I just came across this great paper from Feb 2014, by ideas42, which describes a behavioral design project undertaken by them and Grameen Foundation to improve savings outcomes for CARD Bank of the Philippines.

They combined in-depth interviews of clients with quantitative analysis of the account balance and transaction data to identify the main barriers to “improving saving outcomes”, and then designed behavioral levers accordingly.

Before we look at the specifics, let’s point out the success of this intervention:

  • 15% higher initial deposits
  • 73% greater likelihood to initiate transactions in new accounts
  • 37% increase in balances

It seems that whatever they did managed to increase how much new savers started  out saving with, encouraged higher engagement with the accounts, and got them to save more in the long term.

What did they do?

First, they identified four primary barriers:

  1. Savers were anchoring themselves to the 100 pesos minimum opening balance, and the 50 pesos  minimum balance required every week. They would start at that value, and then think how much they could save above and beyond that, and not focus on how much they could be saving.
  2. Clients open an account without actually having a plan on how to use the accumulated savings.
  3. CARD has a free program which allows deposit collectors to regularly come to their home or business and collect savings. Yet, many clients did not select this option, very probably because the option is presented to them only when they open the account, but is presented in “muted colors at the bottom of the form”, making it easy to gloss over.
  4. Savings goals are “distant and abstract” – saving for expenses that are far off in time, such as school expenses, or harder to imagine, such as “an emergency” are harder to plan for than the more immediate, day-to-day realities.

With this in mind, ideas42 redesigned CARD bank’s account opening process and developed simple interventions around four behavioral levers:

  1. Set a goal: Get the client to set a savings purpose and amount, use visual representation to make goal concrete, and allow client to decide on some of the savings components, with guidance.
  2. Make a specific plan: Get client to come up with a concrete savings plan – how frequently to save, where to save, and how much to save, and provide the option to receive SMS reminders.
  3. Create a feeling of commitment: Essentially get the client to go through some actions that make the commitment to save “feel real”, such as having both them and the institution sign the plan, complete it in front of peers, even give a gift to symbolize the commitment.
  4. Personalize the experience: Ensure that the plan addresses clients’ needs and abilities, use personal statements and encourage clients to share and discuss their savings plans with peers.

The paper details each of these steps, and it’s quite fascinating – do check it out. Including the Appendices – the data work details are there.

ideas42 is very clear that the results of this study should not be simply transplanted to other situations without thoroughly investigating if they are relevant in that context. Still, one can’t help but wonder about the potential implications of the findings generally.

No-frill accounts have been promoted heavily to further financial inclusion. Relatively large opening or minimum balance requirements were seen as impediments by small-balance savers, as were the slew of fees attached to them. Nevertheless, no-frill accounts often have a small opening balance component, as well as some kind of other performance metric requirement (minimum balance, minimum deposits, maximum withdrawals, etc.) that are designed as much to encourage savings as they are to ensure that accounts are financially sustainable. Does the issue of anchoring suggest, though, that an opening balance requirement or a minimum interaction requirement is having the opposite effect? That, instead of pulling up balances and increasing engagement, they are actually allowing savers to more comfortably “settle for less”?

This process also demonstrated the need to engage the client immediately when they are filling out the initial enrollment forms. These forms are often KYC focused, laborious to fill, and seen more as a formality by all parties. Shifting the focus to the client, and specifically to his or her goals with respect to the product, makes intuitive sense.

It might also help explain why people generally sign up for various promising tools and products, but never quite use them. As FAI recently found out in Bangladesh, with bKash.