Leading up to the release of the New America's latest Global Assets Project report -- Beyond the Buzz: The Allure and Challenge of Using Mobile Phones to Increase Youth Financial Inclusion -- on September 12th, YouthSave is hosting a blog series that highlights the paper’s findings. This the first of three installments.
The Buzz: Mobile solutions are accelerators of youth financial inclusion and capability, particularly if they are introduced at a young age.
Mobile solutions to financial access and education are all the rage. Embraced enthusiastically as useful for anyone with a mobile phone, they offer the potential to solve many of the problems presented by brick and mortar banks, or by classroom and curricula-based education. Mobile solutions are especially useful to those with limited mobility, limited time, and limited funds – i.e., children and youth, particularly low-income youth in developing countries. Mobile financial services could allow youth to avoid the often expensive and time-consuming journey to a bank branch, are often cheaper for small transaction values, and can offer youth the privacy of transacting without an adult present.
Applying mobile solutions to financial inclusion for low-income youth seems to hold particular appeal for two reasons.
First, youth are known to be early adopters of new technology. Preliminary data on mobile ownership by young people across the developing world indicates that youth own mobiles at rates that are nearly equal to or greater than adults. In fact, data from middle-income nations like India, China, Egypt, and Brazil show that young people age 15-24 are consistently more likely to own a phone than the 25 and over demographic. Youth are also quite adept at using the technology: research has shown that they can use a mobile phone without any formal training.
Second, mobile solutions could also aid efforts to enhance youth financial capability, ensuring not only that youth have access to financial services, but that they also know how to use them. Youth develop their stickiest behaviors and habits early in life, and are responsive to “nudges” and cues that reinforce those behaviors. Using mobile tools, such as mobile-based marketing and just-in-time educational messages and reminders, for instance, could potentially offer an easier, earlier in life way to supplement financial access with the means to use that access, or the opportunity to encourage positive financial behaviors. In other words, having access to this information early on may help youth develop sound financial habits that can be carried throughout their lives, influencing behavioral changes that ultimately help youth plan and meet their future goals.
As one respondent to the 2013 NAF-Making Cents Pulse-Taking Survey on Technology-Led Youth Financial Inclusion opined: “the mobile device is the single instrument that most youth will use to learn about and participate in a money economy.”
This presents a compelling hypothesis: if youth generally have access to mobile phones, are early adopters and fast learners of new technology, and develop their stickiest behaviors, those most resistant to change, earlier in life, then mobile solutions should accelerate financial access and capability among the youth demographic.
Buzz Kill: Starting young is hard. Issues with regulation, cell ownership, and infrastructure, for example, make it difficult to actually use mobile technology to reach youth.
Promise and excitement aside, however, we are still a long way from realizing the accelerator hypothesis in the field. Issues with infrastructure, cost and usage of mobiles, and government regulations—like minimum age for SIM ownership or identification requirement— still linger. Although the effect of these issues varies greatly by region, they limit the overall ability to offer mobile-based services to the youth demographic.
While they may be eager to adopt mobile solutions, youth might not always be able to do so. Regulations in many countries prohibit young people from buying their own SIM cards and from opening their own bank accounts. Most countries require account holders and SIM card owners to be at least 18, with few exceptions. Many banks require youth younger than 18 to have a parent or guardian to co-sign and oversee withdrawals from a account, although they may often deposit money without an adult present. Since privacy is a top priority among youth, many do not wish to inform their parents about their finances and therefore are less likely to open a joint account. Moreover, 70 percent of children in the world’s least developed countries lack the legal documentation, such as birth certificates or registration documents, that is necessary to open an account. In fact, many countries do not issue formal identification cards until youth reach the age of 18, if at all.
These regulations often prevent youth, especially minors, from accessing financial services through mobile phones. For example, in Kenya, Safaricom’s M-Shwari—a mobile savings-and-loan product that piggybacks on the success of the well-known mobile payment service M-PESA— is quite popular among older youth. In fact, 33% of M-Shwari customers belong to the 18-25 demographic. Unfortunately, like M-PESA, the M-Shwari product is almost inaccessible to youth under 18. In fact, according to Safaricom, none of M-Shwari customers are younger than 18. Government restrictions do not allow minors to own their own SIM cards or handsets. In addition, customers are usually required to hold a Kenya National ID, which is issued only to those 18 and older, before they can open an account (although documents such as passports and residence permits are also accepted). Thus, while M-Shwari’s success among older youth suggests that it might see similar uptake among youth under 18, this customer segment is barred from using the service.
The promise is there, but hurdles may still stifle the leapfrogging abilities of a mobile phone. In our next posts, we’ll consider the two different dimensions of mobile phones as an accelerator – financial inclusion and financial capability.
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Jamie Zimmerman