This is cross-posted from DC Fintech Week where our President and CEO Mary Ellen Iskenderian spoke on the panel “Building Equity into Start-Ups: Lessons from Women in Fintech.” We also want to congratulate our winners from our Making Finance Work for Women Fintech Innovation Challenge 2020 winners, Tyme and myAgro!
Co-Authors: Mary Ellen Iskenderian, President & CEO, Women’s World Banking; Nithyasri Sharma, Manager, Strategy, Women’s World Banking
Expanding women’s access to financial products and services is one of the most powerful contributors to their economic empowerment.[1] Ensuring that women have the skills and resources they need to save toward long-term goals, borrow to build their businesses, and insure their families and businesses against future shocks will be key to global economic recovery and growth post-COVID-19. In fact, if women participated in the economy on an equal footing to men, global GDP could increase by $28 trillion by 2025.[2]
Yet, women remain disproportionately disadvantaged – of the 1.7 billion people worldwide that remain excluded from the formal financial system, nearly 1 billion are women. And while the average gender gap in access to financial services in the emerging markets has stubbornly remained at 9% for over a decade, the differential between men’s and women’s access is as great as 30% in some countries.[3]
The COVID-19 pandemic and the resulting economic crisis have only emphasized the vulnerability of low-income women, making financial inclusion ever more critical as a means for women to recover from the global crisis and build resilience in the long-term. Women’s World Banking firmly believes that digital innovation and Fintechs are the future of financial services, offering tremendous opportunity to drive access and overcome many of the most persistent obstacles to women’s financial exclusion. During the COVID-19 pandemic, digital financial services (DFS) have been the key channel through which financial institutions have continued to serve customers while ensuring safety for all.
From governments driving digital disbursements of G2P (government-to-person) transfer payments, to financial service providers digitizing operations to accommodate contactless services, to employers digitizing wage payments for workers, both private and public sector players have accelerated their progress toward a digital financial environment. And customers have followed suit, embracing DFS more wholeheartedly than ever before with millions of new bank accounts opened in the months since the pandemic’s onset. This crisis has offered an unprecedented opportunity to capitalize on this digital revolution and leverage technology and innovation to bring financial services to those who need them most.
However, women face unique barriers and challenges to financial and digital inclusion that must be designed for in order to build a more inclusive future and ensure everyone benefits. For over 40 years, Women’s World Banking has worked with financial service providers to design solutions with women in mind, enabling them to expand their customer base among both women and men. However, the opposite is not true: when financial service providers take what may appear to be a gender-agnostic approach to product development, more often than not they default toward men’s needs and preferences.[4] They miss the very barriers women face and as a result women remain unserved and left behind.
What does a gender inclusive approach look like in practice? As an example, one of the most pressing barriers that women microentrepreneurs face is access to capital to grow their businesses. Women often face obstacles in building a credit history or access to traditional collateral required by many financial institutions. Fintechs have the opportunity to leverage technology and data to develop alternative credit scoring models and build proxies (e.g., using savings behavior or transaction data from sales) to determine creditworthiness outside of traditional collateral to provide women with access to financing. One does not need to develop a unique solution to women – but inclusive solutions require that we consider those challenges to break down the unique barriers that women face.
Today only 22% of Fintechs are taking a gender-inclusive design approach to customize their solutions for women.[5] Ironically many Fintechs are not looking at their own gender-disaggregated data to evaluate the true market opportunity, allowing inherent biases about the women’s market to creep in. The data show that, far from being a niche segment that is less profitable men, women are a lucrative customer base – both as individuals and as business owners – and organizations taking a gender-inclusive approach stand to benefit considerably.
In one study, 95% of Fintechs that looked at gender-disaggregated data reported that customer acquisition costs for women are actually lower than those for men – and 86% report that the lifetime value of a woman customer is equal to or greater than a man’s.[6] There is a clear business case for taking a gender-inclusive approach and serving women can be a smart growth strategy for Fintechs.
A gender-inclusive focus can contribute to successful business growth for Fintechs, while also allowing them to deliver on the promise of expanded financial inclusion by ensuring that women are not left behind. Women’s World Banking is proud to support Fintechs to drive a focus on serving women clients with both capital and capacity building support. In the past year alone, we have welcomed eight Fintechs into our global Network of partners, all committed to leveraging best practices to serve more low-income women.
We have also launched the Making Finance Work for Women Fintech Innovation Challenge, in partnership with the Monetary Authority of Singapore, to shine a light on Fintech companies that are developing gender inclusive solutions to serve low-income women. As an added bonus, we were thrilled to have received nearly 120 applications from over 40 countries, with more than 60% of the Fintechs with women as co-founders and/or in senior management.
Women’s World Banking cannot do this work alone. Effective partnerships and collaborations with governments, financial service providers, and investors will be key to success in driving financial inclusion for women. COVID-19 has laid bare the inequalities embedded in our financial systems, but it also presents us with the opportunity to build stronger, more inclusive financial institutions and Fintechs can be at the center of that renewal.
Women must be a vital part of economic recovery and growth moving forward – and when given the appropriate financial tools, they can fuel the world economy. Now is the time to work together to champion support, and invest in gender-inclusive Fintechs to chart a different course than the legacy banks and financial institutions – one that breaks down the barriers women face in accessing financial services so together we can build a more prosperous, equitable future for all.
Sources
[1] https://www.gatesfoundation.org/equal-is-greater/our-approach/
[2] https://www.mckinsey.com/featured-insights/employment-and-growth/how-advancing-womens-equality-can-add-12-trillion-to-global-growth
[3] World Bank Global Financial Inclusion Database (2017)
[4] https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2019/November/Women-In-Financial-Services-2020.pdf
[5] “How Fintechs can profit from the multi-trillion dollar female economy”, Financial Alliance for Women (2020)
[6] “How Fintechs can profit from the multi-trillion dollar female economy”, Financial Alliance for Women (2020)
