Banking’s biggest growth market: women

Women in financeBanks are desperate for ways to boost income. Yet they are overlooking the world’s biggest market opportunity.

Women control just over half the wealth in the US and that share will grow to two-thirds by 2020, according to the Federal Reserve. Females also control at least 70% of US consumer spending.

Globally, women control $20 trillion of assets – a growth market more than twice the size of China and India combined.

More than 1 billion women are expected to acquire economic power in the next decade. The economic potential rivals only China and India. Why don’t organizations treat women as a high growth segment and invest accordingly?

As far as I can tell, banks have done little to understand or serve this expanding group of customers.

Savvy banks can capitalise

The Boston Consulting Group says 20% of women’s wealth is in regular checking and savings accounts. This is only expected to grow. That means savvy banks can drive revenue through the creation of new services and  sell value-added products by understanding this segment.

BCG consultants list Banana Republic, Haier and Harpo as companies that understand women and serve them well – but no financial firms. In fact, financial companies are the worst performers.

This is embarrassing for the industry but it’s also a great opportunity. Banks that get it right can distinguish themselves from the pack.

Banks need to gather data to understand their female customers and tailor products and services that go beyond “making it pink”.

There is also a societal benefit. Research has shown that women invest 90% of their income in family, community and environment while men only invest 30%. So if we get this right, we can also make the world a better place. We can drive social change and grow the financial services business simultaneously.

There are some exceptions. Wells Fargo has recently pledged to lend at least $55 billion to women-owned businesses by 2020.

Lisa Stevens, the bank’s lead small business executive, said these businesses are one of the fastest growing parts of the US economy. Women start more companies and grow them faster. Today close to 33% of small business are owned/operated by women. Women truly represent a growth engine. So in today’s environment, why aren’t we more aggressive and how do we capitalize on the opportunity?

The financial crisis shone a light on who runs banks and the answer was almost always men. The CEO of UBS has acknowledged that more women leaders could have checked the bank’s appetite for risk.

In the UK, FTSE 100 companies are targeting 25 % female board membership by 2015 in line with recommendations in a report by former Standard Chartered CEO and chairman Lord Davies in the wake of the crisis. But the crisis isn’t the only reason. Don’t we believe that under the right leadership inclusive organizations outperform non-inclusive organizations?

Do we agree that there is value to having a board and leadership team reflect your customer? If there will be a billion more women in economic power in the next ten years, what are we waiting for?

Safety and growth

Women take a longer-term view of business that can reduce executive groupthink and keep a company on a sustainable footing.

And women leaders can provide the knowledge and empathy required to capitalize on the female economy.

I’d like to hear your experiences about whether or not you believe that women are a growth engine and if so, how banks should go about capitalizing on this opportunity.

 

Debbie Schmidt is Chief Operating Officer, Global Financial Services at SAP. She is responsible for demand management across SW and Services, business unit interlock and best practice management.

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