Improving Financial Inclusion through Communal Financial Orientation How

  • Slides: 9
Download presentation
Improving Financial Inclusion through Communal Financial Orientation: How Financial Service Providers Can Better Engage

Improving Financial Inclusion through Communal Financial Orientation: How Financial Service Providers Can Better Engage Consumers in Banking Deserts Martin Mende, Linda Court Salisbury, Gergana Y. Nenkov, and Maura L. Scott (2020), Journal of Consumer Psychology, 30 (2), 379 -391.

Financial Inclusion in Banking Deserts: The Vision § Financial Inclusion defined: “state in which

Financial Inclusion in Banking Deserts: The Vision § Financial Inclusion defined: “state in which all people of working age have access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients” (Accion International, 2009). § Benefits of Financial Inclusion: § Individuals: increases likelihood to save, invest in education, and absorb financial shocks § Society: reduces income inequality and bolsters economic growth § Therefore: Policy makers, consumer advocates, and financial service entities consider financial inclusion a global priority Mende, Salisbury, Nenkov, and Scott (2020)

Financial Inclusion in Banking Deserts: The Problem § Financial inclusion implies access to mainstream

Financial Inclusion in Banking Deserts: The Problem § Financial inclusion implies access to mainstream banks, but many communities in the U. S. do not have such access. § FDIC (2017): 26. 9% either unbanked or underbanked, conducting some or all of their financial transactions outside of the mainstream banking system. § Low-income (vs. higher-income) census areas more than twice as likely to be banking desert: community with inadequate/no access to mainstream banks (Morgan et al. 2016). § Banking deserts are “neighborhoods abandoned by mainstream banks” (Baradaran 2017). § Lower SES communities often turn to high-cost alternative service providers (e. g. , payday lenders, check-cashing), which can undermine consumers’ long-term financial well-being. Mende, Salisbury, Nenkov, and Scott (2020)

Financial Inclusion in Banking Deserts: The Role of Mainstream Banks § Mainstream banks recognize

Financial Inclusion in Banking Deserts: The Role of Mainstream Banks § Mainstream banks recognize potential benefit of serving § BUT: Mainstream banks that enter banking consumers in banking deserts… deserts often fail to operate successfully because they “[fail] to speak the financial language of the poor” … they do not understand that poor consumers “cannot be offered banking services as though they are simply rich people with less money” (Baradaran 2012). Key Research Question: How Can Mainstream Banks Better Engage Consumers in Banking Deserts? Mende, Salisbury, Nenkov, and Scott (2020)

Communal Financial Orientation & Financial Inclusion in Banking Deserts: Theory and Research Prediction Conceptual

Communal Financial Orientation & Financial Inclusion in Banking Deserts: Theory and Research Prediction Conceptual Foundation: Research on Psychological Consequences of Poverty § Due to disparities in resources / rank, environmental threat, and lower personal control, poor (vs. more affluent) consumers tend to be more communally-oriented = more concerned with needs and welfare of others, and their community as a whole (Haushofer & Fehr 2014; Piff et al. 2012) consumers in banking deserts more likely to be communally-oriented. § Wealthier consumers tend to be relatively more self-focused, due to greater (resource) control, lower vulnerability to threats, and emphasis on individualism and personal accomplishment. § Perceived “communal financial orientation” = extent to which consumers perceive that their engagement with a bank in their community is beneficial for community’s well-being. § Prediction: As perceived communal financial orientation increases, banking-desert consumers’ engagement with and intention to recommend the focal bank should increase. Mende, Salisbury, Nenkov, and Scott (2020)

Study 1 (Field Survey) § Bank opened new branch in banking desert community: 14%

Study 1 (Field Survey) § Bank opened new branch in banking desert community: 14% unemployment rate (vs. 6% in the broader service area); 49% of households at/below poverty line (vs. 18% poverty across greater metro area served). § As perceived communal financial orientation increased, customers of the banking-desert branch report higher levels of engagement intentions and word-of-mouth intentions, as expected. Mende, Salisbury, Nenkov, and Scott (2020)

Study 2 (Field Experiment): Promoting a Financial Education Workshop Manipulated Text Mende, Salisbury, Nenkov,

Study 2 (Field Experiment): Promoting a Financial Education Workshop Manipulated Text Mende, Salisbury, Nenkov, and Scott (2020)

Study 2 (Field Experiment): Promoting a Financial Education Workshop § Customers living in a

Study 2 (Field Experiment): Promoting a Financial Education Workshop § Customers living in a banking desert responded more favorably to the financial education workshop when it was promoted with communal (vs. non-communal) financial orientation. Mende, Salisbury, Nenkov, and Scott (2020)

Insights and Implications 1. Lack of financial inclusion is a pressing global problem. 2.

Insights and Implications 1. Lack of financial inclusion is a pressing global problem. 2. Mainstream banks fail to operate successfully because they “[fail] to speak the financial language of the poor” (Baradaran 2012). 3. Poor communities under-represented in consumer/marketing research many companies still assume poor consumers have same needs, goals, preferences, and responses to appeals as wealthier consumers, which hinders the development of more effective strategies for engaging low-income communities. 4. Promote financial inclusion in banking deserts: communal financial orientation important ingredient for (more) successful financial inclusion. 5. Communal-oriented approach to serving banking deserts can benefit banks = non-trivial incentive for (mainstream) service providers to serve vulnerable communities opportunity to broaden customer base. Mende, Salisbury, Nenkov, and Scott (2020)