Banks missing a trick by ignoring women’s needs

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 customer segment, marketing campaigns have revolved around such clichés, with pink and floral motifs splashed across many of the banking products that have been specifically tailored towards women. Other banks have chosen to overlook female customers and their requirements altogether.

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

While the world’s female population cannot be considered to be a single market – given the socioeconomic and cultural differences between regions and 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. According to calculations by the Boston Consulting Group (BCG), women currently earn a total of $12,500bn (€9,167bn) – more than the GDPs of India and China combined.

Of the estimated 1bn women in the global workforce, 10 per cent account for more than one-third of total female earnings. This represents a considerable market for both retail and private banking.

Female representation in the business world is also significant. 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 is more than 40 per cent in east and central Asia, and eastern Europe, and at about 35 per cent in the developed world. In the Philippines and Brazil, this proportion is more than 50 per cent.

New York-based EA Consultants advises emerging market banks on how to improve services to women. Its founder Barbara Magnoni thinks 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.

Risk aversion, a preference for simplicity and valuing relationships and advice are attributes that women tend to value highly. 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 Andy Maguire, head of BCG’s London operations. “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.”

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.

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.”

Sandy Cimoroni, chief operating officer of TD Wealth, the private banking business of Toronto-Dominion Bank (TD), believes that 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 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.”

Ms Riemer 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. “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.”

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.

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.

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.

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.  

An extended version of this article originally ran in The Banker magazine