It’s Not About Savings, Credit Or Insurance. It’s About Clients


At CGAP’s annual meeting, the organization invited two guests to explore what it means to put clients at the center of financial inclusion: Charlotte Vangsgaard, Partner at ReD Associates, and Ramesh Ramanathan, Chairman and Founder of Janalakshmi Financial Services, an urban nonbank financial institution serving over 2.5 million customers.

This post was written as a part of a series outlining CGAP’s strategic direction and was first published on its site. 

“When you say need and when I say need, we are not talking about the same thing”

These words are Charlotte’s, spoken while making the poignant point that few people explicitly articulate a felt need for insurance or savings or even credit. Rather, they express concern about dealing with health shocks, aspirations for their children’s education, or goals for growing their business. Understanding these underlying needs and aspirations is the key to putting oneself in the shoes of customers. Developing solutions that are responsive is the next step. Approaching actual and potential customers more holistically enables institutions to move from a transactional approach (narrowly focused on selling a product to a customer) to a relationship approach (broadly focused on understanding customers’ dynamic needs over their lifetimes and offering solutions that meet those needs).

And learning from customers is not a one-off thing but rather a continuous process. People evolve, markets evolve, and institutions can easily fall into rote delivery. Indeed, Charlotte underscored that the longer a business is in a market, the higher the risk of myopia. It is perhaps for this reason that corporate market leaders like Samsung, Lego, and Adidas come to ReD to revitalize their businesses.

Ramesh confirmed that businesses can sometimes get lost in the world of building institutions—worthwhile, complicated, and indeed critical work, but not all that is needed. He spoke about starting the journey to look “outside in,” which entails more closely examining and understanding the demand before building the supply. In this process, for example, Janalakshmi learned that the group loan is just scaffolding for something deeper and that customers need much more. Ramesh cautioned that demand for one’s products and services should not be taken as a sign of an institution doing well: “Customers are so bereft of choice, they take on anything we offer with gusto.”

“It is bloody difficult”

These words are Ramesh’s. Uncovering deep insights about people has little value if this new knowledge cannot be translated into offering better services. Indeed, there is a sense that many institutions are actually sitting on a lot of information about clients—for example, in their management information systems. The challenge is to recognize the specific value of these insights and know what to do with them.

Acting on insights can be difficult, but it can also be a competitive source of real differentiation. Charlotte reminded us that companies tend to be married to the systems they build. So if an insight requires an innovation that will change business as usual, change can be hard to implement. Ramesh illustrated this point with a savings-linked monthly loan product that Janalakshmi offered.

As Janalakshmi started looking from the outside in, it quickly learned that the monthly offer to collect deposits did not match customers’ cash flow and that monthly transactions would simply not work. Yet the operational implications of offering more flexibility to customers seemed overwhelming.

Client centricity impacts all areas of the institution

All this is about more than product development and tweaking product features. Pricing, delivery channels, service standards, and the product itself can all contribute or detract from the customer experience. Thus, orienting the entire organization to be centered on clients necessarily touches all parts of the institution, including governance, human resources, delivery channels, processes, incentives, and core systems.

Squeezing deep client analytics into existing operating systems won’t always work. So both Ramesh and Charlotte stressed the importance of creating space for testing new innovations outside the core business, but they warned against marginalizing new ideas to the spheres of research and development or pilot projects. They also encouraged management to develop metrics to help calibrate new ideas and innovations quickly, kill ideas that don’t work, and move to operationalize good ones. Unfortunately, everyone has a graveyard of dead pilots.

“For any disruptive innovation, the business case is likely to be sketchy at first”

Charlotte works with large corporations. Ramesh is a former investment banker. Both want to put people back at the center of business decision-making, and both understand the importance of making the numbers work. After all, over time, without sustainable institutions, a company’s impact will be eroded. Yet both also understand that when it comes to making disruptive innovations and doing things differently to meet client needs, the business case is not a black-and-white issue.

Indeed, many new ideas would be abandoned immediately if evaluated in the short term using existing risk-analysis tools. Sometimes innovation is needed to find new ways to think about and calculate the business case and create deep, long-term relationships with clients and market segments. Donors and investors can play an important role in sharing some of the risks of innovation and providing patient capital that will enable institutions to prioritize longer-term gains.

In the next five years, CGAP’s engagement to understand demand will hopefully unpack what it takes for financial-service providers to be more client-centric. This will include demonstration work with providers on three priorities: understanding current and potential clients, designing effective organizational delivery, and making the business case work. It will also include undertaking foundational research on clients and focusing on systematically underserved client segments. Finally, considerable energy will be spent on financial-inclusion data and collecting evidence on impact—these are important feedback loops to gauge whether we are making progress on advancing financial inclusion and whether access to finance is generating social-welfare benefits for the poor.

This article originally appeared on CGAP’s website and is published here in a slightly edited version  

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