Re-Banking the De-Banked in Mexico
Twenty-two million households in Mexico are middle or low income, and only half of them have a bank account. It’s not that they lack access. Most have had a bank account, but closed it after fees and commissions drained their balances. They are not so much “unbanked” as “de-banked”—they have voluntarily opted out of having a bank account because the banks don’t offer what they need.
Earlier this year CGAP, in partnership with Bancomer, commissioned IDEO.org, the non-profit arm of the California firm known for its human-centered design methodology, to create a savings product that would meet the needs of low income Mexicans. Bancomer, a large Mexican bank, wants to reach more people by offering products that will work for the low income market. This video tells the story of how the team developed products that meet the needs of poor clients, while also making the business case for the bank.
People associate the bank with a commission. Magali Crux, a detergent seller in Chalco, a migrant town on the southwestern outskirts of Mexico City, says “To tell you the truth, I don’t really trust banks.”
“She has such a negative experience of the bank,” explains IDEO.org’s business designer Chava Zepeda, “that she doesn’t want to get a bank account.”
Poor and low income Mexicans have found ingenious ways to “bank” themselves through informal mechanisms and social networks of family, friends, and neighbors.
They separate their savings into different containers as a way to manage their money, and to prioritize what can be spent. They stash savings into separate cans, or Tupperware that they hide in the kitchen, as a way to save themselves from temptation.
They use tandas—informal savings and loans groups--- as a means to borrow and save. Almost everyone the team met during the research was either in a tanda or organized tandas.
Finding a way for the bank to provide additional value for low income customers that goes beyond the informal alternatives was key for the success of the project.
Low income savers recognize that banks offer security for their money. But “what is there besides security?” asks project lead Adam Reineck, “What is the emotional part of it? Where does it fit into their lives in different ways?”
“We keep asking how do you beat the mattress? How do you beat the informal tanda?” says Greiner, “You have to offer something.”
The response is two products that mimic people’s current behaviors. One is a categorized savings account that allows people to save in the way they are familiar with—by allowing them to organize savings as projects in a bank account much like they use the containers they keep in their kitchens.
The other is a product that mimics a tanda, and helps people more easily save and coordinate through the help of the tanda organizer.
“Overall I think we’ve found two things that meet people’s needs and that people are excited about,” says Reineck.
But for the design team, creating products that meet low income Mexicans’ needs is only part of the equation. An equally important challenge is making the business case, and selling the product to the bank. Convincing the bank to look at low income Mexicans as a long-term investment and finding innovative ways to generate revenue rather than relying on the very fees and commissions that turned them away from the banks in the first place, is difficult.
It’s not only a design challenge. To succeed in re-banking the de-banked, the bank will need to win back the trust of low income clients.
Antonieta, a tanda organizer in San Antonio—and a potential ambassador for the bank using the new tanda product--says, “It sounds good. But telling a client it’s with a bank is the biggest problem I see.”
It is the experience in developing economies.But read the article about UK bank moving away from investment banking to retail mass banking copying the successful Scandinavian bank operating in uk
This development could be beneficial for even some urban American citizens. I personally know someone who closed their bank accounts for the exact same reasons and now handle all their bill payments and take care of all their needs with cashing their check as the disbursing bank, pay the bank fee for cashing since they do not have an account there and they use that money to purchase one of those easy payment cards should at the corner stores. Bank definitely no longer have personal relations with customers and their value is not evident to those who have been challenged by their service charges, continuous overdraft charges spiraling the customers into even deeper debt when they were facing financial problems already, heaping burden upon burden. You are offering opportunity for those with limited possibilities.
Excellent video! Really a useful example to show how institutions need to begin to think about products in a way their clients think of products. Unfortunately there seems to be an impasse. The banks won't invest in these client-centered models of development unless you can demonstrate profits in the future, as the video shows. I hope this approach is successful and will make other financial institutions notice the potential for expanding market outreach.