NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The first step of financial inclusion is basic access. And with mobile payments and mobile money opening the world of formal financial services to billions of lower-income people, this access is increasingly a reality. But this is not where financial inclusion ends.

This newly banked population is making the huge leap from paper money to digital money, and from informal systems for managing their finances to formal accounts. In the process, they are adopting new technologies and mastering new procedures – all at once. These transitions are psychologically and emotionally complex, and the statistics show a pervasive adoption and engagement problem. As of June 2012, only 20 percent of registered mobile money users were active in East Africa, with only 9 percent in West Africa.

The first step of financial inclusion may have been achieved – access to financial services is at an all-time high. But true financial inclusion will require major changes in financial habits by consumers. The newly banked have a particular need for post-account opening support to guide the process on how to use the full range of their new financial services.

Account dormancy rates for the newly banked range from 60-90 percent, depending on the market. To take just one example, even though India’s widely heralded Jan Dhan Yojana financial inclusion program has opened over 100 million new bank accounts, a large majority of those accounts have zero balance. The reasons for dormancy are varied and complex, and have not been easily solved by one-way marketing campaigns designed to educate and motivate. This unbanked and newly banked emerging middle class represents such a significant portion of any developing market’s customer base that finding a way to deeply engage with them is critical to success. Banks are trying to leverage technology to drive down costs, allowing customers to save time by making transactions directly from the comfort of their cars, their living rooms or from the palms of their hands. However, the bank no longer has a relationship with the customer, and accounts remain unused.

So what can be done? Financial services providers are taking a number of different approaches. For instance, a mobile money deployment in East Africa had success creating an outbound call center to connect with customers directly over the phone, to discuss their onboarding questions and concerns, build trust and drive usage. This worked, but at the incredible cost of hiring, training and retaining good call center employees. Some voices in the industry insist that we are at a crossroads in financial inclusion: Is the future of financial services highly scalable, technology-driven and distant? Or is it highly relational, high-touch and high-cost? It appears as though there’s a trade-off to be made: services can be cost-effective and scalable, or they can be trust-building and relational, driving deep engagement.

But by reframing the issues, we come to a new question that avoids this tradeoff: How can we harness technology to build relationships with customers in an affordable and effective way?

At Juntos Finanzas, we believe that customers can be brought into the financial system by engaging with them directly in new ways. To achieve this, we’ve developed a turnkey, text message-based platform that deepens bank and MFI clients’ engagement, and increases their usage of accounts. Through this platform, we have succeeded in conducting mass-customized, automated, two-way SMS conversations with a financial services provider’s new customers. These conversations build trust and relationships, ease issues related to onboarding or complicated technology, and solve customer service questions. The automated SMS platform makes this solution both cost effective and scalable. Juntos conversations are formulated through a user-centric iterative design process, starting with qualitative deep-dive, ethnographic research. We develop conversations that are guided by the user’s interests, leading to unexpected insights that short-answer survey questions would not produce. The engagement generated by these conversations has been impressive: In a partnership in Colombia, Juntos users had a 50 percent increase in average account balances compared to the control group, and the Juntos group had a 33 percent higher active client rate compared to the control.

Our own experience and research make us sure that the financial institutions that will consistently win in this digital age will be those that manage to leverage technology – not just to drive down costs, but also to develop deep and meaningful relationships with their customers. Through these relationships, customers feel supported in their financial lives, develop deep loyalty to their providers and increase engagement with their valuable financial services.

Katie Nienow is the VP of Business Development and Cofounder, and Rebecca Wise is a writer and social media strategist, at Juntos Finanzas.