96285 BRIEF Enabling Customer Empowerment: Choice, Use, and Voice The use of digital channels is changing the way financial services can be delivered to poor people. Growing mobile phone usage and the development of agent networks enable customer access to timely, low-cost digital financial services (DFS)1 (World Bank 2014). Despite this, active use of DFS is relatively low. In this Brief, we address the inactivity problem faced by many financial service providers (FSPs) and some of the underlying causes related to customers’ experiences. We explore how empowering customers can help address this issue and the role FSPs can play. This exploratory Brief reflects our hypothesis that customer empowerment—here defined as a process that builds customer trust and confidence through an interactive relationship between providers and their customers—can lead to a win-win for both providers and customers. The premise is that when customers are empowered, Taking up DFS requires leap-frogging into a new they make more informed choices, trust the institutions environment. FSPs assume customers will move they interact with, are comfortable using those financial seamlessly from transacting in a cash environment to services they value, and feel more in control of their operating in a digital setting (Cohen 2013). In reality, financial lives. In turn, customers may become more many poor people have limited awareness of and loyal to and transact more regularly with their FSPs, information about DFS, their value, and how to use which may bring greater consistency in transactions, them. Low levels of functional literacy, information positively affect provider sustainability, and generate overload, and limited financial capability can make it greater value for customers. difficult for customers to understand the services offered. Meanwhile, the onus is on the customer to seek out Obstacles to Usage information needed to make informed choices. Access to DFS is expanding rapidly, as evidenced There are also structural supply-side issues affecting the by, for example, the high number of mobile money customer-provider interactions, such as menus that are account registrations, which reached 300 million in not intuitive,3 registration or sign-up processes that 2014 (GSMA 2015). However, despite the high number are complex and costly, and security passwords that are of accounts, which is often used as an indicator of difficult to remember (Grameen Foundation 2013). growth, the reality is that a majority of these are Many at the bottom of the pyramid lack experience not used regularly. Globally account inactivity rates with both technology and banking. The result is (accounts with less than one transaction in 90 days) are that customers feel pressure to transact without full over 65 percent (GSMA 2015). FSPs are confronted knowledge and adequate time to learn. So they do not with this problem across a range of financial services access their accounts at all or they ask friends, family, as they seek to tap large unserved markets and build or agents to conduct transactions on their behalf and sustainable institutions.2 often for a fee. This behavior is not without risks (CGAP 2014). Moreover, inadequate recourse mechanisms Many reasons have been cited for customers not using weaken trust in service providers—the absence of their accounts. These include customer frustration with accessible and timely complaint and dispute resolution operational failures, ill-equipped front-line staff or agents, mechanisms can impede building customer trust in and weak product design. Inactivity is a function of the FSPs (Chapman and Mazer 2013). products on offer, responsiveness of customer services, and the nature of the delivery channels, including Obstacles to adoption and usage of DFS vary across customer’s interaction with their service provider. customer segments and services and the channels they 1 DFS are delivered (by banks and nonbank financial service providers) using a transaction platform that receives and transmits transaction data; a technology-enabled device or instrument with a connection to the transaction platform, such as card reader/point-of-sale device, mobile phone, or computer; and agents (human or electronic, such as automated teller machines [ATMs]) that allow customers to make cash-in and cash-out transactions. 2 Five retail banks in Colombia, India, Kenya, Mexico, and South Africa reported dormancy rates ranging from 20 to 90 percent in different account categories, with a median dormancy rate of 50 percent (GAFIS 2013). Microsave (2011) reports high dormancy in no-frills accounts in India. 3 These include, for instance, scrolling and hierarchical navigation, languages or character sizes that are neither understood nor readable, syntax construction transactions that require multiple steps/clicks that are difficult to memorize, and insufficient clarity on what to do when March 2015 things go wrong (Medhi, Nagasena, and Toyama 2009). 2 use. Quantitative and qualitative research increasingly by doing,” some build confidence and trust in an FSP. offers insights into some of the constraints faced As one poor woman in Rajgir, India, explained, by different segments, for instance, gender, age, “I opened my account when the bank agent came geographic location, or literacy and education level into my village to sign people up.... The support of (Grameen Foundation 2013; GSMA 2013; CGAP people in my social network and the friendly bank staff 2014). Behavioral research also points to the role have helped me learn how to use the bank services—I of stress, low bandwidth, and other factors for why now make two or three transactions per month...I was people do not use financial services (Ariely and Silva nervous, but over time I have become confident in 2002; Mullainathan and Shafir 2013).4 using the service center and the bank branch...I know Overcoming such hurdles to usage and empowering now what I can demand. Mobile money scares me— customers to build trust and confidence in DFS should what if the money gets stuck in the phone? But maybe be a priority for FSPs entering or already in this market. I’ll give it a try, and if it works I may use it.” The customer interface with an FSP goes to the heart Engaging with DFS can occur at different points of this empowerment process. It encompasses the along the continuum but requires capabilities on multiple touch points involving transactional behaviors the part of the customer, as well as support from between the customer and the provider, be they service providers. The Indian observations reafirm the people or machines. notion that the interactions between customers and their FSPs should be a key focus of any customer How Rural Women in India empowerment strategy. View Empowerment To gain a better understanding of the meaning of What Is “Customer “empowerment” in a financial inclusion context, we Empowerment”? conducted a small study of low-income households in As mentioned earlier, in this Brief, customer Bihar, India. We learned that not only is empowerment empowerment is defined as a process involving complicated, but eliciting its meaning from low-income customers proved challenging. First, people think of interactive relationships between the service themselves as confident and empowered in relation providers and their customers that build trust and to the environment in which they live and the financial strengthen customer confidence. We hypothesize services they use. Second, they are more comfortable that changes in these relationships can lead to an defining what they see as “disempowerment” in terms increased usage of DFS. The emerging parameters of of the negative attributes of the financial institutions these new provider-customer institutional relationships and products they use. would focus on actions by FSPs that do the following: The findings supported the notion that customer • Build customer trust in the FSPs they use empowerment evolves over time, and the articulation • Develop customer confidence in transacting over of this process of empowerment occurs along a time continuum. At one end are those with or without a • Ensure mutually respectful interactions between bank account who delegate the management of their customers and providers finances to someone else—a spouse or other family • Provide transparency around what FSPs will do for the member. At the other end are those voluntarily opening customers and ways they can be held accountable a bank account based on informed choices, managing • Make available opportunities for customers to services confidently, and knowing what to expect from influence their transactional experience and to act the providers. In Bihar we found that those who were on their grievances pushed to open accounts by circumstances—migrant Strategies and actions that empower customers do men or wives left behind who find that they have to fend not occur in isolation, but should be an integral part for themselves—people receiving government benefits, of a more customer-centric design and delivery of and those encouraged by bank agents or members of financial services that support the customer’s priorities their social network to become banked were at various and result in a positive transactional experience. FSPs points on the spectrum. As a consequence of “learning that pay greater attention to how they interact with 4. Even if we designed the seemingly perfect DFS product, there might still be challenges for poor people in using it. Whether it is due to capital, time, cognitive scarcity (poverty and the ever-present concerns that come with it, places an undue burden on an individual’s limited mental resources), or other extenuating factors, what people want to do is not always what they end up doing. This disparity can be referred to as the intention-action gap and helps explain the challenges to removing obstacles or addressing social impediments (Ariely and Silva 2002; Mazer, McKee, and Fiorillo 2014). 3 Enable a Positive Customer Experience. FSPs 1.  An Empowered Customer should understand how people use money, how “I trust the financial service providers I use, they they prefer to interact with providers, and how they treat me with respect; I am confident in transacting identify the attributes of products, services, and with them and feel free to exercise my voice. As a channels that are their priority, such as timeliness, result, I make informed choices among the range convenience, social value, cost, and risk of a loss. of financial options available and use services I The FSPs can use customer transactional data to value. I have greater control of my financial life.” inform this understanding and should consult with their customers to ensure that product offerings solve their problems and that the information they their customers in the digital finance space will have receive is clear and timely. more loyal and active customers. Increased usage of Promote “Learning by Doing.” FSPs can encourage 2.  services and enhanced lifetime value should result in customers to exercise agency by building trust increased revenues (Kilara and Rhyne 2014). and confidence through making available testing services. While front-line staff and agents are likely How Can FSPs Support to be catalysts in this process, they may not be Customer Empowerment? much more knowledgeable than their customers. An important step is to provide staff and agents An interactive process that involves both customers and with the tools, information, and communication their FSPs and that capitalizes on customer institutional skills to engage effectively with customers. Digital touch points is at the heart of the customer empowerment solutions can also be deployed to facilitate the strategy proposed here. As we move from the high- process and directly engage the customer (e.g., touch approach of brick-and-mortar banking to lower- with real-time interaction, games). touch delivery systems associated with DFS, we must Respect Customers and Listen to Them. FSPs 3.  not lose sight of the human dimension. People do not should create an environment that permits behave rigidly like algorithms (Rasmussen 2014). openness, transparency, mutual respect, and This strategy requires understanding how customers constructive feedback, and allows customers to interface with the FSP and others, such as regulators, exercise their rights and responsibilities. This social networks, and civil society organizations extends beyond having effective and “just-in- engaged in financial services. The focus should be on time” recourse mechanisms to implementing what information customers receive, when, how, from structures and providing information that will allow whom, and where. Based on these data, the FSP can customers to understand what they can demand implement interactive tools that help customers make and how they can shape their experiences. That more informed choices, build trust and confidence, and includes transactional terms that hold both parties exercise their voice. Our preliminary research5 suggests accountable and mutually respectful behavior. that a customer empowerment strategy intended to build choice capabilities, customer trust and What Next? confidence, voice, and mutual respect should focus The concept of customer empowerment zeros in on the on three issues across the customer journey: interface between the customer and service provider. Figure 1. Building choice capabilities, trust, confidence, voice, and (mutual) respect Enable a Positive Customer Experience CHOICE Promote “Learning by Doing” USE Respect Customers and VOICE Listen to Them 5. This preliminary research included an initial literature review, interviews and consultations with FSPs and other industry experts, and a qualitative survey of a small sample of customers in Bihar and New Delhi, India, through focus group discussions and individual interviews. See also the blog series: http://www.cgap.org/blog/series/building-empowered-customers. 4 March 2015 All CGAP publications In advocating for the design and implementation of GSMA. 2015.”The State of the Industry: Mobile are available on the customer empowerment strategies and actions, we are Financial Services for the Unbanked.” London: GSMA. CGAP Web site at www.cgap.org. building on the supposition that DFS is not intuitive ———. 2013. “Unlocking the Potential, Women and for most low-income customers, but can be readily CGAP Mobile Financial Services in Emerging Markets.” learned if given time, opportunity, and support by 1818 H Street, NW London: GSMA. the FSP to leapfrog into an unknown world of formal MSN P3-300 financial services and technology. To engender this Kilara, Tanya, and Beth Rhyne. 2014. “Customer Washington, DC loyalty, FSPs will have to “grow with their customers” Centricity for Financial Inclusion.” Brief. Washington, 20433 USA as their customers move onto different phases of D.C.: CGAP. Tel: 202-473-9594 their lives. This concept of a growing and maturing Koning, Antonique, and Monique Cohen. 2014. Fax: 202-522-3744 relationship with customers can pose a challenge for Building Empowered Customers Blog series. CGAP FSPs that are under pressure to generate short-term Email: Blog. http://www.cgap.org/blog/series/building- results. However, having a more empowered customer cgap@worldbank.org empowered-customers. base is in the FSPs’ longer-term interest and can have a positive impact on revenue. Mazer, Rafe, Katherine McKee, and Alexandra Fiorillo. © CGAP, 2015 2014. “Applying Behavioral Insights in Consumer CGAP is continuing to research in more detail why Protection Policy.” Brief. Washington, D.C.: CGAP. customers do not use DFS, even when they have Medhi, I., G. S. N. Nagasena, and K. Toyama. 2009. “A accounts. We are exploring in greater depth how Comparison of Mobile Money-Transfer UIs for Non- customer empowerment can help address this Literate and Semi-Literate Users.” Bangalore, India: situation. We will test our hypothesis that empowering Microsoft Research India. customers—with actions along the three pathways described earlier—can result in a win-win for customers Mullainathan, S., and E. Shafir. 2013. Scarcity: Why Having and providers. Too Little Means So Much. New York: Henry Holt. Platt, Ann-Byrd, Akhilesh Singh, Sachin Bansal, Anurodh Bibliography Giri, and Akhand J. Tiwari. 2011. “No Thrills—Dormancy in No Frills Accounts.” India: Microsave. Ariely, Dan, and Jose Silva. 2002. “Payment Method Design: Psychological and Economic Aspects of Rasmussen, Mikkel. 2014. “Go Digital. Don’t Payments.” Paper 196. 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Simanowitz, Anton. 2015. “Field Research Customer Empowerment India.” Washington, D.C.: CGAP Cohen, Monique. 2013. “From Insights to Action: Building Client Trust and Confidence in Branchless World Bank. 2014. “Report on the Opportunities of Banking.” Washington, D.C.: Microfinance Digitizing Payments: How Digitization of Payments, Opportunities. Transfers, and Remittances Contributes to the G20 Goals of Broad-Based Economic Growth, Financial GAFIS. 2013. “Big Banks & Small Savers. A New Path Inclusion, and Women’s Economic Empowerment.” to Profitability.” Gateway Financial Innovations for Washington, D.C.: World Bank Development Research Savings Project Report. Boston: GAFIS. Group. Grameen Foundation. 2013. “Use of Mobile Financial Services among Poor Women in Rural India and the Philippines.” Washington, D.C.: Grameen Foundation. AUTHORS: Antonique Koning and Monique Cohen