CARD Bank client with her ATM card. Photo credit: Grameen Foundation
“By the grace of God, my business is running well these days. CARD Bank’s Matapat account is convenient for small traders like me. I need smaller amounts more frequently for my business, and the ATM helps me withdraw money at my convenience.” What a joy to hear Evangeline, a CARD Bank client, speak so positively about her experience with the various features of a newly designed savings product. In a conversation with our team, Evangeline told us that she likes that Matapat ensures a return on her savings, and she is particularly pleased about the texting service for deposit pick-ups. Evangeline explained to us, “I am using SMS pick-up to deposit to my account, thus avoiding a wait at a teller counter. The receipts given by the savings associate and confirmation message received on my mobile give a feeling of security since I know my balance from my phone.”
Scaling up affordable savings products
It was just about a year and a half ago that I arrived in San Pablo City, Laguna in the Philippines and took up my role on CARD Bank’s newly formed savings team as lead Project Manager from Grameen Foundation. Grameen Foundation is partnering with CARD Bank [i] in a three-year project aimed at scaling up CARD’s offerings of safe, convenient, and affordable savings products to poor clients. The goal is to reach 350,000 new voluntary savers by October 2012.
We are using a holistic approach to transform CARD from a credit-focused institution to a demand-driven, full service financial institution. This isn’t just a product development and marketing exercise – it simply can’t be. What we are doing touches on every aspect of the organization and requires expertise in areas such as marketing, financial risk management, operational risk management, human resources, information technology, social performance, and training/education. At the beginning of the project, CARD’s senior management knew they had to fill the gap in their marketing and product design work, but they soon came to appreciate that an integrated approach across the institution was essential to successfully manage their clients’ deposits.
In addition to the institutional capacity building work, we also have to be in touch with the clients to create “demand-driven” savings products and services for them. One of our first priorities in the project was to embark on a market research study that would give us a pulse on how clients viewed CARD Bank; how, where, and why they saved; and what they liked or disliked about CARD Bank’s savings products. We enlisted Microsave’s expertise to work with the savings and research teams to conduct the market research, as well as the ensuing product development and pilot testing process. This Note focuses on the client learnings coming out of that work.
CARD had tried several times in the past to collect more voluntary savings, but the efforts never really took off. Our market research on likable attributes of CARD’s savings products showed that security of one’s funds ranked within the top six attributes. During a related discussion, one client noted that, “CARD believes in us, and in return, we put our full trust in CARD.” Sentiments like that weren’t heard 10 years ago when CARD still had to prove the stability of its operations to clients. While reviewing the results of the market research, it became clear to CARD’s CEO that they had not been ready before, and “Now is the time for CARD Bank to do savings!” Earning the trust of clients is critical to the development of a successful savings program.
The market research results also showed that the customers’ highest priority for a savings account was accessibility. Our pilot product, Matapat, which means ‘honest’ or ‘committed’ in Tagalog, was designed to give the greatest accessibility to customers. New staff positions were created at CARD to provide customer service in each branch and to pick up clients’ deposits, either on a predetermined schedule or upon requests through text messages. On the withdrawal side, ATMs were installed at each of the three pilot branches, giving clients access to their funds outside of branch hours and at ATMs in other banks throughout the country.
The use of various technologies at CARD has been important in providing the accessibility that clients want. Recent pilot reviews indicate that the ATM is the most popular feature of the Matapat account because of the convenience of withdrawal any time of day. The confirmation of the deposit and account balance through SMS adds to the feeling of security for the client. However, in rural areas where communications infrastructure isn’t conducive to a constant connection between the branch’s ATM and the ATM network, offering such services requires careful management of reputational risk.
Trust gained over a period of time can be eroded quickly if new technologies are not carefully managed. Clients are disappointed when ATMs go off-line because they want to be able to access money when they need it, especially in emergency situations. Although many clients are very eager to use ATMs, some are hesitant to try the new technology and require one-on-one training during initial transactions. While technology like ATMs and SMS texting services can be used to make a product more accessible and convenient, it must be implemented carefully to ensure that clients are comfortable with the technology and can trust that it is reliable.
The right balance
Grameen Foundation believes that one of the greatest challenges with product development is balancing the clients’ needs with the organization’s needs. This new product design, which includes dedicated staff and ATMs, is costly to sustain on an ongoing basis. To help determine whether we have a viable business model, Microsave has led CARD through two costing exercises and created financial projections for the pilot with various scenarios on staffing and pricing.
The market research identified affordability (low opening balance) as one of the top three desired attributes for CARD’s savings product. We initially set the opening and minimum balance at PHP500 (approximately US$12), consistent with CARD’s existing savings products and competitors’ products. During the review of the pilot financial projections, our savings team discussed increasing the opening and minimum balance requirement as a way to achieve an earlier break-even on the new product. CARD staff felt that PHP1,000 would be affordable for its clients, so we raised the opening and minimum balance. However, initial take-up of the product turned out to be much slower than projected, and pilot reviews indicated that clients preferred a lower opening balance.
This reaction led us to lower the initial deposit to PHP100 and the minimum balance for earning interest to PHP500. The rollout of that change had an immediate impact – the number of accounts opened in six months of piloting doubled just one month following the change. A low opening balance appeared to be extremely important to clients, even though some of the clients were still depositing at least PHP1,000 when opening the accounts. We realized that the initial deposit is viewed by many as an expense rather than savings, so even though PHP1,000 may indeed be affordable for the clients, there is a psychological barrier to locking up that much cash. CARD is exploring ways to gradually build clients’ savings balances, such as through a commitment savings account, both for the clients’ sake and for CARD’s bottom line.
Overall, CARD Bank is learning a lot about its clients’ savings behavior that will help it build a long-lasting savings program. Our project’s market research and pilot activities allow CARD to better understand customers, learn their preferences and needs, and create better products to help customers grow and safely manage their savings. Additionally, CARD’s clients are learning the importance of saving to mitigate risks and improve their lives, and that they have options – different types of accounts for different savings goals. I can’t wait to see where CARD and its clients are ten years from now!
While most Notes From the Field feature USAID-supported work, occasionally we post Notes reporting on work that does not receive USAID support but that represents interesting innovation, good practice, fodder for discussion, or all three. The work featured here has not received USAID funding.
This publication was produced for review by the U.S. Agency for International Development. It was prepared by Julie Peachey and Kimberly Davies of Grameen Foundation.
The views expressed in this publication do not necessarily reflect the views of the U.S. Agency for International Development or the U.S. Government.