Winning Over the Unbanked

Study finds that by tailoring their services to the needs of unbanked individuals, banks could help lower poverty rates.

Winning Over the Unbanked

APPROXIMATELY 1.7 BILLION adults—25 percent of the world’s population—lack access to basic financial services, according to Global Findex, a report on the world’s banking habits. In a recent paper, two professors at ESPAE Graduate School of Management in Guayaquil, Ecuador, explore the transformative impact of financial services (FS) on happiness and well-being among unbanked populations.

According to co-authors Juan Carlos Bustamante and Adriana Amaya, two primary obstacles prevent the unbanked from using FS: a distrust in financial systems and a lack of knowledge about how these systems work. With this in mind, the co-authors argue, FS providers could encourage more low-income individuals to take advantage of their services by taking three steps: opening locations in close proximity to disadvantaged neighborhoods, designing tailored educational messages about using the features of FS, and clearly communicating the benefits of FS.

“It may be not enough for storekeepers to simply express positive messages,” write Bustamante and Amaya. “It is also important to be attentive to the way customers process the messages.”

To learn more about the real-world impact of such strategies, the co-authors surveyed customers of Neighbor Bank (NB), whose locations serve residents living in rural or isolated areas of Ecuador where traditional financial services are often not offered. NB was created to introduce residents of these areas to formal banking services on behalf of Banco Guayaquil, a large FS firm. NB storefronts are run by “small entrepreneurs who act as storekeepers and ‘neighbor bankers’” who assist customers, answer questions, and respond to any misgivings customers might have about using the services, the co-authors explain.

Of 312 respondents to the survey, more than 64 percent earned incomes of US$200 to $350 per month, which falls below Ecuador’s nearly $400 monthly minimum wage. All respondents were asked to rate the extent to which they agreed or disagreed with statements in three categories: customer support (“The shopkeeper is respectful toward me”), customer participation (“I have more control over my personal finances”), and customer well-being (“Using NB makes me happy”).

The researchers found that customers were largely satisfied with the support they received from NB storekeepers, and as a result, reported an increased trust in and use of the services. Overall, customers also reported feeling more in control of their finances and experiencing a greater sense of well-being.

If governments want to lower poverty rates and improve quality of life for low-income populations, argue Bustamante and Amaya, they should create services tailored to the needs of unbanked individuals and collaborate with service providers to create homegrown approaches designed to build trust in FS. By increasing customer participation in FS, the co-authors write, policymakers “could foster financial inclusion and well-being in vulnerable population users in developing countries.”

“A Transformative Perspective of Financial Services for the Unbanked” was published online ahead of print December 20, 2019, in the Journal of Services Marketing.