Financial Empowerment: Bridging the Gender Gap in Financial Services

This is an edited extract from Customer-centric Innovation in Finance.

International Women’s Day often draws attention to women with exceptional achievements in finance and fintech and to the companies they work for–or created. Here, we share a different perspective, throwing light on financial services designed for (and often by) women.

Surprisingly, there is little awareness of what companies are doing to meet women’s financial needs, or whether their efforts are backed up by research. In 2019 we set out to study some of the recent services for women in credit, investment, insurance and so on, to better understand the trend towards providing women with financial services and the design thinking that goes into making them. (Note that, due to the scarcity of services and literature available, we have focused on traditional binary genders. We recognize that gender is, in reality, far more diverse than this).

We found an increasing number of financial service offerings designed for (and by) women.

From credit to insurance, investment to funds for female entrepreneurs, companies around the world are offering financial services specifically to women. According to our research, the number of organizations founded to provide financial services to women more than doubled in 2016–20 compared to the previous four-year period. In 2021 we identified 102 organizations serving women financially and in a recent update (not yet published) we have found even more.

Why would women need their own financial services? There are a number of reasons:

• Biased design: Financial services are not gender-neutral: they are usually designed with wealthier white men in mind and are therefore not always appropriate to women’s needs and preferences.
• Biased service: It is quite common for women to complain that financial advisers do not take them seriously and do not give them sufficient advice.
• Different needs and preferences: Due to their different social roles, women tend from engage with financial services differently to men. Women are avid financial managers: they make or influence 80% of purchasing decisions globally, are more likely to manage the daily family budget and may even be more avid ‘pioneers’ of digital financial services than men (60%).
• Financial precarity: Women are also more likely to suffer financial precarity, especially during young adulthood, or as a consequence of divorce or retirement. Men tend to do better financially over the course of their lives, retiring with more savings and facing fewer financial crises along the way.

Overall, we learned three important lessons that shape design choices to serve women better:

1. Women need financial tools that will help them develop and fulfil their social role. When women are the primary domestic money managers, they often depend upon tools to help them track budgets, smooth consumption and so on. This is why new digital tools, although designed to be used by everybody, are often popular with women (such as Afterpay and Hiveonline). In our recent work updating the overview of financial services for women, we find a trend towards more embedded services. Just like Buy Now, Pay Later (BNPL) services integrate payments in shopping, there is an increasing number of services integrating healthcare, insurance and payments or integrating agricultural credits and insurance with markets.
2. Women need financial tools that will help them overcome historical barriers. The reason why men are more active in investing is not because they are somehow biologically better at it or because they are less ‘risk averse’. Rather, research shows that women looking for professional help in the money world will often be met by stereotypical expectations. We spoke to women about investments, and they all, even well-educated women with professional careers, explained that it's difficult to start investing, they needed to learn a lot about stocks and bonds before taking action and they did not like to consult their bank adviser because they felt they were being condescended to. This led them to postpone investments such as pension savings even if there was a tax incentive to save.
3. Women’s preferences for design and aesthetics are different to those of men. The figure below illustrates that successfully marketing any product to women means making different design decisions than if that same product were designed for men. Financial service providers have recognized this for decades, but until recently their approach to the female market was to ‘pink it and shrink it’ – that is, make the product look feminized rather than actually building in any features specifically for women. This is not a very sophisticated approach and it completely fails to take advantage of the buying power of women.

We see indications that across cultures and nationalities, women face similar challenges (legal, economic and social) and look for similar characteristics in their financial solutions. Women tend to focus on goals rather than profit, on trust and transparency, as they also look for financial tools that make an impact in society – local or global, on climate and on inclusion, among others. And they like to do this as part of a network or community. Digital financial services, especially those provided by fintechs, are beginning to both benefit this market and profit from it. While women around the world share a similar structural position, they are also highly diverse. The benefit of digital financial tools is that they can be designed to suit women’s particular contexts and needs, rather than following a ‘one size fits all (women)’ model.

The lesson that we take from this development of specific tools and from their use is that customer-centric solutions – for any group of customers – cannot be developed without understanding customer behaviour in different cultures, societies and communities. This is absolutely key when working with new solutions in times of change, such as digital transformation.