Woman vs man: tackling gender in finance

Despite the promise of digital financial services opening finance to all, it seems the gender barrier has not been broken. Women still fall behind when it comes to obtaining finance, accessing financial services or narrowing the financial inclusion gap. Financial distress or behavioral biases in financial decision-making are just some of the reasons explaining the disparity. At the same time an army of female-led VC funds and specially designed financial tools are paving the way for greater financial participation of women. So how can financial players help close the gender gap?

Across the globe many women face structural issues restricting their financial decision-making autonomy.

They lack access to formal identification withholding them to open a bank account or own property, are insufficiently represented in the industry leading to products that do not always suit their needs, and carry a behavioral stigma refraining some entrepreneurs from getting access to necessary funding.

This leads to gaps in our financial system — women are 9% less likely to have a bank account than men and 7% less likely to be financially literate.

As a result, women are the single largest underserved group of customers in financial services — a whopping $700 billion revenue opportunity that firms may be missing.

Still, not all financial service providers have yet realized the potential of women clients and continue to view the issue from an outdated lens.

Perceived biases and financial infrastructure must evolve to cater for the social positions women nowadays have.

My girl

For years women have been excluded from financial marketing campaigns under the assumption they are risk-averse, save less and uninterested in financial matters.

Undoubtedly there are differences between men and women when it comes to finance. Partly because women have different financial and nonfinancial needs depending on where they are in their lifecycle.

But the underlying assumption that challenges that women face in managing their financial lives should negatively impact their access to finance or to financial services is contentious.

Numerous academic studies over the years have argued about the differences in the way men and women perceive financial issues such as spending money, investing or financial satisfaction.

However, more recent work — alongside progress and change in our societies — paints a much more, ahum, ‘rosier’ picture of women’s financial behavior. In fact:

Nearly nine in ten women said they are now involved in spending and investing decisions in their household, up from just 42% in 2012.

Working women have higher financial literacy levels enabling them to make better investment decisions and have control over their finances.

Investment decisions are qualified as difficult by just 21% of women compared to 30% of men, measured by the success and higher returns of female investors.

Unfortunately, these behavioral changes have not fully made into the way financial risk is being assessed. Especially when algorithms increasingly run decision-making. Remember how the launch of the Apple credit card raised concerns when it was reported to offer smaller lines of credit to women than to men.

Instead of viewing this as a gendered issue, there is a conceptual element to consider.

While important, female empowerment insinuates that women need an extra push to save, invest, or take risks as if they wouldn’t be capable. Instead, both perceived biases and financial infrastructure must evolve to cater for the new needs and social positions women nowadays have.

This can allow financial providers to invest in the products, services and channels that offer fairer chances to customers, regardless of their gender.

Fintech’s also are wholeheartedly embracing the gender question.

Who runs the world? ̶G̶i̶r̶l̶s̶ Cash.

For industry players to improve their products, they first need to update their reality.

Women are increasingly taking control of their family’s money, becoming primary breadwinners and sharing equal financial responsibilities. In contrast, they too often do not account as a key customer group.

One study found that when a married male client passes away, there is a 70% chance that within a year the surviving spouse will move her money elsewhere because of the poor customer prioritization.

So what are financial providers and fintech’s doing to improve the delivery of services and finance to women? There are a lot of great examples.

To foster greater financial inclusion for women, the Indian banking sector reduced interest rates on home loans for women and launched all-women branches. Wealth managers are revamping their offerings to appeal to female clients, while others tackle the jargon and complexity that deter women from investing. Even Bloomberg terminals now allow analysts to search and segment companies with majority women boards.

And while fintech’s are not all necessarily inventing new products that appeal to women — because access to finance shouldn’t differ between men and women -, they are wholeheartedly embracing the gender question. By increasing the number of women in their management, staff and customers and the way their products are designed.

To complement the product-side of things, women are also growing their entrepreneurial share both in the US and Europe where women-owned businesses have increased in recent years. There is still a long way to go though: women CEOs only get 2.7% of the approximately $80 billion in venture capital each year, and women-led startups suffered a substantial drop in venture capital funding last year.

Better tailored financial products are a step forward, but also raise the question whether women-specific products or providers reinforce stereotypical biases. Especially if aimed at pinkwashing.

Therefore, industry innovation must be underpinned by supporting policies.

It’s about designing products with women in mind and removing structural barriers to their active participation in the formal economy.

This is a man’s world…

“… but it wouldn’t be nothing, nothing without a woman or a girl.” And according to the latest numbers, Ray Charles was spot on.

In the coming years, women will control an increasing amount of the world’s wealth, both as breadwinners and as beneficiaries of wealth transfers.

This trend needs to go in pair with the role given to women in financial services:

1. Introducing products, tools and services designed for women’s needs;
2. Shifting the gender balance by advancing women in financial services; and
3. Accelerating access to finance by encouraging women-entrepreneurship.

To get to these results we should expect from policymakers that they develop strong infrastructures to enable more payments such as wages or social benefits to be digitized so to encourage women to participate more actively in the financial system.

Luckily, some things are being done.

From global prioritization of women’s economic and financial inclusion in government policies, to regional progammes like InvestEu stimulating gender-smart financing, or more local initiatives such as in Chile where sex-disaggregated data has been mandatory in financial reporting.

From financial providers and fintech’s we should look for a diverse and balanced group of people creating the financial services of the future, accounting for the many needs of a heterogeneous customer base. But also greater focus on aggregated data on customers, usage and life cycles so to better identify the impediments to women’s financial inclusion.

Let’s be clear, it is not about achieving parity but about designing products with women in mind and removing structural barriers to their active participation in the formal economy.

A future of digital finance enabling real opportunities for all — hopefully tackling the gender issue in finance at last.