Digitise the financial system to promote gender equity

This post is written by María Sofía Muratore, Master in International Development and Cooperation at Comillas University.

• The problem: Financial systems and services often aren’t designed with women in mind.
• Why it matters: Financial systems should promote equity, reduce vulnerability and empower people.
• The solution: Develop a financial model which empowers women to manage their financial affairs throughout their lifetime.

For years, women have been associated with the idea that they need a man to be able to fulfil themselves. Even if they work, the person who handles the finances is often their partner. Giving financial knowledge and tools to women is an interesting way to make them powerful, autonomous, and independent. In short, to empower themselves.

What does ‘empower’ really mean?

But what does ‘empower’ mean? It refers to two denotations: "To make a disadvantaged individual or social group powerful or strong", and secondly: "To give someone knowledge to do something". It is for these reasons that it is imperative to put financial inclusion, and therefore financial education, on the agenda if we want to empower women who are currently in a situation of vulnerability.

Nowadays, it is essential to understand that everything “has an economic axis”. Personal finances are transversal to the various events and actions of life. That is why it is necessary to establish specific financial inclusion and education projects so that women learn how to manage their income. Reducing poverty and promoting sustainable development is a challenge that all actors have in their sights. However, financial knowledge can be the “light at the end of the tunnel”.

According to the World Bank, since 2010, more than 55 countries worldwide have made efforts to develop policies for financial inclusion, and more than 30 of them have established specific projects to promote this objective. However, the results are not as desired. Some 2.5 billion people globally are unaware of formal financial services, and almost 50% of people living below the poverty line are unbanked - that is, do not use mainstream financial systems and services.

Digitise to promote equity

Today, technology has democratised access to banks, and the possibilities of linking with financial entities with just one click.

In order to do this, IT companies digitise processes and reduce the friction of traditional financial procedures, which contributes to radically lowering the costs of offering financial services. In fact, a McKinsey study estimates that the costs of offering financial services digitally are 80% to 90% lower than with traditional physical formats. With lower costs, these companies can provide more financial services to more users. On the other hand, those who have traditionally been left out of the system may be more likely to start using services digitally if the experience is simpler, and doesn’t require too much form-filling on paper.

In turn, the promotion of fintechs creates more transparent systems, eliminating irregular money that usually occurs in more vulnerable neighbourhoods through cash. Digitising the system is a way to reduce the amount of money that comes from non-regularised work. At the same time, it is a more efficient way to collect data on gender and finance that can be used to make decisions in the future.

We must talk, listen and debate women’s needs, considering ourselves not a problem, but the solution.

It should be noted that the digital revolution in financial matters entails various challenges, and alludes to a paradigm shift. Just as it can generate equity in terms of access, its misuse can reaffirm the gap. In fintech, the chances of making wrong decisions are greater, which is why financial education and an understanding of advances in communication technologies are important.

Education must be transversal to all plans

For this, it is necessary to establish education plans so that from primary school the basic skills of money management can be acquired, such as savings, investment, knowledge about credit tools, budgets, and interest rates, with a primary emphasis on the possibilities for independence and empowerment through the creation of women's businesses.

At the same time, it is important that educational plans not only boast of teaching knowledge but also increasing confidence and contemplating existing risks in each action that is taken throughout financial life. Women tend to have a less confident profile compared to men in this matter; they even prefer to trust a third party before managing their own income.

Financial products that respond to demands

On the other hand, to achieve success in financial digitisation, not only education is needed, but also products with a gender perspective. According to a study by the Boston Consulting Group, 73% of women who access a digital financial service are dissatisfied. Given that the group expresses that the current systems are not designed to respond to their specific financial needs, it is important that products are designed based on the demands of women; what their expenses typically include, their attitude to savings, and their behaviour with money and regulated financial institutions. Gender differences exist and must be reflected in the products offered.

Indeed, action plans cannot be outlined without placing women at the centre of decisions, and without including them in the transformation. Furthermore, the goal should not be to seek radical changes but to meet the needs that women themselves establish.

Closing digital gaps are closing gender gaps

Finally, to achieve the success of financial digitisation, it is necessary to invest in digital infrastructure. Allow connectivity in areas that are currently outside the internet. It is important that the state, together with private entities, think of strategies to connect the most remote areas.

To sum up, to commit to gender equality, we must talk, listen and debate women’s needs, considering ourselves not a problem, but the solution. It is necessary to go beyond the limits and adapt to new possibilities of action in terms of digitisation. Therefore, educating and working together with innovation and new challenges of financial systems is the way to generate real change.

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