How BoK Used Pilot Findings to Focus On What Really Matters

YouthSave’s bank partners began creating their youth savings accounts in 2010, with extensive market research that obtained firsthand information about the savings habits, needs, and preferences of young people. But using these data to design the savings accounts was not enough; the resulting product prototypes still had to be “road-tested” in order to confirm that we had correctly a) interpreted the market research, b) translated it into product designs that met youths’ needs, and c) put in place the right marketing, back-office and sales systems, policies, and delivery channels. In three countries – Ghana, Kenya and Nepal – YouthSave’s bank partners did this through time-bound pilots in a limited number of branches. These pilots yielded valuable lessons that ensured the products’ success when they finally rolled out network-wide in 2012.

In the third installment of YouthSave’s Measure Twice Cut Once blog series, Bank of Kathmandu (BoK) staff share how piloting helped them simplify a complex product and focus their resources on the elements that really mattered.

Complex market research results

The market research behind BoK’s “CYBY” youth savings product revealed some seemingly contradictory findings. A significant proportion of the 500 youth respondents, approximately 80% of whom were low-income, actually said that they wanted a portion of their money locked away to help them accumulate more savings over the long-term. However, they also said that they needed emergency access to their savings to deal with unforeseen circumstances.

BoK responded with a product that met both those needs: a bifurcated design featuring a savings account linked to a fixed account, where each customer deposit would be split 50/50 between the two. In addition to fulfilling customer preferences, BoK felt this design would bolster the internal business case for the account by providing a mechanism to build a small but stable -- albeit more expensive -- base of deposits through the fixed account. In addition, BoK decided to offer account holders a free piggy bank to hold small savings between deposits at the bank.

Halfway through the 4-month pilot, BoK and SC conducted focus groups to check in on how new account holders liked the product. One of the clearest findings was intense appreciation of the piggy bank – but mainly among younger youth. Since youth aged 16 and over are allowed to own and operate their own accounts in Nepal, many of them expressed preference for an ATM card (which was not part of the original account design).

There was more consistency between older and younger youth regarding the bifurcated account design – in the sense that neither demonstrated good understanding of the different purposes of the two accounts. And indeed, data provided by YouthSave research partners indicated that account holders were not making substantially more withdrawals from the savings accounts than they were from the fixed accounts. BoK was therefore incurring higher interest costs on fixed deposits that were not much more stable than the savings deposits.

The final nail in the fixed-account coffin came through a process assessment conducted by MEDA. In analyzing transactions and speaking to bank staff, MEDA consultants found that splitting deposits between the two accounts increased operational risk non-negligibly – and, in light of the findings on customer awareness and behavior, unnecessarily.

A simple solution?

At rollout, BoK therefore decided to eliminate the fixed account component of the product – along with the associated risk and cost. However, they retained the free piggy bank feature in spite of its cost and logistical requirements because of how important pilot findings revealed it was to younger youth. For youth 16 and up, on the other hand, BoK provided the option of receiving an ATM card instead – something that was not only more highly valued, but also cheaper and already part of the bank’s systems and procedures.

Rationalizing the product features in this way does not seem to have impacted uptake, with BoK opening over 2200 accounts in the first six months after the national product launch. Indeed, it may even have helped the product appeal to older youth, as the proportion of account holders 16 and over has increased since rollout. Average balances have also exceeded expectations, in turn minimizing lingering concerns about the cost of providing free piggy banks.

Offering an attractive, accessible youth savings account can entail several sources of expense, complexity, and risk for a bank. In BoK’s case, the pilot helped reveal which were really worthwhile and which were not – allowing them to focus investment on the features that really mattered and, in doing so, maximize chances for CYBY’s sustainability in the long run.