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Banamex Leverages Digital Channel to Reach Unbanked

September 27th, 2013

In Mexico, Banamex, the subsidiary of the Citigroup, set its sights on a population that by definition is often overlooked by financial institutions: the unbanked.

In 2012, Banamex launched a product dubbed Tran$fer, which was designed with the unbanked population in mind. The service enables mobile payments, transfers, cash withdrawals and balance inquiries via SMS text message and better yet doesn’t require the user to have a relationship with the financial institution. Banamex was able to do so by partnering with Telcel, the largest mobile provider in Mexico, and using the individual’s cell phone number as their Tran$fer account number.

“We had to understand the unbanked population and we had to understand their needs and figure out where services could really help them,” said Mercedes López Arratia, Banamex’s digital chief marketing officer, in a recent interview with Euromonitor. “At the same time, we wanted to understand the impact we could have on the vast unbanked population in Mexico. It’s a big, big audience within a big country so it was important for us to understand how we could reach them.”
 

Mexico’s vast unbanked population

Not even half of the Mexican population over the age of 15 are considered bank, according to the latest figures from Euromonitor. In fact, Mexico has the lowest banked population rate of the six Latin American markets research by Euromonitor International and one of the lowest rates globally. Of those individuals that are considered banked in Mexico, more than 60% are categorized as underserved, which means the individual has only a current account, savings account or a credit card and not a combination of the three.

The development of Mexico’s financial industry has been hampered by a high rural population. As of 2011, the Mexican government reported that 57% of municipalities lacked access to a bank. For those who do have access to banks, a perception of high fees also poses a problem for low- and middle-income consumers. In general, Latin American consumers remain distrustful of financial institutions after years of hyperinflation, high interest rates and excessive commission fees. In addition, a large informal economy is a major driver of high cash usage and the avoidance of mainstream financial institutions.

Like many Latin American markets and even emerging markets, in general, it is more likely for Mexicans to possess a mobile phone versus a computer with internet connectivity. In addition, it is more common for consumers to possess a mobile phone than to have a formal relationship with a mainstream financial institution. As a result, mobile can be a cost-effective method for financial institutions to reach consumers, especially the large number of unbanked and underserved individuals across Mexico.

Banamex designed product with user in mind

Banamex realized from the onset that if it wanted to reach the unbanked population that it would have to do so through the mobile phone. Banamex researched the market to understand the specifications and overall design that would resonate with this consumer base.  Banamex also used focus groups to test the product prior to launch and after the launch it sought feedback from its target market to refine the product.

“One thing we learned is that transferring money from one part of the country to another, or long-distance transfers, was important for this part of the population,” Arratia said. “Often these individuals are working in another city and have to send money to their home towns. We also learned that the other part of the market that could really help us to use the product and communicate the product to others was the younger audience.”

To encourage users to recommend the product to friends and family, Banamex established an incentive programme. Those activating an account for the first time would receive 20 pesos, as well as the person that sent them the first-time transfer. The product’s Facebook page became popular because of a feature that allowed users to gauge the amount they could earn in incentives. The word-of-mouth advertising became key to driving users to try the product and increasing overall usage, Arratia said, who spoke about the launch of this product at the Medios de Pago Latam Summit in July. She presented alongside Joe Kutchera, a self-employed digital marketing strategist, and author of a book written in Spanish called “E-X-I-T-O en Marketing Digital: Su Estrategia en pasos” (“Success in Digital Marketing: A Five-Step Process” in English).

The newly released book tells the story of how leading Latin American companies have effectively launched online marketing programmes and also dives into Kutchera’s five-step marketing plan for reaching the next generation of consumers across the booming Latin American markets. The five steps when written in Spanish spell the acronym, “E-X-I-T-O,” which in English means “success”. Kutchera said in a recent interview that the five steps toward digital success include the company listening to its audience, relating to the user, integrating all the company’s communication channels, transforming the audience into communities and optimization of the product. A case study on Banamex’s Tran$fer product was included in the book as an example of how to create a product with the user in mind.

“The audience it went after didn’t feel comfortable going into a Banamex branch,” Kutchera said in a recent interview with Euromonitor. “For Banamex, this product was a better way to serve that audience. The second breakthrough point was making it a simple product to use for that market. Thirdly, mobile has everyone’s contacts so enabling users to invite people to receive a transfer and pay a transfer helped the product.”

Although Banamex declined to publicly release figures about Tran$fer, the product has gained some traction for two big reasons. First, Banamex developed the product with the end-consumer in mind and made it easier for unbanked consumers to sign up for an account by reducing the amount of information that was needed to do so thanks to its partnership with Telcel and by using the mobile phone number as the product’s account number. Secondly, the bank created a strong word-of-mouth strategy with cash incentives for existing users that helped to boost recruitment efforts. Word-of-mouth endorsements are important in any culture and especially vital in a region that distrusts mainstream financial institutions as Latin America consumers do. Tran$fer has given unbanked and underserved consumers in Mexico an opportunity to access financial services that may have been previously out of reach.

 

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Michelle Evans

As the Global Head of Digital Consumer Research at Euromonitor International, Michelle Evans oversees digital research to provide actionable insights and in-depth analyses into how technology is fundamentally changing commerce. Recognized as a thought leader in digital commerce, she was named to Innotribe’s Power Women in Fintech in 2015 and Asian Entrepreneur’s Women on Top in Tech in 2016. She regularly shares her expertise across industry events whether as a speaker, chairperson or juror. Leveraging her master’s degree in journalism from Northwestern University, she authors a biweekly column in Forbes and has been quoted in several publications globally. She follows the technological advances that are shaping the way consumers browse and buy goods and services with her specialty spanning mobile payments, digital commerce, e-commerce, m-commerce, digital marketing and social media.

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