India may not have taken banks to all its villages, but it has certainly taken banking to the rural hinterland. In the process, it has substantially reduced the gender gap in banking. But if we truly want to bring women into the financial sector there is much more that we will need to do.

This is a slightly longer link-enhanced version of an article that first appeared in the Mint. You can read the original here.

One of the more notable successes of India’s digital journey has been the progress made in the last-mile delivery of banking services to underserved communities. Much of this has been on account of the Pradhan Mantri Jan Dhan Yojana (PMJDY) that has since its launch in 2014 seen the number of bank accounts open in the country rise from 147 million in March 2015 to 462 million in June 2022. According to a report by the Bank for International Settlements, this is the largest increase (45%) in bank accounts opened by any country in the same period, as a result of which, India managed to achieve in 9 years what would have ordinarily taken 47.

Gender Gap

What is perhaps less appreciated is that 56% of all these new bank accounts are owned by women. This implies that over and above the remarkable financial inclusion that has been achieved overall, we have also managed to significantly reduce the gender gap, from 17% in 2011 to 6% in 2017. This is a remarkable achievement, one that we do not speak about often enough. Having said that, there is a difference between having an account and actually using it.

According to a report by Women’s World Banking, most women only access their PMJDY accounts to withdraw the benefit transfers that they receive in them from the various government initiatives that they are eligible for. Most of them do not use these accounts for savings, to build a credit history, or avail of any financial products such as insurance and loans. Until women actively engage in the formal financial industry, we still have a long way to go.

There are several reasons why women are not as actively engaged as they ought to be. For one, most women tend to work and shop within a four-kilometre radius of their homes. This means that most financial services tend for all intents and purposes to be effectively beyond the reach of most women, particularly in the rural hinterland. Women also tend to have concerns around privacy and confidentiality and as a result hesitate to discuss personal financial matters with strangers. If we want to increase the participation of women in financial markets, we need to find a way to address these concerns.

Promote Digital Payments

One way to do this might be to actively promote the use of digital payments among women. If financial services can be provided over mobile devices, women would have no need to actually travel to a bank branch to avail them. Not only will this reduce the time and effort required to manage their finances, it will reduce physical and financial risks associated with travelling to the branch. Since they can be carried out anywhere and at any time, digital payments offer a level of privacy and confidentiality that far exceeds what would have been available at a bank branch, offering women a greater sense of control over their financial information.

In order for any of this to happen, fintech firms and financial institutions will first need to make a concerted effort to actively design their services to address the needs of women across all levels in society. According to the Women in Financial Services Report by Oliver Wyman, the financial services industry leaves roughly $700 billion of revenue on the table every year by not making more of an effort to serve women customers. This money represents roughly 5-20% of the total revenue of the industry and far exceeds the annual revenue of most of the world’s leading financial institutions.

So what will it take for financial services firms to better understand the needs of women and develop products specifically designed to meet these requirements?

A Gendered Lens

In the first place, market participants need to better understand the specific challenges that women typically face, and design products to address them head on. They will need to bring a gendered lens to each stage of the product delivery cycle to make sure that they are not just superficially repackaging a generic financial product and serving it to women by actively taking into consideration their genuine concerns around limited mobility and access to information.

They need to recognise that what women have to deal with can affect their financial lives in ways that are different when compared to men. For example, even though women tend to live longer, they have higher medical expenses, which renders traditional retirement planning poorly suited to the needs of the average woman. Similarly, traditional wealth-planning assumes income will increase steadily each year—whereas, in fact, this is more likely to hold true for men than women who often have to take breaks for caregiving.

It is also important to appreciate that merely providing access to digital payment tools is not enough. We also need to ensure that women have the digital and financial capabilities to use them effectively. In rural environments, this would include nurturing the ecosystem of business correspondents on whom most women depend by training them to better handhold their customers and offer them a broader range of services than just plain banking. These could include overdrafts for emergencies, micro-insurance, micro-pension and other products.

Digital payment solutions can be easily redesigned to enable privacy and confidentiality, and to specifically address the challenges of mobility and access to information that are key stumbling blocks to the financial inclusion of women. Not until we have done that can we earnestly say that we are leaving no one behind.