The Global Banking Alliance for Women, with the support of McKinsey & Company, has released a report revealing the common misconceptions bank leaders have about serving female consumers. Dozens of senior bankers from around the world were interviewed as part of the study, and from those conversations, four myths about the female economy emerged.
Myth 1: Men and women are the same
Reality: Men and woman have different attitudes towards financial matters.
A common objection to developing a banking program for women is that their attitude to finance differs little from men. However, social science research, particularly into consumer behavior, pinpoints some attributes that distinguish women from men. For banks, three female characteristics are particularly relevant:
1. Women strike a more conservative balance between risk and reward. Women are more likely than men to err on the side of caution, sacrificing potential upside in exchange for lower risk. This means women have a greater orientation towards saving, and can therefore help to provide a stable liquidity base for banks.
A recent US study by Prudential found that 70% of women consider themselves savers as opposed to investors. In contrast, 70% of men enjoyed the ‘sport of investing’ and were prepared to take some risk for the opportunity of greater financial reward, whereas only 49% of women were willing to do the same.
This finding extends across cultures. A DSP BlackRock survey in India found that women are more inclined towards safety, and thus prefer to place more money in instruments that yield fixed returns. The GBA Women’s Market analytics survey confirms that women drive savings as banks report that the value of savings from women as a percentage of total deposits is higher than the proportion of women in the credit portfolio in all cases.
2. Women have a greater focus on building deep relationships. This has two implications for banks. First, women require that a relationship is established. Once this is done they are more receptive to financial advice and product information from a financial advisor, research from Prudential shows. Men, in contrast, have a greater tendency to buy products direct instead of via an intermediary or salesperson. Women want a relationship with a bank, while men want a transaction.
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Second, women have a higher propensity to share experiences, and act on the recommendations of peers and friends. Thus, women are an important source of referrals and Westpac has found that women have a higher net promoter score. They will tell up to 52 people about a good experience, but will tell more than that when they have been treated badly. Banks can leverage this trait to increase awareness and attract a loyal customer base, but must focus on establishing relationships based on trust when serving women.
“An ‘aha’ moment was when our bankers learned that women generally take longer to make decisions. This understanding explained a lot.”
— Beth Marcello, PNC
3. Women take more time to make decisions. Women make decisions differently than men. They tend to want more information, and be more thorough. Several studies, including one by LPL Financial, show that women need more time with financial decisions, particularly with investments.
Banks should take these attitudinal differences into account when developing value propositions and marketing campaigns targeted at women. Focusing on relationship building, allowing women time to make decisions and couching promotions in terms that resonate with women can generate positive returns with minimal investment.
For instance, to maximize sales to women, Banco Nacional de Costa Rica found that it needed to sensitize sales people to how women make decisions differently from men.
Myth 2: All we need is banking products that are feminized
Reality: Serving women is about tailoring value propositions to suit each sub-segment within a holistic view of their needs.
“Women do not want pink products. They want information, education and networking opportunities.”
— Larke Riemer, Westpac
There needs to be a real value-add to products and services, taking into account female needs and concerns, to make a women’s program successful. This means asking “What challenges do women customers face?” and “How can banks help?” rather than asking “What products do women want?”
Research showed that banks with successful programs have improved women’s access to financial services, knowledge and networking opportunities, which all link to the attitudinal differences highlighted in the first myth.
Improved access. In emerging markets, where women often struggle to qualify for loans, banks have moved to accept alternative forms or levels of collateral. Centenary Bank, for example, uses cash-flow based lending and accepts a range of securities including personal property and co-signers, both of which are easier for women to obtain than the land titles traditionally mandated by banks.
Financial literacy. There is an abundance of data that shows women in all segments lag men in financial literacy. Allianz found that nearly two-thirds of women express a strong interest in learning more about finance and retirement planning. Banks that help plug knowledge gaps and integrate knowledge into their programs can thus empower women, and build trust in their brands. Among the institutions interviewed, each bank with a women’s program offered financial education as a key component in their value proposition.
Networking. Research shows that women tend to have narrower but deeper networks than men. This is true when working in organizations as well as when running their own businesses. For example, female entrepreneurs tend to rely on a support network including their spouse, family and friends, while male entrepreneurs tend to network with other entrepreneurs and/or investors. Researchers found that 60% of banks with women’s programs assist women with networking opportunities, with many fostering mentoring programs between entrepreneurs.
Myth 3: We don’t see the business case
The women’s market offers banks a profitable opportunity.
In retail banking, women around the world are generally underserved by banks. Lack of knowledge of financial products — exacerbated by limited communication from banks specifically relevant to women — is one barrier. In emerging economies, researchers estimate that women are about one-fifth less likely than men to have an account with a financial institution or to have borrowed formally. Another study documents how average loan balances for women are one-third or more lower than for men. Data from the US and Israel shows how lack of finance accounts for twice the number of business failures among women compared to men.
“From years of research, our women customers continue to tell us that they do not want to be treated differently; they want to be treated equally and with respect.”
— Larke Riemer, Westpac
In developed economies, access to collateral is less of an issue, but female consumers are still underserved by banks. Research by Allianz shows dissatisfaction with product information and poor advice, which is sometimes condescending or delivered in an intimidating institutional environment.
One indication of the scale of the opportunity for banks is the “credit gap” — defined as the difference between the desired and actual levels of debt for credit constrained small businesses. In emerging countries, McKinsey and IFC estimate that the credit gap for women-owned SMEs is about $287 billion, with the largest gap in Latin American and the Caribbean. Typically, women have relied on informal sources of finance, including their own savings, and loans from friends and family.
A major UK bank has found that businesses with female proprietors have lower churn (15% vs. 21% for businesses with a male owner). Women-owned businesses served by BHD León in Spain have a lower rate of non-performing loans than ones owned by men across all segments. At Westpac in Australia, women customers hold a greater number of products and accounted for top line revenue of $1.5 billion in 2013. Finally, data from BLC Bank shows the average profit margin for SME loans to women is 15% higher than that of loans to men.
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Myth 4: There’s just not enough data
Reality: Banks often have better data than they realize.
Robust data is important to build a business case and engage key decision makers. Banks lacking data breakdowns by sex have used sampling and manual classification to build a compelling initial business case. In the meantime, every bank should recalibrate systems to begin collecting gender data.
“Because we don’t identify customers by gender, it’s difficult to measure the ROI of the women’s segment and therefore a challenge when competing for internal resource,” says Beth Marcello, Director of Women’s Business Development at PNC. “The external research and our own experience show that more of our business customers are women. Better measurement would allow us to better analyze the impact of our outreach programs and make adjustments that would ultimately improve the delivery of financial services to this segment” .”
A few simple definitions can help banks improve their data capability rapidly and comprehensively. The GBA has found that 60% of bank survey respondents with women’s programs define a firm as female owned when women own 50% or more; and one-half of respondents define a female owned SME by the account holder. For their part, WEConnect International — a leading advocate of women-owned businesses as suppliers to global and national corporations, and government bodies — and the IFC have embraced a similar definition of what constitutes a ‘woman-owned SME’: an enterprise with a minimum 51% ownership by a woman/women or greater than 20% owned by a woman/women and have either the CEO or COO be a woman and have greater than 30% of the board be women.
The capability of banks to break down data by sex is mixed, but improving. This is particularly true for US banks, where disaggregation by sex could be deemed discriminatory, and poses legal risks. Nonetheless, a majority of banks (55% of all banks interviewed and 90% of GBA members) have women’s programs, and the capability to disaggregate data by sex.
About one bank in three (35%) with a women’s program is using pragmatic solutions to generate women-related customer data from their existing customer base. But one in ten banks (9%) is sufficiently convinced of the opportunity presented by the women’s market to be moving ahead with developing the business case for a program without data. In interviews, some argued that there is too much focus on data, while others felt the benefits of women’s programs are well established and it was important to act quickly.
Action Plan: Making Change Happen
To succeed in tapping the market for women’s banking services a bank may need to transform how it conducts business.
Role modeling and leadership alignment. Where leaders serve as role-models for change, success is much more likely. Nearly 90% of the banks with a women’s program have a dedicated executive leader. At BHD León, a successful women’s program was driven by a CEO who had experience in gender diversity programs. At Rawbank in Africa, the Ladies First team involved senior leaders before embarking on its program and then engaged internal champions.
Internal buy-in. Beyond senior management, it is important to ensure buy-in at all levels of the organization. At Chase Bank in Kenya, initial resistance was turned around through sharing the stories of successful women’s programs in other markets (such as BLC and Westpac), setting up a strong customer value proposition and training branch level staff how to provide it, sharing women customer statistics and setting up focus groups with external experts.
Training in employee skills and sensitization. This can help ensure all employees get the capabilities to work in new ways, and ensure men feel involved and see the value in a women’s program. PNC offers its bankers a four part training course covering differences between men and women, with a focus on the key attributes for selling to women, networking and investing for retirement. In addition, bankers have the option to become PNC-certified Women’s Business Advocates, of which 32% are men.
Formal systems of reinforcement, including KPIs. These link the required culture to incentives and consequences. Banks with successful women’s programs understand what motivates employees and the need to link performance-based KPIs and incentives to their women’s program.
Align treatment of women as employees and customers. In some cases, an internal diversity and inclusion program is considered an essential pre- requisite to development of a customer program. For example, CSOB in the Czech Republic believes that a bank cannot begin to seriously address the female market segment without first addressing the internal gender imbalance. Around 75% of banks with women’s programs have internal diversity and inclusion programs. In the male-dominated world of banking, where the vast majority of senior executives are guys, it’s definitely something to think about.