Tuesday, Jun 08, 2021
The FinTech Gender Gap
This Community of Practice on Financial Inclusion and Gender Equality webinar discusses the results of the recently released BIS Working Paper, The FinTech Gender Gap, which identified country characteristics, differences in the willingness to use new financial technology, and different attitudes towards privacy and technology as reasons for some of the gap.
The speakers also explore challenges and opportunities in fostering financial inclusion with new technology for supervisors and regulators.
Watch the full webinar:
Read the transcript:
Demet Canakci:
Hello everyone, thank you for joining us today. My name is Demet Canakci. I'm a Program Director at Toronto Centre. Welcome to our financial inclusion and gender equality community of practice webinar series. We are delighted to host three guests today, Jon Frost, Sharon Chen and Sebastian Doerr. You have received their bios, so I will briefly introduce them. Sharon Chen is a founding member of Ernst and Young, fintech team, and the lead author of the Global Fintech Adaptation Index 2019. She derives global and regional fintech strategy and collaborates across the financial services ecosystem on fintech trends and policy development. She will join us in a couple of minutes. Jon Frost is the senior economist in the innovation and digital economy unit of the BIS. In this role, he conducts policy oriented research on fintech and digital innovation. Previously, Jon worked at the Financial Stability Board, and the Dutch central bank among others. Welcome Jon.
Jon Frost:
Thank you.
Demet Canakci:
Sebastian Doerr has been working as an economist in the innovation and digital economy unit of the BIS as well. His research interests covered financial intermediation and macroeconomics, with a focus on how innovation affects the financial sector and the economy. He was awarded the European Economic Associations Young Economist Award, as well as the Young Innovators Award at the Vordenker Forum. Congratulations again Sebastian and welcome. In today's session, we will be hearing about the recent publication titled the fintech gender gap. It is an interesting paper, I encourage you to read it, if not already. Before I pass this over to Sebastian, I want to thank our funders, Global Affairs Canada, The Swedish SIDA, International Monetary Fund, Jersey Overseas Aid and Comic Relief and USAID without whom we couldn't achieve our global mission. Please use the Q&A tab to submit your questions. We will try to answer as many questions as we can. It is now my pleasure to hand over the session to Sebastian for his presentation. Enjoy the session and over to you Sebastian.
Sebastian Doerr:
Thank you for the introduction and giving us the chance to present our work here. So the Fintech Gender Gap is joint work with Sharon from EY, Jon, Leonardo, and in Hyun Song Shin at the BIS. Jon and Sharon are on the call and will join me later also for the Q&A. So we all hope that fintech is fostering financial inclusion, right? So the idea of it transforming financial services and many policy initiatives and have the explicit goal to foster financial innovation and improve access to finance for the underbanked. And so one big question is whether the fintech gap, whether fintech can close the gender gap in access to financial services. So we know from the World Bank data, that around 72% of men globally have a bank account, but only 65% of women do.
So fintech promises by using non traditional data, machine learning and other new technologies, to maybe overcome this challenge and hopefully narrow the gender gap. So what you want to know in this research paper is whether the use of fintech products and services differs between men and women. And so we will importantly distinguish between fintech products offered by fintech entrants and traditional financial institutions. And once we address this point, the next question we're asking is whether we can explain any observed differences in the use of fintech products, whether it's sent around privacy, economic benefits, or other attitudes toward technology. And to answer this question, the main data we're using is the EY Global Fintech Adoption Index from 2019. I'll give more detail in a bit, but basically, it's a survey of around 27,000 adults in 28 countries that is within each country representative by gender and age. And the survey asks detailed questions on the use and attitudes towards fintech.
So the key finding in our paper is that men are more likely to use fintech products or services than women. And this is what you see in the graph here. So on average, 29% of male respondents say that they use fintech products or services back in the entrants and 21% of women say that they do. So that's an 8.4 gap in the average. And as you can see, the pattern is precedent in almost every individual countries, the red dots in the right side in the graph are the share of male respondents that use fintech in each country, and the black dots, the female respondents. And except for Peru and India, where that gap is very close, everywhere men report using fintech more. There's two outliers here, China, India that's most explained by payments that's still been used. Now, arguably fintech products cover different aspects from peer to peer loans to managing your money, and so forth. But actually, when we look at different categories of fintech products, the gap is also there.
So when we try to understand what could explain this gap, the first thing we look at, our individual characteristics, such as age, income, education, but also country characteristics. So whether you live in a rich or poorer country, your financial development, and so forth. And when we account for these factors, and we do find that the gender gap narrows from 8.4 pp to 5.2 pp, so that's around a 30% decline in the gap. But the gap is still there. And actually, when we plot for each country the average gap, that's what you see in the right in the graph, once unconditionally, so just the raw gap that's there in the data. And then once conditionally by taking into account differences in individual's age, income, and so forth, we actually find that there's a very high correlation. So that suggests that individual characteristics, at least the ones we can control for, but also country level differences don't explain that much of the gap.
So another question we're then basically asking is whether it matters who offers the fintech product, right? So it could be that maybe if the fintech product is offered by a traditional bank, maybe then there's no gap there as to opposed it's been offered by fintech entrants. And so when we do that, we find a few interesting patterns. So actually, more respondents say that they use fintech products offered by traditional banks than if they're offered by fintech entrants, so that's the average, almost 50% versus 25%. And interestingly, respondents are more likely to use fintech entrants if they also use fintech products by traditional banks. So this could suggest that actually fintech is more of a compliment rather than a substitute for traditional banking services.
That being said, we do find that the gender gap is almost identical across both groups, so it doesn't really matter whether the product is offered by a traditional financial institution or by a fintech entrant, the gap is similar in magnitude and not statistically different. So this could suggest it's rather more about the product, fintech product, rather than the provider. It could be responsible for the gender gap we observe. Now, so I've told you all the things that don't explain the gap. So of course, it's more interesting to provide some answers of what could explain the gap. So what we do is we document, in the first step differences in gender attitudes towards privacy in technology. And so specifically, we want to know whether individuals are more or less concerned about privacy when they're dealing with companies online, their general willingness to use new financial technology, also their price sensitivity. So would you be willing to use any or to switch to a fintech entrant if they would offer cheaper services or better rates, and finally, a product fit?
So the idea being that maybe fintech offer product that simply are better tailored or more innovative and suit my lifestyle better. So we first document differences in these attitudes, and then we want to know whether the differences in these attitudes could explain the gender gap. So the first thing in terms of documenting differences, we find that women report that they're more worried about their security when dealing with companies online, and they're significantly less willing to adopt new financial technology, for example, digital banks. Again, these questions come from the survey. Men instead of more price sensitive to them, they're more willing to use a fintech entrant or even share their personal data with fintechs if cheaper offers would be the result. Well, women are actually less willing to use a fintech even if the products are somewhat better suited to their needs or lifestyle.
The next thing we do is there are differences, obviously, in attitudes towards fintech products. But the question is, can they narrow the gap when we account for them. So what we do is we subsequently account for these differences across genders and we find that actually worrying about their security or the difference in the suitability of products don't really narrow the gap. Instead, what explains a large part of the gap is that there are differences in attitudes toward technology and price sensitivity. So they bring the gap down from 5.2 pp to 2.3 pp. So, in a nutshell, if you control for individual characteristics in the sense of age and income, as well as country characteristics, and then on top of that, for attitudes and price sensitivity, the gap declined by 75%. So that's a huge drop.
That being said, 2.3 pp are still around 10% of the average adoption rate, which is 25%, but it's still quite a significant gap. But I think it's good that we find some variables that could explain the gap we're observing. Of course, now we know that there's difference in attitudes, but what determines these differences would obviously the next question. And so in our paper, we can't answer this because this is not explicitly part of the survey. But we think there's three major explanations based on previous literature that could explain differences in attitudes, and hence also a large part of the gender gap. So on the one hand, there could be differences in preferences across genders. There's been a lot of work showing that, for example, women tend to be more risk-averse than men. And so it could be that simply by being a new technology, it will take some time to be adopted.
Another explanation could of course be gender based discrimination. So there's also I think, convincing evidence out there that loan officers have certain biases that might have been discrimination in the past, that might discourage some people from actually using new technology. And the final explanation we think is a possible one, is that there are social norms and laws that might affect the cost benefit trade off. So what that means is that maybe the leak of data could be more severe for women than for men, for example. Then even if a product would give the same benefit to both genders, if the costs of a data breach are disproportionate, then that could discourage women from adopting fintech, which usually relies on data intensive technology.
So in terms of policy, we argue that there will be more research needed to pinpoint the underlying cause of the gender gap. So as we mentioned, attitudes differ and they go a large way or a long way of explaining the gender gap. But what determines those attitudes or pricing activities is at this point, an open question. But we think that depending on the cause, it could be the case that if you want to foster financial inclusion through technology, you might need policy support, that takes into account explicitly that the willingness to share data or to use technology differs across subgroups in the population. And again, only if we know the cause, we can actually design the right response in terms of policy. So in that sense, we think it would be promising to look further and better understand what determines differences in the attitudes or technology and price sensitivity to understand how to design best policy.
Now, this is basically the key message of the paper. And now I'll spend the next 10 to 15 minutes to give you a bit more background to convince you that what we find is more than just a few pictures and correlations, but there's a solid analysis behind that. So that we're really convinced what we find is a very consistent and strong pattern that is hard to explain. So let me spend a few minutes on the Global Fintech Adoption Index first, and then move into the analysis. So the Fintech Adoption Index by EY is based on a survey of 27,000 individuals in 28 countries, roughly 1000 people per country. It's representative in terms of gender and age within each country, but it's an online survey. So one drawback here is that we only interview people or EY only interviewed people that actually have access to the internet. Now, in terms of fintech users, it might not be the worst thing because without internet, you can't really use most of the fintech services, but it's important to keep in mind.
And the survey asks these are questions on the use and attitudes towards fintechs, but also towards traditional financial institutions or non-financial services companies. We also know respondents' age, gender, income group, education, marital status, employment, country and language. And just as I mentioned, in the very raw data, the fintech gap is very large. So 29% of men use fintech products offered by fintech entrants and 21% of women do when it's present all subcategories. So it's during payment products, investment, borrowing, financial planning or insurance products. There's also quite a few other differences in attitudes. So, this basically just shows you the same in the picture. So once more in every individual country except for Peru and India, there's a significant fintech gender gap. The left figure shows you basically the difference within individual product categories. And as you can see, some fintech products are used more than others. So payments, for example, is by far the most used fintech product in the survey. But the gap is there in every individual category. And actually scale by mean adoption rates is quite similar across different products.
Now, when we investigate those patterns in more detail and regression analysis, we basically want to know whether the outcome here is just a dummy saying it's a value of one with the use of fintech products and zero otherwise. And we regress that on a female dummy. So basically, the beta here will tell you, if it's positive, women would use fintech more than men, if it's negative, they will use fintech less. And the nice thing here is we can control for a host of factors, including individual characteristics, but also everything at the country level. So we can basically abstract from factors like financial development, average internet access, GDP per capita, and all these things at the country level that could explain or potentially explain the gap.
And so when we do that, so the right hand side is the regression table, but I think we can ignore most of the details here. So when we add more and more of the controls that could explain the gap potentially, so characteristics at the individual level, at the country level and so forth, we read the gap narrows, but it never disappears. And it also doesn't disappear when we only focus on those that already used banks or don't use bank for fintech products and services, we get that it's actually quite similar in both groups. And again, in the final column six and seven, what we do is we really compare 19 individual fintech product categories. So we very narrowly separate fintech products in different groups. But we find that the gap is present, even if you compare very similar products. I mean, in principle, you could think that maybe for some reason men only use payments fintechs and women only investment fintech products, and that could maybe explain the gap. But actually, we show that that's not the case, the gap is there in very narrowly defined product categories, which we found quite striking.
Similarly, when we compare fintech entrants, and traditional FIs, again, controlling for all these factors that could confound our findings, if anything, the likelihood to use a fintech entrant is higher if you also use the traditional bank that offers fintech products and services. So again, we think this could be a sign that fintech is a complement to traditional banking and services. That being said, when you control for all different factors, the gender gap is identical, statistically speaking, whether it's offered by traditional banks or fintech entrants, that would be columns five and six, the interaction coefficient for those of you interested in regression tables. So one interpretation of these results could be that the gap is not specific to who is offering the product, but rather that the products themselves matter. Okay, so we can explain the gap but we couldn't make the gap go away by forcing all fintechs to be bought up by banks. Not that we would want to do this, but it also wouldn't make sense to close the gap.
So what could explain the gap, I already gave you a brief overview, but basically, in the survey, we have quite a few questions on different attitudes. So one is about worry about security, the question rates are worry about the security of my personal data when dealing with companies online. So we basically assign a dummy if a respondent says yes to that question and then we do a first principal component analysis. So basically what we do is we take a bunch of questions which asked about similar things. So your willingness to adopt financial technology, to adopt products for cheaper offers, or because products or services would better fit your lifestyle. And then we just combine all these different questions into one common component. And then we want to know whether this component differs across genders. And indeed, we find that there's a significant difference across men and women. Again, female respondents tend to worry more about the security on average, but are less willing to adopt new financial technology.
Women are also less price sensitive, so men are more willing to use a fintech entrant, but men are more willing to switch to a fintech if they offer better products and products better tailored to respondents lifestyle. All these differences are quite strong and pronounced across genders. So the next thing we do is basically account for these factors directing our regressions to understand how much of the gap they can explain. And so in that table, if you want, you can focus on columns five to eight. So basically, the coefficient on the dummy female indicates the size of the gaps, and column five would be -5.3 pp. And then when we account for the worry about security in column six, we add technology. So attitudes and technology as a control. In column seven, we add price sensitivity, in column eight we add the product fit. And what you see is that, so from column five to six, and then again, from six to seven, the coefficient declines on the female dummy by quite a bit from 5.3 pp to 2.3 pp, further adding the product fit doesn't really do much.
So what this means is that attitudes towards technology and price sensitivity really could be factors explaining why this gap is there. But as I mentioned a few minutes ago, our survey doesn't allow us yet to determine what could explain differences in these attitudes. And I mentioned discrimination could be preference, could be social norms. And we need more research to understand what is driving these differences in attitudes toward foreign policy. We perform a few further exercise in the paper. Let me skip that, I think, because probably in the Q&A some of these will come up. But so one thing I want to mention here towards the very end is that not only the dimension across genders matters, but also the trust in counterparties. So basically, who's providing the service. In the survey, we did find that fintech entrants and traditional financial institutions offering fintech products can exhibit a similar gap, but nonetheless, when we asked about the willingness to share data in exchange for better offers, there is a pecking order.
So basically, in the survey, there are questions whether you would be willing to share your data for a better offer with either traditional bank, a fintech or non-financial services company, for example a big tech. And pretty consistently most countries across the world, consumers are most willing to share their data with traditional banks than with fintechs, and only then with big techs, so think of Amazon, Google, Tencent, and the like. Although, to be fair, definitions vary a bit across countries. So we think this is an interesting pattern to the extent that apparently, at least in terms of who you trust, more or less than your counterparty matters. And here at BIS, we have another work in the making, which should come out tomorrow around noon, where we use very high quality survey data for the US, on US consumers. And we asked them basically, how much do you trust each counterparty to safely handle your data. And there's a very similar pattern. So they trust banks the most, traditional FIs, and they trust fintechs, but also government agencies to a similar extent, but less than banks. And they have far the least trust in big techs. So this pattern is really consistent.
And interestingly, the survey was in September 2019. So we asked consumers about how COVID-19 has affected their willingness to share data. And there was, again, a very strong pattern that is varying to the extent that COVID-19 has exacerbated previous pecking orders, basically. So a quarter of respondents became less willing to share the data in general in response to COVID-19, but almost half of these were less willing to share the data with big techs. Okay, so that the ones they trust the least to begin with, they became even less willing to share the data with. Traditional banks, on the other hand, on the right hand side would be the blue dots. See the lowest increase in distrust during COVID-19. And I mean, this obviously matters, right? We know we all have to rely on, I don't know, be it Zoom, be it remote work, be it online shopping. So we all rely more on data, but people became more concerned. They don't trust everybody equally. So in terms of policy, I think it has quite interesting implications. But let me wrap up and then open the floor for questions. So data lie at the heart of digital economy. And the quality and representatives of the data are crucial. It could be that an uneven provision of data could lead to bias algorithms, discriminatory pricing, and so forth.
And so, just having better technology might alone not really help us close the gender gap in the access to financial services. Instead, we might need policy to support this financial innovation. And that policy needs to take into account the different groups of the population that have different concerns. And they're less or more willing to share that data, for example, and there's some more willing to adopt new technology. And so this new normal we're living in of remote work, Zoom presentations, might not benefit all groups equally, because although we all have to do it, some might like that more and some might like this less or become more or less concerned about what would happen if the data would be leaked, for example. And so just to wrap up, the fintech gender gap, you can read up the paper on the BIS web page. But we find a very strong pattern in almost all countries in the survey. And women use fintech products and services less than men.
And it's very hard to explain the gap just with individual characteristics or country characteristics. Instead, it seems that attitudes to technology and price sensitivity go a long way of explaining the gap. But we definitely need more research to understand what determines differences in those attitudes. So let me stop here and I guess, at this point, Jon and Sharon will join me for Q&A. Demet, back to you.
Demet Canakci:
Thank you Sebastian, it's a great presentation. Very informative and to the point. This is the advantage of having three speakers and some questions are already answered live.
Sebastian Doerr:
Okay.
Demet Canakci:
Perhaps we can just still go over those questions to see if you would like to add anything. So one of the questions, "If I own a fintech service, and my wife uses it, to which gender would you assign the use of the service? Might this be creating a false perception or a gender gap?" Yeah.
Sebastian Doerr:
So I assume Jon and Sharon answered that, at some point, we split the sum into those who live alone and those that don't. So I mean, it's true. In a household, we wouldn't know who was using the service, but if you focus on responding through alone, in that sense we find a similar gap.
Demet Canakci:
Okay, thank you very much. So Calvin is... Ah, okay, that's answered. So, there's one question here.
Sharon Chen:
If I could just cut in on that last question. I do want to, apologies, I do want to point out that... Oh, I guess we're starting video. There you go. I do want to point out that fintech as most of the fintech solutions are very mobile phone based. So in theory, you can share an account and there are some, I guess, products are designed to be shared between families or couples, but actually, it's as propositions are very individualistic. So it's possible that what we're not seeing is if in a traditional split of duties, women might be looking after childcare, and then might be making financial decisions. So we might not see whether or not there's indirect benefit of a woman whose husband is using a fintech product and saving on behalf of the household. Before looking at the who's using the product in and of itself, then I think that what we've got here is a pretty fair measure.
Demet Canakci:
Thank you. Yeah. Thank you very much. So there's one question, not answered yet. I think it's just by matter of preference. And now wouldn't it be more important if the gender equality was based on who makes more fintech products? Anyone who wants to answer?
Sebastian Doerr:
I'm not sure I clearly understand the question, I'm sorry?
Sharon Chen:
Well, to maybe take a stab at the question, I think it's very separate to this piece. There's quite a lot of thinking and questions around how do we get more female founders into not just the fintech space, but into the tech space and whether or not there's institutional barriers, financing barriers, cultural barriers, whatever they are, there's a lot of people researching this, speculating, trying to fix that. I think it's important to ask the question of whether or not fintech is reaching women very much because the idea and the reason fintech has had so much traction is that it promises to be better in however you want to define it, whether it's cost or whether it's some better user experience, but better than what products might be available. And in that case, if you're looking at it from a societal benefit perspective, you want to make sure that those benefits are able to trickle down to all parts of society.
In this case, we're looking at gender. But if you look at the industry, there's also concerns about making sure it hits the elderly or the less technologically skilled or making sure it hits more vulnerable populations without certain ideas and so on. So I think it's important to remember it is a industry but also given the impact it's had on the industry, itself and on financial services, making sure that the benefits trickle down and reach everyone across society. I think I answered the question.
Demet Canakci:
Thank you very much. Okay, George is asking a question here. "Interesting report, an important contribution to an emerging focus on diversity and financial services. Did your analysis discover any similar results in insurtech?.
Sharon Chen:
I was going to say that our definition of fintech in this case covers insurtech, wealth tech, pay tech, quite broad brush. There's I think, 19 services we've included in there in the cover. They touch upon what we think were the most popular and most available globally across all the consumer financial services products. So yes, it does cover insurtech, I don't think we've done the analysis to see if there's a difference between insurtech versus wealth tech versus, say, digital banking services.
Jon Frost:
So we have found that there is a gender gap across each of the 19 services. So that includes insurtech. And I think that it's notable that a lot of the discussion on financial inclusion and the use of technology or financial inclusion references the potential of insurtech solutions to help small businesses, to help women, for instance, with crop protection. There are there a lot of these examples that we hear about that are very promising indeed, but at aggregate level, I think it is notable that we see a gender gap for the insurtech space as well. So it seems that aggregate level insurtech is not yet helping to close the gender gap.
Sebastian Doerr:
Although to be fair, we don't know if it's bigger or smaller compared to other categories. So we didn't check that explicitly. So it could be to ensure that you're still doing better, relatively, but we didn't check that yet. But the gap is there, so in that sense, correct.
Demet Canakci:
Okay, thank you. While we are getting other questions, I have a question. Your survey sample consists of more advanced economies, do you think there will be differences in your results if you work on some emerging market economies?
Sharon Chen:
Well, there's a number of emerging markets in there, and I will agree that they're not necessarily representative of all the, I guess, the different levels of development. But aside from the developed markets, like the US and UK and a lot of Western Europe, we did try to bring in markets like South Africa, into the mix. And in this 2019, we included quite a lot of Latin America, I guess, to try and represent some of what the interesting activity happening in that space.
Demet Canakci:
Okay, thank you. I'll continue with the questions from participants. "Quite an insightful paper. My question is, how do you take into consideration variations in digital divide robustness of ICT infrastructure, discrimination against women across the countries involved in the study? Also, do you think level of financial literacy has any effect on gender gap on the fintech industry?"
Jon Frost:
So I can take this and I think Sebastian will also have some things to add. I should note that our survey is of digitally active respondents. So it assumes that the respondent has access to digital technologies, which means that it likely understates the gender gap. Indeed, there are indicators showing that there is a digital divide, women are less likely to have access to digital technologies to start with. And we show that even among those who have access to digital technologies, who were able to take part in the survey, there is this gap in the use of fintech. We also have a proxy for financial literacy. It's not a perfect proxy, but we do have a question and we find that the results are robust to including this measure of financial literacy. Sebastian, I'm sure you have something more to add here.
Sebastian Doerr:
Yeah, so one thing to point out is that we do know the country you're in, but we don't know which part of the country. So arguably, if you look at larger countries, there could still be huge differences within countries in terms of gender attitudes, discrimination, things like that, that we can't pick up in the survey. So all we can take care of is the average in each country. That said, so the US survey I briefly mentioned at the end, there we asked a few questions which are more detailed on literacy, who takes financial decisions and so forth.
So at least in the US, they don't explain the gap. We do find, however, that in areas where people perceive there's more discrimination against women, they're less willing to share their data. I mean, it's still in the making, so I don't want to make too bold statements here. But they would be in line with I think what you have in mind with your question. But the survey we have in this paper, we don't know if it is segregated data at the country level. Sharon I don't know if you have other thoughts.
Sharon Chen:
No.
Sebastian Doerr:
Okay.
Sharon Chen:
I'm afraid we weren't able to... We had the limit of how many questions we put in there.
Demet Canakci:
Okay, thank you. Next question. "I have heard that self service gas stations came into being because soccer moms prefer not to leave their cars than buying gas." Unexpected question. "Is there a similar example in fintech?"
Sebastian Doerr:
So the question is whether the demand for products leads to the product being made or offered? I guess that's the-
Demet Canakci:
Yeah, I think that's my understanding, otherwise, Jon can rewrite. But yeah.
Sebastian Doerr:
Sharon, Jon, any examples?
Sharon Chen:
What I would say is that if you look at most tech startups, including in the fintech category, and you speak to the founders, there's always an origin story about why they think there's a... Or how they got inspired by the idea and why they think it's something that needs to be resolved within a new technology or a different approach. And that's everything from some of them. For example, if you speak to a founder of a remittances company, then they might be an immigrant themselves, or they might have had experience working with people of immigrants, and therefore that's been the inspiration for going off and starting what they do. So nothing immediately comes to mind quite as specific as the example that's given.
But there is I think, within the industry, a general acceptance that not only do you have that origin story, or try and fill niches in the market, but also as part of the design of the product, you incorporate quite a lot of customer feedback in tweaking what you initially might start off into what actually gets presented or what, by time you get to your Series B or C, what is the product that you're trying to really scale up.
Demet Canakci:
Yeah, Jon, he had clarified the question. Whether there are any fintech products preferred by women, that's what he was trying to say.
Sharon Chen:
Okay, I'd say that's quite broad brush, because I think that's when you start talking about when I venture into the category of intersectionality. Because what women might want at age 50, well, it might be very different from what someone in their early 20s might want, and also brings into very specifically into their needs and their goals. One thing we are seeing is that products are a specific target that women do address, try to overcome some of the illiteracy points, tends to be a bit more social with communities and networks. Those are all approaches that a lot of fintech startups have adopted to try and reach more women as their customer base.
Demet Canakci:
Okay. So that must be a good answer, because he thanked already. Thank you for the question, Jon. And so we have two questions from Carol, I think. First, do you have any plans to conduct more research to look at those without access to technology are reversing for the research in Syria?
Sebastian Doerr:
I don't know Jon if you want to make a CBDC example on offline CBDC, but please go ahead if you have any ideas.
Jon Frost:
Sure. So one of the issues with doing research on financial inclusion and particularly for people who are not digitally active, it's of course it becomes much more difficult to collect data. There is a lot of research, and I'm sure people in this community are very familiar with the Jay [Powell 00:40:02] and the work by [Diplo 00:40:04] and others that really looks at RCTs and in emerging market development economies sends surveys, sends people to collect data. A lot of what we do is based on digital data sources, which by definition of it, more difficult to reach people without access to technology. So this study, I mentioned that by construction, we only have information on digitally active respondents. Of course, we're not able here to get information on people who don't have access to digital technologies. But the point that Sebastian was mentioning is that there is a lot of research on how digital technologies can be made more inclusive. And I think that one interesting example is in the central bank digital currency research.
There's a lot of discussion about how central bank digital currencies can be constructed to be inclusive, can be used for offline payments. So even for individuals who don't have access to a smartphone or even a feature phone. So there are, in China for instance, the People's Bank of China is looking at interfaces, including prepaid cards and other means for offline payments. I think a lot of Bank of Canada staff have written about universal access devices. So these are very low cost devices that would be just for payments in central bank digital currencies. And these are specifically meant to allow for digital payments by people who don't have access to a smartphone or feature phone, or might not be comfortable using it for payments. I think that that's a really important area, particularly in light of the groups that are most vulnerable and least likely to have access to digital payments currently. Think about the homeless, think about migrants, visually impaired people, different more vulnerable populations.
So yeah, I think this is a very important area of research. We don't have good data sets on these populations, but certainly we're following what's being discussed here and the technological solutions that are meant to cater to these specific segments.
Demet Canakci:
Okay, thank you. I do have another question. "I read the paper, it's really interesting. And if the differences in adaptation rates for fintech products are based on the differences in hardware preferences, behavior of thing mainly, then the scope for interventions through policy would be limited, I understand. Are there any role for supervisors to do more especially, for example, addressing the data security issue, you discuss in the paper?"
Sebastian Doerr:
I mean, so let's take the example of, for example, concerned about your data being leaked. So I think even if preferences were determined that maybe would affect that, even given the same risk, for some reason, women think it's much more harmful. I don't think there's such a thing as too little risk of my data being abused, maybe. So I think we can probably, as a supervisory regulator, adopt a stringent standard on data privacy laws, that certainly wouldn't harm men. But still even the preferences are the difference and could encourage women to use more fintech products and services. So that would be my journey, Jon do you have more to add. That would be one example, I mean, for clearly regulation, supervision could help.
Sharon Chen:
Okay, thank you. Well, I do think that when you talk about preferences, that's quite cultural, social, as well. And so I do think regulators, people in positions of authority do have or can play a role in normalizing certain behaviors, which I admit is long term and a lot more indirect. But there are definitely things that can be done to not just, I suppose set the standards, but to make certain practices whether at the consumer side or at the business side, just common and make people more familiar. And once you've got that, you pass that familiarity barrier, you pass the understanding barrier, then you will naturally see more uptake of whatever product you're talking about.
Demet Canakci:
Jon, anything to add?
Jon Frost:
I think that.
Demet Canakci:
Okay, thank you very much. I saw a question, but it disappeared. I believe it's answered. Sorry, it was actually related to my earlier question. So-
Sebastian Doerr:
Even if we may make one quick comment also in response to what Carol wrote about the gas station.
Demet Canakci:
Sure. Yes, I was about to read it, yes, thank you.
Sebastian Doerr:
I think three of those questions bent on what Sharon briefly touched upon, that there might be... I don't think we're missing that thing, because there's research on that. But there's solid evidence that there's fewer female founders in fintech than male founders. So to the extent that you think that maybe female founders know better what female customers would want, and that's an argument I've made, then certainly you could wonder whether there's any market failure preventing female founders from getting enough funding to start their fintechs. I think we're aware of the problem with all the good research, but I don't know if we have found the definite answer why there are so few female founder fintechs. Maybe Sharon knows more about that. But I think that thing you brought up, gets to the heart of this, right? I mean, if there's demand for products, we need to know about that. Somebody needs to create the product, maybe there could be a disconnect here.
Sharon Chen:
Well, I won't touch upon why there isn't enough female founders, because I think that's another 5, 10 papers even if we manage to get that research done. But I will say that it's worth remembering that this paper was very much designed to be a global survey. And so in the questions we put together, in the methodology that we design, the idea was to be able to have a benchmark that you can then compare, actually very different countries, and then be able to say, or discuss, we use the same approach for each country. And therefore, you might have the fact there are limitations of countries that you may or may not be able to factor as you've picked up on, some of the questions have picked up on but the whole idea was to have a global benchmark. Whereas I think some of these questions about where there are gaps where, why my women in one country be more willing to share data and all of that, I think there are interesting questions, there are interesting case studies, if you dive into specific countries about what's happening.
So what might be seen as a need for women in India is not necessarily a need for women in the US or in Switzerland, and therefore, it wouldn't necessarily be covered in our survey. But then if you go and look at what products are available in the market, you'll see that variability in products from country to country.
Demet Canakci:
Thank you. So Kelvin mentioned the question again, so perhaps the response wasn't clear. The focus of my earlier questions were around whether men or women are better at understanding the risks around fintech products in advanced economies. Maybe men need more financial education. What do you think?
Jon Frost:
Could well be.
Sharon Chen:
It could be an anecdotal industry view because I won't be able to necessarily point to specific academic studies. But if you speak to, for example, the people who run investment apps or who run investment businesses, the trend that they tend to pick up on is, I think women, A, feel like they need to have more knowledge than men before they are comfortable with making certain decisions. And then I think, and this is obviously very anecdotal and very broad brush, but men also tend to be much more comfortable with taking risks compared to women. So there is an element of I guess, at the decision and also the the way the decision or the information is portrayed to them. In both things are things that fintechs have done to remedy. So there's some very good products in the market that have been trying to bring in behavioral analytics and gamifying experiences to help people understand their risk level rather than just saying I'm comfortable losing X amount.
And then there's also other apps that really focus on helping people understand illiteracy, and they're not necessarily targeted towards men or women in particular, but the people who run the apps have very much commented, they have noticed differences in how female versus male customers engage with those apps.
Sebastian Doerr:
If I may add one academic reference here Jon, there is this fantastic title paper and now old data titled that boys will be boys and gender overconfidence, it comes to stock investment, and what they show is that men are very overconfident. They trade way too much and actually make returns that are negative at times. So if you think okay, fintech, maybe men use lots of cryptocurrency, that obviously would be lots of fintech news, but not necessarily as socially optimal. So I mean, that's not what we're saying in the paper. But obviously, it could be the case that I mean, it's a very risk seeking, and that needn't be the optimal outcome from a society perspective, that everybody's using products they don't know yet.
Jon Frost:
Yeah, absolutely. And just to add to that, I mean, there is literature as well showing differences in risk aversion. So women tend to be more risk averse. And getting to the point that Sebastian mentioned earlier, I mean, there are legitimate concerns around data breaches, in some cases, there's a lack of regulation of new products and services. So there may well be a case for educating people about some of the risks that they face and making sure that they are aware of the risks and of dealing with companies online, of using digital products, and that they are able to protect themselves against those risks. There's probably also a case for regulation, particularly of data use, regulations like GDPR, and the European Union, I think are being replicated in other jurisdictions around the world.
So there is very much a need for actions here. And I think that's one thing that we've also seen in other work is that, people tend to worry about issues when they've had an experience with them themselves. When people have experienced a data breach, they're more likely to worry about data breaches, when people have potentially been subject to discrimination, they may be more worried about discrimination going forward. So it's better to educate people about these things that perhaps in advance, than allowing these incidents to happen and having them worry afterward. But yeah, again, this is, I think, a role for public policy.
Sharon Chen:
Actually, if I may add a stat from the index, where at one point we asked the respondents, who do they rely on to help with financial decisions. Over a third of women say that they rely on family and friends and colleagues, so they consult, essentially, whereas I think about 20% of men say that they don't rely on anyone, and that anyone includes not just friends and family and professional advisors, but also even online and offline tools or government institutions, or relationships that they may have with their own individual research. So I think that's quite revealing in their mentality.
Demet Canakci:
Yeah. Thank you. If I remember correctly, one of the main drivers of this fintech gender gap in your paper, as men are more price sensitive, when they see a cheaper product, they just move right away. So that's one of my takeaways from the paper. Okay, Kelvin, thank you for your thoughtful answers. And we have question from George Brady, "Behind social cultural norms that may contribute to the gender gap, did you discover any legislative or regulatory barriers to gender equality, whether financial laws, regulations or other?
Jon Frost:
This is a great question. And I think that one thing that we should say at the outset is, as Sebastian mentioned, the country level characteristics actually don't play that large of a role in explaining the gender gap. So that was something that surprised us. But there are of course, very large differences. Some countries have enshrined gender differences in legislation. There's a great paper by Maria [Hyland 00:53:35], Sydney [Djankov 00:53:37] and Penelope Goldberg on gender laws delivered in the workforce. This is an AR insights, they make available indicators on gender laws and basically on gender discrimination in legal frameworks, and it's clearly there are a number of countries around the world that still have differential treatment of men, women and a number of laws from voting to labor markets to all sorts of civil protections.
So that is very important, that couldn't, of course, have a role. And your first pillar pension rules, which you mentioned here, I mean, this could of course, also have a role in the use of fintech. But what we found is that, at least in our survey, and for the data we have access to, that this didn't seem to be a key driver of the gender gap that we found. And it's notable that even in relatively egalitarian countries, we still see a gender gap in use of fintech.
Sharon Chen:
I would also venture that it's hard to, I suppose, say here is the type of policy that does or does not play a role because each country is different. I mean, to an earlier question about where there might be gaps in market, if for example, in the UK, most of the fintech products will be very dependent on having some form of identity and some sort of natural history to start with. And I say most, there are obviously exceptions, but the majority of that, if you look at payments providers, or if you look at some of the investment companies, you need at least some form of, if not ID or bank account or even a Facebook profile to help with your credit scoring. So that's very true ability to tap into those products in the UK or in the US, will depend on you having some element of establishing yourself whereas in other countries, like some of the more developing ones, where there isn't necessarily that specific requirement, there's a feeling that if you've had a mobile phone, then that's all you need, you don't need to worry about having a bank account, and instead of fintech will come in and be your bank account.
So it's hard to say that this one legislation will specifically help women because what we've seen is that fintech will come in and try and fill that gap and work around the legislation or work around what's already happening at the ground level rather than trying to write rather than saying treating each country specifically the same.
Demet Canakci:
Okay, thank you very much. I think we answered almost more than 20 questions, this is a record. Thank you so much. Including my questions, I think we answered 21. And seems like everybody is happy with your responses, no follow up questions. I would like to thank you, Sebastian, Jon and Sharon, very much and participants and asking questions, making it more enjoyable for us this morning or afternoon or evening in your case. Thank you for joining us today we will stay on the line with the community of practice members to continue our meeting, which will be closed to public and thank you again and stay tuned for our next webinars.