Digital financial services have been a robust part of the development sector for over a decade and their impact continues to grow. This blog is part of a series that focuses on successful DFS projects that achieve results-driven impact in people’s lives.
By Sonali Rohatgi, Technical Advisor, Digital Solutions
Youth are often not seen as viable customers by financial institutions given the high dormancy rates and low balances that plague youth savings accounts. Can banks rely on digital channels to attract and retain youth savers more cost-effectively? FHI 360 is partnering with Ecobank to test a digital outreach strategy for youth in Ghana.
Advertised as “a truly mobile account for the mobile generation,” Ecobank recently launched “Ecobank Xpress Account” in Ghana. An entirely digital interest-bearing savings account, the Xpress Account can be opened and operated without a visit to a bank branch. This digital account is driven by the Ecobank mobile banking application, and can be accessed via smart phone or a feature phone. Deposits and withdrawals from the account can be made at any Ecobank Xpress Agent point, bank branch or at the ATM. Alternatively, one can transact through the mobile money agent network, as the account allows customers to push money from their mobile money account to their Xpress Account, and vice versa. With the introduction of this product, Ecobank can extend savings opportunities to unbanked populations such as youth who need to make small and frequent deposits but cannot readily take on the time and cost to visit a bank branch. If successful, Ecobank can scale a youth product offering across Ghana, and eventually across the 30+ countries in Africa where it operates.
How could Ecobank use its new Xpress Account product to reach youth and convert them into active savers? Building upon learnings from other initiatives indicating that SMS reminders can boost savings, FHI 360 and Ecobank set out to determine if pairing the Xpress Account with digitally-delivered financial education could encourage youth to improve their savings and financial management skills. Digital channels used could include SMS, mobile applications, or social media.
To develop an approach, FHI 360 commissioned a phone-based survey with over 800 predominantly urban youth aged 18-24 to understand their access to financial services, goals and priorities, and use of mobile applications. Evenly split between men and women, 25 percent of respondents had a primary education or less, and 23 percent had completed junior high school. The remaining had senior high school or tertiary-level education. The goal of the survey was not to conduct a statistically rigorous study, but to inform a digital engagement strategy for a pilot in Accra.
The survey results surprised us in many ways:
Mobile application use is more limited than expected for urban youth with relatively high educational levels. 45 percent reported that they do not use a computer, and almost 40 percent reported that they do not use any apps on their phone. Almost one-third used their phone to access only Facebook daily, 18 percent accessed only WhatsApp daily, and 16 percent accessed Instagram or multiple apps.
Almost half of all respondents said they do not earn enough to save. 22 percent save in a mobile money account — indicating that many youth are already using digital accounts. 16 percent save in a bank or microfinance institution, signaling engagement with the formal financial system. Less than 15 percent used informal savings groups known as “susus,” and other unregulated methods. Those with higher levels of education were more likely to use bank, microfinance institution and mobile money accounts.
Education, business startup and supporting dependents are priorities. When asked about savings goals, education came out on top, driven mainly by those who had completed at least senior high school and were perhaps looking to save for tertiary education. Business startup was a high priority that cut across all levels of education, followed by supporting dependents. The least popular response was saving to get a loan, followed by saving for consumer purchases such as a phone or motorbike.
Youth don’t use formal credit. While 38 percent of youth reported saving in a financial institution or via mobile money, 60 percent do not borrow at all and 30 percent borrow informally from family and friends. A savings-led value proposition seems to be a more promising way to engage this youth segment in financial services.
When asked about financial education needs, 42 percent prioritized learning how to manage spending, and 26 percent wanted to learn how to build their savings. Accessing and evaluating loans (7 percent) and deciding where to save (8 percent) were less popular. These results suggest that digital tools that allow youth to track and manage their spending and savings can potentially be extended as value-added services to attract and engage them.
FHI 360 and Ecobank used these results to form the approach. We developed a multi-channel outreach strategy, relying on SMS, IVR, in-person financial literacy training and peer education rather than social media channels that had more limited reach. Because youth feel they do not earn enough to save, we focused on demystifying savings. Our financial education emphasized that even small bits of savings can add up quickly, and provided rules of thumb on managing spending. We also encouraged youth to set savings goals, followed up by weekly reminders on progress against those goals to keep them motivated over an extended period of six months.
As our pilot unfolds, we plan to monitor and iterate our approach with constant feedback from youth clients from formal and informal sectors, so we can use the results of our prototype to build a truly customer-centered and scalable youth financial services product.
Photo Credit: Neil Brandvold