Apr 11 • 4 min read

As of 2017, about 24.2 million households in the United States—25% of the population—did not have access to basic financial services such as banks and online lending platforms. Some people choose not to bank with traditional financial services possibly due to lack of trust or high costs. But others lack access because financial institutions consider them to be high-risk individuals, effectively shutting them out of financial services.

Instead, these excluded individuals meet their financial needs by using alternative financial services (AFS) such as check-cashing outlets, payday lenders, pawnshops and rent-to-own stores. Sadly, these providers are often predatory and more expensive than typical banks and credit facilities.

Driven by her 30 years of experience in financial services and her passion for giving back, Sherry L. Williams, DBA ’19, decided to investigate what people care about when they select financial services. According to Williams, understanding what makes a person choose one service over another is the first step toward building inclusivity in banking.

“For the end game, how do we get people that are using AFS or people who are ill-equipped to pay these exorbitant costs associated with financial services, and bring them into the fold so that they have lower cost opportunities to bank? It starts by understanding the drivers that make them decide if they want to bank at TD Bank or at the local cashier service,” says Williams.

Williams used two studies to explore consumer preferences and how they affect their choice of financial services. She conducted her research during her time in the Fox School’s Executive Doctorate in Business Administration (DBA) program, and reported her findings in her dissertation, Closing the Financial Inclusion Gap: Financial Services Provider Selection Criteria as Drivers of Choice.

From Leaders to Thought Leaders

To hear Sherry Williams discuss her research into determining what factors and/or combinations of banking features determine how someone chooses a financial service provider, check out the Fox School podcast, Catalyst.

Williams’ studies revealed that while costs such as bank fees are important to consumers, trust and convenience are most essential when choosing a financial service provider. Williams also discovered some specific nuances, such as how these factors change with age and gender. For example, men are willing to pay more for better convenience and in-person customer service than women.

For financial service providers, these results potentially reveal new areas of focus. Williams states that, in terms of trust, providers should offer in-person customer service, demonstrate they have a consumer’s best interests in mind, offer fair resolutions in the event of a disagreement and be truthful in their customer interactions. In addition to building trust and in-person customer service options, providers should also expand and enhance consumer convenience factors, including ease of use, helpful service, and readily available locations and networks.

Public policymakers should also consider trust and convenience when creating strategies for financial inclusion, focusing on policies that improve trust and customer loyalty. Additionally, decision-makers should be aware of the need for the removal of barriers to convenience, such as complex service offerings and location limitations.

Williams also considered how the United States Postal Service could be a viable option for providing financial services. Recent public debate has proposed that the USPS could drive inclusion, with the rationale being that the existing trust and familiarity in the USPS can help it to reach even more consumers with financial services.

Williams argues that while using the USPS is not a bad idea, another option has emerged thanks to technology.

“The USPS is not a bad option. But fast-forward to today, I think the investment that will need to be made for an institution of that size is very significant. Ultimately, we may find FinTech would do a better job at addressing the financial inclusion gap,” says Williams.

Whatever solution or policy is chosen, Williams emphasizes that it must account for the factors that drive consumer choices.

“The solution to bridging the financial inclusion gap is multi-faceted,” says Williams. “For example, let’s say post offices now have a banking component. That’s fine but there would still be a need to address the root causes that explain why so many consumers are drawn to expensive non-bank financial institutions. Additionally, an examination of the barriers that result in the exclusion of a large percentage of the population from traditional banking services is warranted. That’s really where we need to get to address the lack of inclusion.”

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