Why is it that 80 percent of bank account holders in Madagascar only use their accounts once a month or less? 

What makes the parents of a child requiring unforeseen medical treatment in the DRC choose to approach their mutualitée (a local form of informal mutual aid society) for a loan despite access to a microfinance institution or local bank? 

If a Zimbabwean has a mobile money account, why does he ask a family member to send him money in the care of a bus driver rather than through that mobile account?

The gap between uptake and usage is well documented in financial inclusion. But while these insights are important evidence of the gap, they tell us very little about why this gap exists. The result is that we know there is a problem, but without understanding why, we can do very little to change the problem. 

To help us better understand the why, we at insight2impact (i2i) have been exploring the factors that affect usage. In doing so we have incorporated insights from across multiple fields on human decision-making and applied the most relevant aspects of existing models and understanding to the field of financial inclusion.

Decision-making is important for both financial service providers (FSPs) and policymakers to understand, but it isn’t simple, and, typically, our decisions are not based on one single factor. Furthermore, psychology and behavioural economics have illustrated that in some cases we are not even cognitively aware of many of the important factors that influence our decisions.

Some of these factors appear straightforward at first. For example, in the case of mobile money use in Zimbabwe, although the bus drivers do not carry the money free of charge, they charge the sender and recipient does not pay a fee. 

However, if you unpack this further, you may find that there are other factors that influence the decision. As one mobile money user explained, “It took me a long time to start using it [mobile money account], maybe because I didn’t trust it. I didn’t trust the services … I wasn’t sure how it was going to be working out“.

Addressing or removing the barriers to usage does not mean people will automatically make use of specific products, nor does initial uptake (even voluntary uptake) imply sustained use. There is a trigger that results in uptake and first-time use, but this is often followed by a significant drop-off in activity. This is often evident in mobile money, where promotions for free airtime lead to spikes in uptake, but low usage is observed over time, and consumers continue to rely on cash. 

So, what are the factors that affect financial decision-making (the drivers of usage)? In our understanding, there is a range of factors, but they largely fall into three categories: 

• Functional: Fundamentally, positive relative value is required for a person to continue using a device (although perceived value rather than actual value drives decisions). These functional drivers are the most obvious and visible component of decision-making. In the example cited above, the respondent asked that money be delivered via a bus driver to avoid paying transaction fees. 

It may be tempting to just stop here. However, we know that what influences our decisions goes beyond the basic dollars and cents:  

• Relational: Relational factors like trust have been explored in detail by other researchers, but we want to delve deeper to understand what constitutes trust in the use of financial services and how this manifests. In our example, the individual in Zimbabwe signed up for a mobile money account but delayed using it until a level of trust had been established. Other relational drivers, like belonging, have not been explored as deeply, yet still appear to play an important role in decision-making.
• Behavioural: Individuals may be unaware of some of the factors that influence their thinking and the way they respond to things, but a better grasp of these behavioural drivers (and the way these are affected through specific interventions) will be useful for FSPs attempting to drive usage of specific products and for policymakers keen to deliver impact through financial inclusion policies. One example is hyperbolic discounting – the fact that people prioritise present value over future value and choose smaller rewards now over larger rewards at a later time – which influences the way that people perceive relative value and cost for short and long-term products/needs.

Individuals make decisions within a context and that context has an influence on the outcome of their decision. We call these structural factors.

• Structural: We define these as the contextual considerations (for example, gender, level of urbanisation, and so forth) that influence the drivers identified above and therefore affect uptake and usage, but which the individual, policymaker or FSP will have no or very little control over. 

Of course, given the complexity of human decision-making, many of these factors resist our attempts at simple, neat classification. As an example, trust in financial services is often the outcome of a number of experiences, and even a composite of other drivers. It can be affected by behavioural factors like an intrinsic bias (for example, certain providers are “out to get me”) or social factors like having viewed negative comments about a specific provider on social media.
  
Through a closer examination of the drivers mentioned above, i2i hopes to understand what the most critical drivers of financial product usage are and how they interact and influence each other. 

The drivers of usage don’t only explain why or whether people opt to (continually) use a financial service, but which device they use and which provider they turn to – including whether these are formal providers or informal providers like savings groups or friends and family. These insights are likely to be valuable to FSPs, policymakers and development organizations alike. 

The objective of this work is not to build an exhaustive model of all the individual factors that influence consumers’ decision to use financial products, but rather to offer a framework that simplifies reality in that it encompasses all the key factors of customer decision-making in a digestible form. Better understanding the range of, and the most important, factors that influence use will aid policymakers and providers to design policy approaches and products that target sustained use rather than merely uptake.

We would love to hear from you if you think we have omitted a category of drivers, or if you have previously conducted research in the field. Contact jeremy@cenfri.org to contribute to this analysis of the drivers of financial services usage. 

In addition to this desktop research on drivers of usage, insight2impact will be piloting demand-side surveys in select countries to better understand people’s financial needs and how they go about meeting these needs in different environments. The insights from our desktop research and these pilots will enable us to refine our measurement frameworks and contribute to a richer understanding of financial inclusion.