throughout a 12-month pilot.
<h2>4. Investing in Financial Capability is More Effective — and Less Expensive</h2>
Traditional, classroom-based financial instruction is costly. Features that build financial capability are often cheaper and more effective because they generate direct and longer lasting behavior change.

When researchers analyzed more than 200 individual impact studies on financial education, they found that <a href="https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/CU%20Final%20Report.pdf">only 0.1 percent of the observed positive changes</a> in people that had attended classroom-based financial education programs could be attributed to the programs themselves.

On the other hand, impact evaluations of financial products that incorporate behavioral insights to nudge client behavior consistently find statistically significant positive impacts. For example, in a study with <a href="http://www.bancoadopem.com.do/app/do/frontpage.aspx">Banco ADOPEM</a>, researchers tracked customers who attended either a traditional accounting-based financial education class or a class that, in keeping with behavioral insights, offered simple rules of thumb in accounting. Both classes aimed to assist customers to separate business and personal accounts. In the end, the <a href="https://www.povertyactionlab.org/sites/default/files/publications/124_303%20Rules%20of%20Thumb%20AEJ%20Apr2014.pdf">customers who received the simplified rules of thumb displayed more positive business outcomes</a> — they saw a 30 percent increase on average in the level of sales during weeks with typically low sales and saved an average of 6 percent more in personal savings.

More and more institutions are thoughtfully designing products and experiences that not only match their customers’ experiences and lives, but also consider their attitudes, skills, and behaviors. Financial institutions that invest in building up financial capability are likely ensuring they will have customers that are more active users of their products, that are loyal for longer, and that will use a wider variety of products.

<em>We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/">Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations</a> project, supported by MetLife Foundation.</em>

Four Reasons Focusing on Financial Capability Is Good Business

<em> </em>

[caption id="attachment_23941" align="alignright" width="597"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/08/icici-bank-and-stellar.jpg"><img class="wp-image-23941" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/08/icici-bank-and-stellar.jpg?w=490" alt="" width="597" height="603" /></a> ICICI Bank and Stellar: A look at a transaction enabled by blockchain. [/caption]

Why are mainstream financial institutions and fintechs partnering to pursue financial inclusion? In the case of ICICI Bank and Stellar, it’s because combining forces enables them to reach clients with a free blockchain-backed mobile wallet that they could not sustainably offer on their own.

Last week we released a new joint report with the Institute of International Finance (IIF), <a href="http://bit.ly/2uWXvFQ"><em>How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines</em></a>. As part of the report, CFI and IIF conducted in-depth interviews with over 30 industry participants. We discovered dozens of partnerships between mainstream financial institutions and fintechs in emerging markets, and we detailed the workings of 14 of them.

The story of ICICI Bank and Stellar began when an ICICI Bank senior executive read a book about new technologies. The book mentioned a blockchain company in Silicon Valley called Stellar. Fast forward to today, Stellar now provides ICICI Bank with an open-source online ledger, or blockchain, designed to oversee the movement of money. ICICI Bank customers in India and abroad can transfer money through a free mobile wallet over Stellar’s platform. These transfers are made in real fiat currency, but internally they are documented in cryptocurrency. While the transfers are recorded on Stellar’s ledger in a cryptocurrency called ‘lumens,’ ICICI Bank holds the value for these transactions in Indian rupees in a pooled account. Due to the open nature of Stellar’s platform, ICICI Bank customers can transfer money to customers at any other bank on the platform. Stellar’s open platform has allowed ICICI Bank to easily connect with financial institutions that it might not have connected with otherwise.

The partnership is expected to help transform the way value is transferred—both within the bank and between the bank and other institutions. Following the establishment of 300,000 accounts, the bank will pay Stellar a fee for each additional account. This low pricing allows ICICI Bank to provide the wallet free to customers, enabling the bank to serve lower-income segments than it can reach with more traditional money transfer services.

Currently, ICICI is piloting the mobile wallet on university campuses in India. The bank envisions that it will become a core product for underbanked customers in the future.

<strong>Bank-Fintech Partnerships Are a Win-Win-Win</strong>

As we see with ICICI Bank and Stellar, partnering with fintechs is enabling mainstream financial institutions to create profitable and useful services including some that solve traditional problems in much more efficient ways. And this arrangement is a <em>win-win-win</em> for everyone. Banks can offer new services or reach new segments, while fintechs get to scale their technology and access growth capital. Customers, in turn, are offered a wider range of product options.

In another example, in Ghana, Stanbic Bank’s partnership with DreamOval led to the creation of Slydepay, a mobile money platform that serves both individuals and businesses with solutions tailored for the local Ghanaian market. And in Spain, Santander is partnering with PayKey to integrate a person-to-person payments function into popular messaging applications such as WhatsApp and Facebook Messenger. These partnerships were expected to increase customer loyalty and keep customers engaged in the long-run.

Many of the partnerships we identified focused on mobile payments. We see these moves to partner as responses to competition from mobile money providers. In addition to adding features and convenience to standard bank services, the products these banks are offering attempt to go one step beyond MNOs by bringing interoperability into the mobile money market, including acceptance of transactions from multiple mobile money providers and easy transfers between customers at different institutions.

<em>For more on bank-fintech partnerships, including other standout examples, read the report:</em> <a href="http://bit.ly/2uWXvFQ"><em>How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines.</em></a>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/07/31/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines/">How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines</a>

<a href="https://cfi-blog.org/2016/07/21/new-cfi-and-iif-report-reveals-banks-are-leading-financial-inclusion/">New CFI and IIF Report Reveals Banks Are Leading on Financial Inclusion</a>

<a href="https://cfi-blog.org/2016/09/08/the-new-wave-of-partnership-models-between-banks-and-fintech-startups/">The New Wave of Partnership Models Between Banks and Fintech Startups</a>

ICICI Bank and Stellar: Using Blockchain to Reach the Base of the Pyramid in India

Yanina Seltzer

Pablo Anton-Diaz

Colombia

Dominican Republic

Europe and Central Asia

Latin America and The Caribbean

Mexico

Spain

Behavioral Insights

Consumer Protection

Delivery Channels

Financial Capability

Human Centered Design

Personal Financial Management

Responsible Digital Finance

Article

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

If you’ve never used financial services in the past, you’re going to encounter a significant learning curve when you finally get access. That’s why more institutions are rolling out products to support first-time clients and equip them with actionable tips and tools to simplify their experience. These new services aren’t just good for customers, they’re good for business. By helping consumers attain the <a href="https://www.centerforfinancialinclusion.org/a-change-in-behavior-catalogue-of-innovations-in-financial-capability">knowledge, skills, attitudes, and behaviors</a> necessary to make sound financial decisions — what we call financial capability — customers can become more informed and engaged. In other words, they become better customers.

For any financial institution interested in increasing customer loyalty, building better financial capability is crucial.

<a href="https://www.accion.org/accion-and-metlife-foundation-announce-expanded-partnership-to-advance-financial-inclusion/">As we work with MetLife Foundation</a> to expand financial capability through customer-centered innovations, we’re excited about the potential benefits for both customers and institutions. Here are four reasons why helping clients build their financial capability is a win-win:
<h3><strong>1. Financial capability drives active use of financial products </strong></h3>
Products that help increase financial capability, <a href="https://www.centerforfinancialinclusion.org/financial-capability-building-practices-in-mexico">drawing insight from behavioral science</a>, can encourage customers to use products more often, which translates to higher profitability for providers and greater usefulness to customers.

Take the case of <a href="https://www.grupobancolombia.com/wps/portal/personas/productos-servicios/cuentas/ahorro/transaccional/ahorro-a-la-mano"><em>Ahorro a la Mano</em></a><em>, </em>a mobile savings product and e-wallet from Bancolombia, the largest bank in Colombia. The bank discovered that if a customer does not make a transaction within the first month of opening the account, she is unlikely to make a transaction at all. It decided to use <a href="https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/nudge/">“nudges”</a> to remind users to put money into their savings.

Bancolombia worked with<a href="https://www.forbes.com/sites/petercohan/2011/06/01/juntos-finanzas-helps-latinos-save-plan/#3c0a808d5db3"> Juntos</a>, a fintech company that specializes in data science and behavioral insights. Juntos developed a chatbot named <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/IIF-CFI_FI-Fintech_Partnerships_Final.pdf">“Emilia,”</a>  that could point out opportunities to use the product and makes special offers to encourage transactions within the first month. Because they provide individually tailored messages in a friendly, personal voice, Emilia’s nudges and reminders build trust with clients, and they become more likely to act on her suggestions.
<h3><strong>2. Customer loyalty increases</strong></h3>
As customers use their products more frequently, they are likely to become more loyal. Most financial service providers’ balance sheets and product viability calculations do not figure long-term customer loyalty into their calculations, but customers that stick with a provider over time are important to business success.

In September 2017, BBVA launched <a href="https://www.bbva.com/en/bbva-opens-its-banking-app-in-spain-to-accounts-and-products-from-other-providers/"><em>Bconomy</em></a>, a digital platform meant to add value to the customer experience by giving them a full picture of their financial health. Fueled by data analytics, the platform uses behavioral insights to encourage positive behavior. Clients can see an overall snapshot of their finances, turning their bank accounts into financial management hubs. The tool ensures that customers continue returning to the platform and rely on BBVA as their primary financial provider. To date, the platform has had over <a href="https://www.centerforfinancialinclusion.org/banking-sector-approaches-to-customer-engagement-and-capability">2 million users per month.</a>
<h3><strong> 3. </strong><strong>Capable customers use more products</strong></h3>
Part of the accepted definition of financial capability is a person’s confidence in using a wide range of products to meet their financial needs. Savvy institutions that promote financial capability also build appropriate follow-on products for customers. Institutions that ignore this strategy may see their first-time customers move on to other providers as they become more comfortable with formal finance.

<a href="https://acreimex.com.mx/">Acreimex,</a> a savings and credit cooperative in Mexico, has incorporated savings into payroll loan repayments so that customers who opt in can save painlessly while they repay their loans. Savings discipline is a key attribute of financially capable people, and automated savings is a tool that assists people to stick to their best intentions. Acreimex built this option by combining its two most popular products. It merged its payroll loan and savings services by rounding up repayment installment amounts and automatically depositing the excess amount into clients’ savings.

The combination of products resulted in significant increases in savings activity and balances. An <a href="https://optixproject.org/acreimex/">evaluation</a> showed that participants made about twice as many deposits and saved 30 percent more than those who didn’t participate. Additionally, <a href="https://nextbillion.net/stealthy-saving-building-on-payroll-credit-to-automate-savings/">96 percent of savers chose not to withdraw</a> the balances from their accounts throughout a 12-month pilot.<strong> </strong>
<h3><strong>4. Investing in financial capability is more effective — and less expensive </strong></h3>
Traditional, classroom-based financial instruction is costly. Features that build financial capability are often cheaper and more effective because they generate direct and longer lasting behavior change.

When <a href="https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/CU%20Final%20Report.pdf">researchers analyzed</a> more than 200 individual impact studies on financial education, they found that only 0.1 percent of the observed positive changes in people that had attended classroom-based financial education programs could be attributed to the programs themselves.

On the other hand, impact evaluations of financial products that incorporate behavioral insights to nudge client behavior consistently find statistically significant positive impacts. For example, in a study with <a href="http://www.bancoadopem.com.do/app/do/frontpage.aspx">Banco ADOPEM</a>, <a href="https://www.povertyactionlab.org/sites/default/files/publications/124_303%20Rules%20of%20Thumb%20AEJ%20Apr2014.pdf">researchers tracked customers</a> who attended either a traditional accounting-based financial education class or a class that, in keeping with behavioral insights, offered simple rules of thumb in accounting. Both classes aimed to assist customers to separate business and personal accounts. In the end, the customers who received the simplified rules of thumb displayed more positive business outcomes — they saw a 30 percent increase on average in the level of sales during weeks with typically low sales and saved an average of 6 percent more in personal savings.

More and more institutions are thoughtfully designing products and experiences that not only match their customers’ experiences and lives, but also consider their attitudes, skills, and behaviors. Financial institutions that invest in building up financial capability are likely ensuring they will have customers that are more active users of their products, that are loyal for longer, and that will use a wider variety of products.

<em>We’ll continue to share insights on financial capability based on research conducted by Accion’s Global Advisory Services team and the Center for Financial Inclusion as part of our project on </em><a href="https://www.centerforfinancialinclusion.org/about/what-we-do/building-financial-capabilities-and-strengthening-institutions-through-customer-centered-innovations/"><em>Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project</em></a><em>, supported by MetLife Foundation.</em>

Four reasons focusing on financial capability is good business