With a global aggregate income of $12,500bn, and spending power beyond that, women represent one of the world’s largest banking markets. Yet most banks still seem unwilling or unable to service the unique needs of their female customers.

Would any bank think that an effective way to attract customers in a coveted market would be to offer credit cards in the colour of the national flag? Or to use cultural stereotypes to brand products? Very unlikely. But for a specific – and crucial – customer segment, marketing campaigns have revolved around such unfortunate clichés, with pink and floral motifs splashed across many of the banking products that have been specifically tailored towards women. Other banks, meanwhile, have chosen to overlook female customers and their requirements altogether.

“There was a flash of making things pink,” says Andy Maguire, head of Boston Consulting Group’s (BCG) London operations and leader of the group’s retail banking division. “What you see is pink [products], which is irritating and bad; what you don’t see is people being progressive.”

 

Inez Murray, chief executive of the Global Banking Alliance for Women, a consortium of 39 financial institutions, has little patience for frivolous touches on banking products; they miss the point and can be counterproductive, she says. “I know of a bank in the Middle East that put a mirror on one side of a credit card. Really demeaning. Generally, it’s not about product ‘fixes’, it’s about improved customer service.”

Femme fatale

But why should banks really care? Are female customers that valuable or different to male customers?

While the world’s female population cannot be considered to be a single market – given the large socioeconomic and cultural differences between regions and even countries – aggregating the global income of women gives an idea of the size of the segment, and highlights the importance of serving these customers well. And the aggregate data is quite eye-catching. According to calculations by BCG, women currently earn a total of $12,500bn – more than the gross domestic products of India and China combined.

Of the estimated 1 billion women in the global workforce, 10% account for more than one-third of total female earnings. This represents a considerable market for both retail and private banking. Furthermore, research shows that women tend to control household spending, so even if not in employment, women can have significant influence over financial matters.

Female representation in the business world is also significant, presenting great opportunities for corporate bankers. A report by Goldman Sachs published this year – Giving Credit Where it is Due – states that nearly half of all formally registered small and medium-sized businesses (SMEs) in developing markets are owned by women. This figure stands at more than 40% in east and central Asia, and eastern Europe, and at about 35% in the developed world. In the Philippines and Brazil, this proportion is even higher, at more than 50%.

Meaning business

This is no sudden phenomena. Similar findings were made in a 2011 study by consultancy McKinsey, ‘Strengthening Access to Finance for Women-owned SMEs in Developing Countries’, and in a 2009 book, Women Want More: How to Capture your Share of the World’s Largest, Fastest-growing Market, co-authored by BCG senior partner Michael Silverstein and BCG partner Kate Sayre.

The book, which features the results of a survey of 12,000 women from 22 countries, details the growing financial power of female consumers. It also highlights how underserved this significant market segment feels: financial products were the leading cause of consumer dissatisfaction – along with healthcare – for the women surveyed. And, it seems as if little has changed since these results were published.

New York-based EA Consultants advises emerging market banks on how to improve services to women. Its founder and president Barbara Magnoni thinks that banks are missing opportunities by not properly identifying the needs of female customers – both in developing and developed markets. She has first-hand experience of this. Like many female entrepreneurs, Ms Magnoni feels particularly short on time, and so her preference is for simple and clear products.

“I run a small business myself, and I identify so much with the people I work with. I face similar concerns to them, although at different levels. I do feel financial institutions are missing opportunities – nobody is really asking me what I need. If somebody were to offer me a single interface on my online banking platform to automate paying taxes and do my payroll, and take me through it in 10 minutes on the phone, I’d switch banks straight away,” she says.

Womens role in the global economy

Gender differences

With women often shouldering the lion’s share of a household's domestic duties, thus limiting their free time, convenience is a significant factor influencing female purchasing patterns. This is not just an intuitive conclusion; it has been statistically documented by a number of studies, including the 2009 BCG survey. Risk aversion, a preference for simplicity and valuing relationships and advice are also key attributes influencing women's spending habits.

Until recently, however, the banking world had gone in the opposite direction, and developed increasingly complex products. “If you think of pricing and products, clarity and simplicity and lack of complication are more attractive to women on average – and not a bad thing for men,” says Mr Maguire. “But product marketing for financial institutions has been driven by too many features, too many price points, too many clever things that actually didn’t serve much of a purpose.”

According to Mr Maguire, female customers tend to find the savings accounts and credit cards currently on offer to be packed with 'clutter', making it harder to choose between products. When it comes to investments, women typically have a stronger focus on the outcome they wish to achieve, rather then on the special features of the investment vehicle. “Men like slightly complicated [products] because it validates their self-image; women value simplicity and clarity. Nobody needed all the guff that came with asset allocation, it was just something the industry did to satisfy an apparent need in a very clumsy way,” says Mr Maguire.

Research shows that women tend to be risk-averse, loyal to a brand and feel empowered by sharing knowledge. Securing new female customers, therefore, means helping to lower banks’ funding costs, as women tend to put their extra income into bank accounts rather than investment products. It also means potential new business, as women are inclined to recommend a good product to their personal connections.

Reading habits

Australia’s Westpac realised the untapped potential of its female client base almost two decades ago, and has since invested in providing appropriate products and services, measuring its results each step of the way.

“Women take longer to make financial decisions, because they are risk-averse,” says Larke Riemer, director of the women’s markets unit at Westpac. “Once they make that decision, they’re very loyal. They don’t decide based on price; they decide based on trust and relationship. They are also a fabulous source of referral to the organisation. You would say that with a satisfied female customer, there is at least an 85% chance that she will deliver referrals if you ask her – the equivalent with men would be 50% or less.”

Westpac has also documented the fact that women tend to save in bank accounts, while men would take on more risk and put their money in products that generate higher returns.

Women’s risk aversion has other implications. Consultancy Javelin Strategy and Research surveyed 8700 consumers in the US and found that women were larger users of debit cards as opposed to credit cards, which were preferred by men. The research, ‘Banking with Women Customers’, which was published in March 2014, went on to suggest how this insight could be used by banks.

“There is no one soccer mum or executive stereotype that will speak for all, but what we generally see is that, frequently, women are involved in day-to-day decisions with money at a higher rate than men are,” says Mark Schwanhausser, director of Javelin’s omnichannel financial services. “It appears that women are more concerned than men about [using credit cards] and not having the money to pay off [the bill] later. This creates an opportunity for, say, a mobile app that would help them stay on top of real-time balances, and of where their credit limit is.

“It is true that men are more likely to describe themselves as first adopters of technology, but it would be a mistake to say that we should [focus] on men.” Mr Schwanhausser uses the example of how smartphone cameras can be used to scan bills, which could then be paid on a mobile banking platform.

There are also differences in the time at which men and women tend to use their banking services. Mr Maguire says that research conducted for a number of BCG’s clients showed that women would tend to phone the call centre between 9:30pm and midnight, while men typically preferred to do this in the late morning, before their lunch break. By making sure that the best team was available at the appropriate time, and that the valuable customer calls were routed to the best officials, banks were able to offer a much better service, improve customer satisfaction and retention, as well as the chance to generate greater business from those individuals in the future.

“If you look at traffic by gender, affluence and time, the smartest people in the business use that [information] to do their routing. How many smart people [or banks] are there? A couple of handfuls, globally – across developed and emerging markets," says Mr Maguire.

Taboo subject

Such insights do not seem particularly hard to come across, so the question is, if this is working so well for some, why are others not following?

The reason may be cultural. “If you’re a banker, you should be paying attention to the fact that half of your customers may have [different] attitudes, perceptions and needs and that you may be underestimating their potential value,” says Mr Schwanhausser. “The reason why this can occur is because of gender politics: it is difficult, sometimes, to raise these conversations because you don’t want to be accused of sexism or generalisation. In many cases it’s easier to focus on other [differentiators], such as age or income.”

Sandy Cimoroni, chief operating officer of TD Wealth, the private banking business of Toronto-Dominion Bank (TD), agrees that often discussions around gender can be hard to tackle. To launch a programme targeted at women, such as the one TD launched two years ago for female investors, Ms Cimoroni says that it is crucial to have a senior manager putting their weight behind the initiative. In TD’s case, this senior manager was Mike Pedersen, the former head of wealth management who is now in charge of US business.

According to Westpac’s Ms Reimer: “Because there are so many older men who have been in banking for many, many years, and who have certain behaviours, it’s very difficult in some of those banks to turn [the situation] around; [those men] don’t feel comfortable with being the sponsors. Banks that [are tapping the female market] will usually have a senior executive who feels strongly about it and takes it on.”

For Westpac this figure was David Morgan, its CEO in the late 1990s, whose work has been pushed even further by current chief executive Gail Kelly. But, Ms Riemer also stresses the importance of being able to measure the profitability of any such initiatives so that they are not just seen as social responsibility measures. This has a positive impact on how successful and sustainable the project is. Indeed, the women’s market unit that Ms Riemer runs sits within Westpac’s business operations. “The only way to get the buy-in from the board is to be able to measure [the initiative]. We are able to measure [female customers’] profitability, how many products they buy and their advocacy score. These are measured on a monthly basis and we set annual targets. And, I can tell you, we grow those targets every year," she says.

"I’ve been in rooms full of men saying ‘don’t ignore your female customers’, but I only talk about profitability. Once they understand it is positive for the business, they get it. A lot of them think that you want to do the right thing by the community – and we do want to do the right thing by the community – but we’re a bank with shareholders and need to increase our profits.”

The bottom line

Still, many banks continue to view their engagement with female customers not as a way to generate profit, but primarily as a commitment to society. Goldman Sachs’s recent report on the subject focuses on the economic benefits of improving access to credit for female entrepreneurs, who face a $300bn credit gap in developing countries. Goldman is itself investing $32m, alongside $100m by the World Bank, on a risk-sharing programme with local banks.

The business and social aspects of catering to women are strongly interlinked, particularly in emerging markets. Serving women well improves both a country’s economic development and the profitability of its financial sector. Because of this, development banks are becoming increasingly vocal about the subject.

The European Bank for Reconstruction and Development has, for example, been promoting the discussion around women and their role in businesses and the economy. This year's annual Inter-American Development Bank (IADB) meeting examined banking products for female customers. Gema Sacristan, the head of the financial markets division at the IADB’s structured and corporate finance department, has led discussions around the topic. She is keen to point out the practical role of the bank, which provides technical assistance and training to local lenders under its ‘web’ project (women entrepreneurship banking), which helps create new analysis models to better assess small businesses owned by women.

The convergence of economic and social data is encouraging emerging market banks to look into this matter. In Brazil, where levels of female entrepreneurship are particularly high, Itaú Unibanco is gathering in-depth data on female business owners to develop new services, says Eduardo Ferreira, the bank’s head of microfinance. While in Mexico, socioeconomic developments have convinced Banorte to create a series of products better suited to women. Chief marketing officer Carla Juan notes that since 1995, according to official statistics, women have entered the formal workforce at a much faster rate than men, a growth of 80% for Mexican women compared to only 38% for the country's men.

In India, cultural considerations have played a bigger role. Standard Chartered felt that a good way to grow business with female customers in the country was to open all-women branches, says Sanjeeb Chaudhuri, global head of marketing and branding at the emerging market specialist.

Radical new thinking

Given that improving financial conditions for women has a direct impact on gross domestic product, the pace of development still feels inadequate to many.

"Female entrepreneurs are a growing force in Brazil, but it doesn't feel like there are many banking products and services for them,” says Silvia Fazio, an international partner at law firm Chardborne and Parke who advises a number of financial institutions in the country. Ms Fazio also chairs an organisation that promotes women’s participation in the workforce, Women in Leadership in Latin America. She believes that by growing the number of senior female bankers, financial institutions would be better placed to understand the other half of their customers, as well as to speed up the creation of the necessary products.

“Market studies and research are all valuable but you also need to have greater female representation within financial firms to push the development of better products for women," she says.

Both in industrialised and developing countries, the business rationale to improve offerings to women is apparent. The size and value of unsatisfied customers is huge; and lenders that have already looked into female customers’ behaviour have already achieved great results at relatively low costs – often by simply adjusting existing products (colouring products in pink would not be classed as a key adjustment).

The solution in some markets might need to be radical, such as the creation of all-women branches. In others, it may require a more subtle approach, such as making the best call-centre teams available at the right times of day. At both ends of the scale, improvements do not seem hard to put together. What has been hindering progress, so far, is limited knowledge of the female segment, and a discomfort around talking about gender. But, as awareness about the subject and the depth of research grows, a new, and relatively easy, road to riches is bound to open up.

Silvia Pavoni is the economics editor of The Banker. She also collaborates with Women in Leadership in Latin America.

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