4.6.2 Know your options: what technology is most appropriate for your youth market?
Newcomers to the technology space may become overwhelmed at the different technology options for serving young people with financial services. In addition to thoroughly researching youth’s current uses of technology, institutions should understand the different technological options available to them as well as the potential drawbacks. For example, creating a Facebook page could attract youth customers; however, these youth have the freedom to post any comment, positive, negative or ridiculous, on the page. A financial institution should understand these types of risks prior to adopting any new technologies. The following text boxes showcase the different types of technology being used to reach youth. The section immediately following will address some of the common challenges and solutions associated with each example.
FINCA DRC has been participating as part of the UNCDF-YouthStart project, developing savings products for youth, ages 12-24. Its market research showed that youth wanted convenient access to savings within close proximity to their homes, work or schools. High transportation costs to the bank branch were particularly discouraging for youth where the costs of traveling the bank were often larger than the sum of money they hoped to deposit. FINCA also wanted to use technology to decrease foot traffic in the branch offices and deepen its outreach in the rural and semi-rural areas. It developed a network of POS banking agents who provide cash transaction services as well as a fixed location for FINCA staff to provide account opening and clients’ biometrics registration for POS usage.
FINCA offers financial literacy training sessions to youth as well as direct marketing strategies on how to use the savings account. It selects POS agent locations based on their proximity to schools and uses the schools themselves as agents where deposits are collected on a daily basis using a POS device. This new agency network has significantly decreased FINCA’s operating costs. The cost to open an agent is approximately $1,600 while the cost to set up a branch is US$200,000.
As of September 2012, FINCA DRC has 3,928 active youth clients, 1,153 of whom have accessed the new youth account. These youth have conducted 2,464 transactions, 10 percent of which were done through the POS agents. FINCA anticipates a steady growth in POS transactions as it continues to create awareness and increase the usage of the POS channel.
In Pakistan, 29 percent or 51 million people are below the age of 24. Of the entire population, 177 million, only 12 percent have access to financial services. While the population is largely unbanked, there are approximately 75 million unique mobile customers, almost all (98 percent) of whom are pre-paid. According to CGAP, this scenario provides a laboratory for innovation in branchless banking (http://www.cgap.org/blog/pakistan-laboratory-innovation-branchless-banking). ShoreBank International (SBI) partnered with UBL, Pakistan’s largest commercial bank, to assist the bank in expanding financial services to the un-banked through their branchless banking platform known as Omni. The model uses an SMS –based transaction menu and operates through 9,500 agents around the country. To date, the system has attracted over half a million registered customers conducting more than three million transactions per month making it one of successful branchless banking initiatives in the region.
As UBL designed the program launch, it anticipated that tech savvy youth would be the first adapters. The bank conducted massive marketing campaigns during the Cricket World Cup 2011. This initially drove account uptake however customer interest faded in the months that followed the event. The most common transactions are bill payments, remittances, and mobile top-up. Youth customers, aged 18-30, are the first to open an account, however they tend to focus their mobile banking activities on purchasing airtime rather than storing or transferring money through their mobiles.
The challenges in driving account registration and uptake were due to a combination of low literacy and awareness, and mistrust in technology. While the youth are seen as early adaptors of technology, they don’t use the complete suite of financial services due to the lack of finances and low employment. However the youth’s exposure to financial services is increasing as most households use the young to pay utility bills through agent locations. Over the last 12 months UBL has invested in marketing campaigns that illustrate the benefits of using branchless banking to open accounts to store money (monthly salaries), transfer money back home (for migrant workers) and pay bills through this affordable and convenient mode of banking. These efforts have seen an increase of domestic remittance transactions used by migrant workers, youth being among them, to transfer money back home every month. On-going initiatives include creating the awareness to open and use accounts through the mobile or a debit card instead of over-the-counter (OTC) agent transactions.
In Ecuador, Freedom from Hunger has been working with Cooperatives San Jose, San Miguel, and Cooprogreso to develop savings accounts and financial education for 15,000 youth aged 13-24 as part of the Advancing Integrated Microfinance for Youth program (AIM Youth). Early on in the project, managers realized that technology could help to both increase access to the savings services and increase financial literacy. Partners now employ a range of technology including smart phones, debit cards, payment services and are evaluating the possibility of using SMS messaging and social networks.
Cooperatives San Jose and San Miguel have equipped their savings officers with smart phones. Staff receives deposits at a young client’s home or during a financial education session. Transactions are then entered into their smart phones. Both Cooperative San Miguel and San Jose have managed to reduce the transaction time to less than one minute and use mobile printers to provide a printed receipt both for the customer and for their records. This provides a convenient service to the youth and gives the coop the chance to cross-sell to family members during the visit. Results after one year at Coop San Jose show that youth have higher than expected average balances. Staff is pleased with the ease of use of the smart phones and youth clients are satisfied with the personalized service where they can deposit, receive their balances and conduct other transactions without having to travel to the bank.
Cooprogreso is experimenting with debit cards for youth over 18. These youth now have access to a national network of ATMs, five of which belong to Cooprogreso, 365 ATMs are part of the BanRed network and 60 ATMs are part of the Red Transaccional Cooperativa network, permitting them greater opportunities to access their money closer to home, school, or their jobs. This coop is also developing a Facebook page designed specifically for its Yo Soy product that provides information and promotions to youth clients. Finally, it is will soon provide financial education reinforcement messages such as savings reminders and promotions through SMS messaging, that will be tied to the financial education principals that teach youth to make goals, plan for the future and decide between needs and wants. The SMS technology would be integrated into the coop’s management information system (MIS) and staff could then send SMS to clients at any time. The cooperatives have also signed an agreement with the popular servipagos network where clients can pay bills or conduct money transfers at an addition 63 nationwide points.