Women are key to financial inclusion
For a long time, financial service providers have focused on high networth individuals, salaried individuals and business owners to increase their profitability. This is attributed mainly to two factors. One, a lot is known about these segments because they leave large financial footprints and rich data. This enables financial service providers to make accurate decisions, create targeted products and manage Know Your Customer (KYC) risks. Two, the cost of customer acquisition, maintenance and service costs in retail banking business is high.
However, digitisation is enabling inclusion of customer segments, which have been historically excluded from the financial service provider gamut. Effective implementation of Aadhaar-based eKYC collection and authentication lowered barriers of entry to the formal financial system. It has allowed the Jan Dhan-Aadhaar-Mobile (JAM) trinity to lay the foundation to bring 230 million unserved and underserved women into the formal financial services ecosystem. Women Jan Dhan customers constitute a cumulative ₹61,000-plus crores of deposits in these accounts.
We worked with a leading public sector bank to look at ways of increasing savings adoption by Jan Dhan customers, and found that when engaged effectively, they are an important and economically valuable consumer segment for banks for the following set of reasons.
First, women are decision-makers for spending and savings in most low-income households. They are thus more committed and disciplined savers than men. In our pilot project, we found 32% of women who were committed to saving versus 25% of men. These women grew their balances by 36% during the project period of five months (versus 24% by men). This showed that when given the opportunity, women save and by doing so build financial resilience.
Two, women value relationships over deals, special offers and rates. As their interaction with the bank improves, women can be encouraged to avail overdraft loans and micro-insurance, which enable them to invest in their families and create revenue opportunities for financial services. Thus, the bank will see better cross-sell and larger lifetime value in serving women customers.
Three, the Government of India sent ₹500 as direct benefit transfer (DBT), each month between April to June 2020, directly to women Jan Dhan accounts as Covid-19 relief. This has led to the activation of dormant women accounts and a spate of new accounts being opened by women. Families now want women to have and use their accounts, since they want to receive government benefits being sent to women. We saw a 15% increase in the number of women’s accounts since March 2020, compared to a 4% increase of men’s accounts in the same period.
Despite digital technologies and government initiatives, hurdles to serve women Jan Dhan customers have not been eliminated. A challenge in engaging women is the lack of gender-disaggregated data.
Financial service providers need to deploy strategies that focus on the Jan Dhan women segment by using sex-disaggregated data. For instance, target and communicate with women and design products and processes to be women-centric. At a policy-level, collecting and analysing gender-disaggregated data is vital for the creation of products and services for low-income women.
Women’s engagement with financial institutions and their ability to access participation in work and credit from such institutions can increase their social capital. Thus, empowering 230 million women Jan Dhan customers financially leads to the potential upliftment of 920 million lives, at an average family of four. It is economically viable for banks to target women, while contributing to such social good. The second wave of the pandemic has intensified the need for economic support. Our research shows that the government’s continued focus on women and their inclusion in the financial sector can have a transformative impact in boosting household economic resilience, expanding women’s access to credit and work opportunities, aiding empowerment and equity.