The answer is, of course, customer needs. Customers’ knowledge and perceptions about the financial services on offer—plus any challenges in accessing these services—are the other two major guiding factors. With all this in mind, any service provider can develop and then modify successful products.

Easy to outline in a very short paragraph, easy to comprehend, but the real problem lies in the implementation.

In India, the financial inclusion stakeholders (the central bank and its retail banking network, microfinance institutions, international donors, among others) realized that the unbanked and under-banked–41 percent of the overall population, 60 percent in rural areas—were facing the service-access challenge noted above. Many couldn’t open their first accounts because they lacked both the necessary cash for initial deposits and the documentation to fulfill standard KYC (Know Your Customer) authentication and credit-check procedures.

So banks came up with Zero Balance Accounts, a “product enhancement” that allowed these stymied prospective clients to open an account with no deposit and relaxed KYC (i.e. minimal identifying paperwork and background checks for creditworthiness).

In theory, and on paper, and in conference rooms a far remove from the undocumented and the unbanked, these solutions should have worked…but they didn’t. Why? (For a comprehensive understanding of the history and many complexities inherent in this problem, please see MicroSave’s research papers on Dormancy in No Frills Accounts. Also, Barriers in Access to Banking which highlights a wider spectrum of issues beyond simply minimum balances and authentication.)

Life Insurance Company of India (LIC), India’s largest state-owned insurance and investment operation with an estimated asset value of US$3 billion, and prestigious industry awards (see here and here for more) would seem to be an unlikely candidate to be doing a much better job at serving up the right solutions. But they do. Let’s look at some of the reasons.

LIC’s core product from the outset almost 60 years ago has been life insurance, with a focus on an endowment, risk cover, and long-term savings. During this time, they have been consistently creating new, targeted combinations for every new customer segment—while improving and extending their agents and office delivery channels, which now include an LIC app and more flexible premium payments.

Somehow LIC has also managed to avoid the deadly detour into back-end processes and regulations dictating the customer interface, even fairly simple interfaces like money transfers. Instead, the basic LIC customer need for long-term financial protection seems to actually inform everything from sign-up to pay-out. Digital financial services could usefully heed this distinction.

As everyone knows, but no one readily admits, mobile banking and all its various electronic offshoots depend almost entirely on remittances to be “sustainable”—i.e. make money and survive. Without internal remittances from urban migrant workers to rural communities, (estimates vary from $1-5 billion and of course, are not current), the essential cash-IN would not exist to enable savings, investments, payments, and other cash-outs that help create and maintain full financial inclusion.

So, if we briefly revisit the first paragraph, the urgent customer need—in this case, quick, easy, cheap money transfer from sender to the beneficiary—should be simple to understand and even simpler to execute. Opening an account just gets in the way. Banks instituted the need for this tiresome and usually unwelcome process to comply with money-laundering concerns, not because an account is needed to transfer a small amount of rupees from bank agent to bank agent. And, as many remitters are discovering, it is possible to do the easy way without an account—please see Transition from OTC to Wallets–Findings from Bangladesh, and Values Offered by OTC.

User adoption is based on trust. Bank accounts are no exception. If anything, since money is involved, more trust and thus more time are necessary. Let people try something first, with no commitment or complications, for as long as it takes, before insisting they buy into your value proposition and open an account.

Late last year, MicroSave researchers were in the field talking to customers, bankers, and agents about various authentication techniques. (In India, identification and verification for a transaction can include thumb impressions, signatures, PINs, and/or all ten biometric fingerprints.) Most customers like the thumb and biometric impressions best since they don’t have to remember anything. But many had learned how to manage PINs—after initial mistakes and frustrations—and proud of their mastery, they weren’t interested in changing.

Biometrics posed problems as well at the outset. Customers pressed their rough fingers on a surface that could only read smooth, clean fingertips and incurred delays, false negatives, and other difficulties. Again, they figured out quickly that moistening their fingers expedited the process—and their G2P benefit payments. Even the elderly, not usually the fastest segment to adopt and adapt to a new technology, saw the benefit to perfecting their biometric technique and did so with minimal fuss.

From this, we can conclude:

• In order to collect money (or any asset of value) in their name–and to ensure it does not end up in someone else’s hands—people will accept relatively complicated authentication processes and learn them quickly and without complaint;

And by extension:

• In order to collect money from a relative or the government—funds recipients feel are rightfully theirs—people see no reason to open an account from which they intend to withdraw all or most of the full sum immediately. They see even less reason to then pay fees on an empty account.

Perhaps the more correct answer to Financial Inclusion and New Product Development–What Should Guide Us? are customer needs, to be sure, but explored over time and without biases. It’s surprising how much people will tell us if we just listen better, observe more, and pause to think how most of us would respond in their situation.