The incessant struggle: incentivizing customers to keep value digital

Snapshot 6: “How can users begin to keep value digital, longer?” is one of 16 learning themes designed to address a range of topics within the digital finance space. The FiDA Partnership synthesizes and disseminates the digital finance community’s knowledge of each of these learning themes as “Snapshots” that cover topics at the client, institution, ecosystem, and impact levels. The Snapshots give a current view of “What We (in the digital finance community) Know” about the topic in question, highlight “Notable New Learning” and call attention to “Implications” for future research and investment.

A recent catastrophic mudslide in Sierra Leone highlighted the potentially life changing role that saving or storing money digitally can have on the lives of underserved individuals. The landslide in Freetown on August 14, 2017, impacted a population of nearly 92,000. A small survey found that only 7% of affected individuals had formal savings; the rest saved at home under their mattresses, in cupboards, and behind books. As a result, those without formal savings  lost everything in the disaster.

Incentivizing low-income individuals to store or save money digitally is an important and enduring challenge. Beyond the benefits of catastrophe-proof savings, the financial inclusion benefits are far reaching — from enabling individuals to better manage their resources and smooth financial shocks, to unlocking merchant payments and putting people in a position in which they can pay for daily expenses electronically.

And yet, more than a decade since the launch of the first digital finance service, the majority of accounts are empty or hold relatively small balances and dedicated digital saving accounts are still secondary products in terms of popularity. Snapshot 6 explores in depth the ongoing struggle to keep value digital, as well as what incentives may help drive improved digital savings and storing behavior.

Key findings

Both digital finance customers and providers face a number of challenges  in keeping value in the digital ecosystem. These range from providers encouraging (or requiring) clients to cash-out their money immediately to demonstrate their need for a social payout, to the lack of interconnected digital financial services and use cases driving the need for physical cash on a daily basis. Trust and information gaps, psychological barriers to saving, and ill-designed savings services are also potential barriers to saving.

In terms of incentivizing money to be kept digital, providers can introduce automatic contributions to savings products that mimic the “friction and flow” of many informal financial management strategies. Read Snapshot 6 to better understand why clients aren’t saving and storing digitally at the rates the digital finance community had hoped,learn more about what the digital finance community can do to improve digital finance behavior in this area, and to find the top 10 reads on this topic, this year.