CHAPTER 4.
CONCLUSIONS AND OBSERVATIONS
This chapter presents conclusions and observations summarizing the findings from both quantitative and qualitative research on the access, usage, and quality-related aspects of financial inclusion in Russia from the demand-side perspective.
Access
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Physical access to financial services in Russia remains a challenge, with remote and rural areas being insufficiently covered with financial service provider branch networks, POS-terminals, and communications infrastructure.
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From the demand-side perspective, physical access seems of relatively lower importance compared to the factors related to provider reliability, and especially the high complexity of available financial products and services.
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Recognizing the physical access issue, financial service providers mention the high costs of physical infrastructure development, but more in terms of excessive regulatory requirements that increase the costs and adversely affect providers’ business case.
Usage
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Higher awareness levels about financial products and services do not necessarily bring about higher usage. While the aggregate figures on the usage of financial products correlate highly with awareness levels, disaggregated statistics often show either no or even inverse correlations between awareness and usage for specific segments.
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Sociodemographic characteristics tend to be stronger predictors for financial service usage than personality characteristics in terms of people’s attitude to money (although further research may be needed in this area, as this research was a first attempt to establish such correlations).
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Financial products used the most are those that are provided to customers by third parties (e.g., employers and government) rather than those actively sought by customers themselves. The issuance of these provided products does not result in a more active usage of other financial services. This presents a challenge because programs such as those aimed at universal bank account coverage may not result in higher financial service usage, but at the same time, it is an opportunity for providers to develop various products that account for this type of customer financial behavior.
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A trend to watch both for providers and policy makers is much higher usage of credit than savings products. This trend is especially pronounced among the lowest income segments, where the usage of savings products is five times lower than of credit products. On the one hand, among the dangers of an excessive credit usage is customer over-indebtedness; on the other hand, through responsible promotion of both credit and savings services and their increased usage, providers can advance financial inclusion as they can influence both borrowing and savings behaviors.
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Insurance products — used the least among financial products — have a high potential for development, provided that products are better understood by customers and are better suited to their needs.
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The potential of innovative delivery channels for expanding the range of financial services will largely depend on customer perception of these channels as more reliable and easier to understand and use than traditional channels.
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Special attention should be paid to financial inclusion of the lowest-income segments: the level of nonusage of any formal financial services in this category is more than double that of the Russia-wide average. The challenge is how providers can be better attuned and more responsive to the needs of this segment through the development and marketing of products that offer good value propositions for customers and that are, at the same time, profitable and sustainable for providers.
Quality
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The research substantiates the need to increase levels of financial literacy as many customers do not distinguish among products, nor are they even aware that they are using some of them.
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Among the most important factors affecting the choice of financial service provider and the decision to use financial services is high complexity of financial products for customers and lack of standardized presentation of terms and conditions of financial products. There is room for providers to be more proactive in making their products easier to understand for customers.
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Policy makers may want to consider introducing standardized financial product description and disclosure formats. They may also consider regulating the terminology that providers can or cannot use — especially with respect to savings products, to clearly denote which of them are covered by the deposit protection scheme. These measures should be complemented by financial literacy campaigns explaining the descriptions, disclosure formats, and terminology to customers.
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Overcoming common stereotypes with respect to financial service providers and products (such as a negative attitude to credit or a belief that savings make sense only for large amounts of money) will be necessary to increase financial inclusion in Russia. This could be a task for both policy makers and providers of financial services.
This research has confirmed that closing the financial access gap in Russia is a multidimensional task that will require efforts on the part of all stakeholders: policy makers, providers, academics, funders — as well as customers themselves.
