Building Consumer Confidence with Simpler Digital Financial Services
By Anuradha Ramachandran and Jenny Johnston, Financial Inclusion, Omidyar Network
With more than a billion mobile connections, India should be one of the most “digitally ready” markets on Earth for innovative financial services. The country has also made tremendous progress in building infrastructure and regulatory frameworks that encourage digital innovation in financial services. Yet, adoption and usage lag behind similar markets in Africa and East Asia.
Since 2014, India’s PMJDY program has opened over 100 million new bank accounts, but a large majority still have zero balance. Large segments of the population remain in digital darkness, with fewer than five in 10 women owning a mobile phone, and smartphone penetration below 5 percent in rural areas. We believe that a deeper understanding of consumers is the missing piece of the puzzle to unlock adoption of digital financial services in India.
To bring the voice of Indian consumers to the forefront of the discussion on adoption and usage, Omidyar Network issued a research report: Currency of Trust: Consumer Behaviors and Attitudes Toward Digital Financial Services in India. The report covers deep engagements with a diverse sample of Indian consumers from 30 communities across the country on their context and behaviors regarding digital connectivity and consumption, and their readiness for digital financial services.
One of the learnings from the report is that current digital financial services offerings are viewed by many consumers as too complex. They often have difficulty grasping financial jargon on product offerings and fail to understand communications when not in local languages. Additionally, according to the research, consumers’ lack of trust in their own abilities is one of the biggest hurdles today for adoption of digital financial services. However, providers tend to prioritize time and resources in building trust in their brand.
Lowering the stakes for consumers to experiment with digital offerings is a must for providers. One way of doing that is by improving consumer onboarding to ensure that they really understand how the product works and can reap its benefits.
Vistaar, one of our portfolio companies in India, is doing just that. Vistaar is a finance company that expands access to credit for small businesses. Along with building a unique methodology for evaluating a customer’s creditworthiness, even without conventional documentation, Vistaar went further to design simple, accessible, onboarding videos.
The animated videos use clear language to explain how the company’s credit products work. Many of Vistaar’s customers may be accessing the formal financial system for the first time, and are more familiar with the moneylender. Available in six local languages, the video works as an educational tool, while affirming to customers that Vistaar is not trying to trick them with technical jargon.
“Before taking a loan, ask yourself whether the loan is needed, whether you can afford the monthly payment even in periods of slow business, the benefits of timely payment, and credit bureau records”, the narration advises.
Over the course of three core lessons, the videos tell the story of two business owners and borrowers, Arun and Sujit. While Sujit uses credit to buy productive assets for his textile unit, makes payments on time, and builds good credit, Arun buys a TV and falls behind on his payments as his dairy business and his family fall into a vicious cycle of higher priced loans.
“Increase your credit score by making your monthly payments without mishap,” the narration advises in another lesson. “By being careful, business owners can ensure they are using loans to help their businesses succeed, and make their family’s future bright and prosperous.”
While navigating evolving financial and regulatory environments can be tricky for startups, taking the time to develop customer-centric tools, such as these simple videos from Vistaar, can have tremendous long-term effects on establishing customers’ trust — in the product, the provider, and themselves.
Anuradha Ramachandran is a director at philanthropic firm Omidyar Network. Jenny Johnston (@jenny_colgate on Twitter) is an analyst at Omidyar Network.