Growth in savings accounts for the unbanked and underbanked has mainly happened in one of two ways. Those who see value in an account open one for themselves, or those who need others to have an account open one for them (as in the case of payroll or government-to-person, or G2P, transfers).
In Mexico, where just over 40% of people (33.6 million) sport a bank account of any kind, low-income customers have historically not had bank accounts or have used them narrowly, with many tossing the accounts when their purpose was served. From the 2015 National Financial Inclusion Survey, we know that:
- 63% of the 33.6 million Mexicans with bank accounts have a payroll account, while 40% have a savings account.
- Many of these savings accounts are in the hands of low-income clients and recipients of G2P social transfers (more than 15 million), whose main use of the account is a weekly, biweekly, or bimonthly visit to the ATM (or branch, to the displeasure of banks) to cash out in full.
- Of those without accounts, 11 million once had one (rendering them “debanked”), and 31.6 million have never had one.
- Half of the “debanked” population explains that their payroll account became unnecessary when they stopped working, while others reported not having had any use for it or having had a bad experience with it (10% in each case).
Rebanking the debanked and banking the unbanked, plus improving the value proposition for the already-banked to keep them in the system, requires combining clients’ need for a specific product with product relevance and accessibility. In the limited universe of account offerings, a new entrant seems to be doing just that. Its name is Saldazo, and it is making swift inroads.
Saldazo is a co-branded, simplified account with low know-your-customer (KYC) requirements and no minimum balance (albeit capped). It is issued by Banamex — one of Mexico’s largest banks — through a VISA card, and is sold and activated for less than US $2, in less than 5 minutes, at any of the more than 14,000 outlets belonging to Mexico’s largest corner store retail chain, OXXO. It works like a card-based digital wallet (but it is a bank-issued account) with optional access to Banamex's Transfer mobile service, a mobile payment platform that enables mobile payments, transfers, balance inquiry, withdrawals, and airtime purchases without a card. (See the full presentation here.)
Since Saldazo’s national launch in 2012, OXXO has become the number one transactional account supplier in the country, having sold and opened more than 5 million accounts to date. The reported activity rate (positive balance in the account or at least one transaction — monetary or non-monetary — in the preceding eight weeks) is above 60%, and growing by more than 290,000 accounts per month. It conducts more than 7 million monthly transactions. Over-the-counter (OTC) financial services at OXXO stores are available daily from 8 a.m. to 8 p.m. For Saldazo clients, these include free cash-in, limited cash-out for a fee, balance check, transfers, payments, in-store purchases and airtime top-ups. The card can also be used at VISA accepting retailers.
OXXO has leveraged a number of elements to achieve this level of success, including:
- It has taken advantage of the regulations that allow risk-based, tiered account opening, making it possible for agents to open accounts.
- The retail chain is highly accessible, with a large nationwide footprint and extended daily opening hours (it is also the largest single banking agent network with full connectivity).
- It enjoys high brand recognition and a large customer base.
- There are synergies with its convenience store model, which include applying time and cash management optimization procedures. For example, it analyzes the time it takes to sell products, using this to inform sales and pricing of all products in the store including financial services.
- It integrates deep customer insights into its product design and better understands its clients through their card use.
Saldazo seems to have nailed the “need+relevance+accessibility” trinomial at the same time as it has enabled a mostly cash-based retailer to learn about the purchasing and spending habits of its clients. But not all is milk and honey. Saldazo’s success (together with OXXO’s agent business) has triggered increasing and fluctuating transactional and cash-handling volumes (and costs) that are putting pressure on OXXO’s operational model. Saldazo clients are showing a preference for OTC transactions with the card, rather than using the mobile, to interact with and use the product (only 16% have activated the Transfer mobile option). Although financial services are playing an increasingly significant role in OXXO’s business revenues, costing remains a constant challenge for a retail chain whose core business is consumer goods.
Conversely, there are also challenges faced by the bank, Banamex, which include low-balance accounts (~ US $20) and the costly use of its branch and ATM networks for which by law it cannot charge its own clients. It does, however, currently levy a monthly “rent” of US 80¢, which is obviated if bank infrastructure is not used during that period.
These and other challenges will need to be managed adequately and through coordinated efforts for the product to continue its growing success. Identifying use cases among the millions of Saldazo clients will help both Banamex and OXXO better understand client profiles and their preferences for this particular product, which need to be built into problem-solving efforts going forward.