Accounts in India have one of the highest dormancy rates in the world. Women’s World Banking undertook research to determine why women aren’t saving actively in a bank and tested prototypes to change that behavior. What we found is that breaking the status quo requires shifting the perception of saving with a bank along with prompting more opportunities to save, leveraging existing mechanisms in their everyday lives.
Like most of the unbanked, low-income Indian women have ways to conduct basic financial transactions outside the formal financial system. For instance, women save in hidden kitchen containers or with a local savings club and take out loans with a local moneylender.
Bringing people into the formal financial system—when they have lived outside it comfortably for so long—isn’t easy. Even well-designed products run into a huge problem: low-income people just don’t see banks as an option for them.
Women’s World Banking’s work in India with Ujjivan Small Finance Bank is a case in point: when the institution started offering savings, very few of their clients were using it because they didn’t see Ujjivan as a place to save.
Low engagement is a national problem
The Indian government has instituted multiple initiatives over the past few years that have drastically improved access to bank accounts for the unbanked: the PMJDY program, demonetization in 2016, and the introduction of payment and small finance banks. Despite the increase in account ownership, India has one of the highest dormancy rates in the world. According to the Global Findex: 48 percent of account holders had not made any transactions in the previous 12 months.
Driving account engagement will have positive effects on women and the institutions that serve them. Women will be able to save their money safely and be able to build cash balances to achieve their long-term financial goals, such as investing in health, education or growing a small business. Institutions deepen their relationship with each customer. Ultimately, better engagement with the 200M underbanked women in India will drive inclusive growth for the country at large.
Many accounts, few transactions
Ujjivan has a group lending customer base of 3.6M women. It transformed from a microfinance institution to a small finance bank in 2015, allowing it to accept deposits to fully serve its clients’ financial needs.
Ujjivan began automatically opening savings accounts for its customers when they applied for new loans. Unfortunately, usage of the savings accounts was low. Women’s World Banking’s analysis of new savings accounts opened in 2017 found that 34-54%* had no transactions at all after the account was opened, tracking with the country’s overall dormancy average.
In order to build a solution to address the dormancy problem at Ujjivan, Women’s World Banking observed and analyzed the financial practices and decision-making of Ujjivan clients. The team found that women are extremely financially savvy, thrifty and usually the ones managing the household expenses and savings rather than their husbands. So why weren’t they saving in their Ujjivan savings account?
A sticky status quo
For one, women have multiple methods of saving that doesn’t involve a bank. They put money away around the house, hiding it from their families to pay everyday expenses. They contribute to chit funds to have access to lump sum amounts when an emergency strikes, and they save in the form of gold to prepare for their daughter’s wedding. Women already have a portfolio of non-bank savings methods that work for their goals. Because these methods work, they stick to their status quo.
Second, if they are saving with a bank, women are saving at the first bank they opened an account. Choosing to deposit in their first bank account is another instance of a sticky status quo. There is no trigger for them to switch to Ujjivan.
Third, because the customers have a borrowing relationship with Ujjivan and it is new to deposit-taking, they do not even associate Ujjivan as a place to accumulate cash for short-term expenses, let alone long-term asset building.
Engagement requires opportunity
Women’s World Banking also found that even among the most well-intentioned of savers, the opportunity isn’t always there. The act of saving is the last thing on Ujjivan customers’ minds: “At the end of the day when all expenditures are paid, not a single rupee is left,” as one customer put it.
Thus, Women’s World Banking determined that prioritizing the act of saving and building that habit must be part of the solution if it is to truly address account dormancy.
Solving for women’s barriers to saving with Ujjivan
Based on these findings, Women’s World Banking determined that the solution for Ujjivan’s dormancy problem had two primary goals: shift the customers’ perception of saving with Ujjivan and provide opportunities to act, i.e. save..
These research findings guided Women’s World Banking’s development of the solution prototypes, making sure that the proposed solutions work with partner constraints and existing operations. In Ujjivan’s case, this meant delivering solutions through their main touchpoint: the monthly center meeting, which is largely used to collect loan repayments.
Women’s World Banking tested prototypes with Ujjivan customers, including:
The savings punch card: Inspired by loyalty cards, it intends to build a monthly deposit habit at Ujjivan. Women get instant gratification in the form of a stamp for each time they make a deposit at the center meeting. Initial testing was promising: women found the concept motivating and compared the card to a reminder bell or a sticker handed out by teachers when one does well in school.
The double envelope: It nudges women to set some money aside for savings while they are putting money aside to repay their loan. This provides a moment to save while eliminating the hassle to go to the bank branch by collecting it with the loan repayment during the center meeting. During user testing, women reported that the double envelope drove greater awareness of saving.
Gamified savings initiative: Creating excitement around savings can drive deposits. Leveraging group dynamics, gamified savings builds in healthy competition among the group loan customers, rewarding those that deposit the most in their savings accounts. During user testing, women said they were excited about being recognized in their communities by winning.
Heavily branding all these solutions with Ujjivan’s colors and logo and leveraging the preexisting commitment to attending the center meeting (which is already strongly associated with Ujjivan) supports shifting clients’ perception about Ujjivan as a place to save.
Women’s World Banking is going back to India later this year to further test these prototypes and pilot a solution based on these results. The team looks forward to sharing these results on this blog.
If your institution has a savings product with low engagement, here are some initial questions you should start to ask in order to increase usage:
- Ability: Are my clients actively saving/ do they have the capacity to save?
- Current practice: If they are saving, where do they save?
- Brand Association: (Especially if your institution, like Ujjivan, has a lending relationship with clients first) Do they associate my institution as being a place to save money?
- Operations: How easy is it to deposit/ withdraw money from my institution? Particularly for low-income women who are time and mobility-poor, having multiple trusted touchpoints is crucial to usage.
Women’s World Banking’s work in India with Ujjivan Small Finance Bank is generously supported by Visa Foundation.
*34 percent for 12-month-old accounts; 54 percent for 6-month-old accounts.