Expanding MicrosavingsMarket Expansion Training

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September 2011

WHY CULTIVATE MICRODEPOSITS?

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Long Term View: Deposits increase with growth in depositor income over time

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• People’s income increase as they advance in the life cycle• Investing in micro-depositors will present long term benefits to the bank

Marketing Perspective: Wide deposit base expands business opportunities for the bank

• Sometime in the future, a depositor will need financial services

• A deposit account presents an opportunity to build a lasting relationship with clients

• Trust and good relationship make it easier to offer other products and services to depositors

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Financial Impact: For a bank whose deposits fall short of loan portfolio, more deposits translates to more income

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Shortfall funded with Bills Payable at 9%

Savings Account only pays 1%

Potential savings

DESIGNING A PRODUCT

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The target market will determine the selection of product attributes

Product Attributes:• Minimum balance• Interest• Holding period• Reporting platform (i.e. Passbook, ATM, statement)• Technology platform (e.g. Over-the-counter, check book,

ATM machine, online, telephone, mobile banking)• Fees and waivers• Bundled products (e.g. Insurance)• Service (e.g. Pick-up for large accounts)

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Choosing the market for deposit products is necessary steps to create products

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Households Enterprises

ChildrenEmployeesUtility companies

FishermenFarmersOut-of-town Workers

Teachers

An effective deposit product matches the needs of target market

Utility company needs:• A local water company needs to

collect monthly bills payment from 50,000 household subscribers in a province.

• Collectors cannot keep up with the volume of transactions.

Subscribers’ needs:• Households wants flexibility in the

timing of payments prior to the bill due date.

• Utility company is too far from households to travel every month

Deposit Product for Utility company:• Bundled deposit account and service

where bank collects bills on behalf of utility company and credits the collection into deposit account

Deposit product features:• Account earning savings account rate• Link with GCash for payer convenience• Deposit holding period of 15 days to

defray the cost of collection• Handling fee of P2 per collection• Monthly statement with special details

of collections• Check book for company to debit

funds from account

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MARKETING MICRODEPOSITS

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Savings Booster Example: Raffle Promotion to Mobilize Savings

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• Every P1,000 deposit balance entitles to one raffle entry!• Prizes displayed prominently at all branches

Result 1 for Bank A: Deposit increased with the raffle promotion

• Total deposit increased by 25% during the promotion period• Deposits further increased in months after the promotion by at

least 27% from pre-promotion period• Deposits accelerated during the promotion period, but growth

scaled back within 6 months after the promotions before recovering in succeeding months

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Notes: (1) Voluntary deposits refer to deposits excluding contractual deposits. (2) Voluntary deposits presented here refer to average of monthly balances.

Result 2 for Bank A: Promotion accelerated deposit accumulation during and after the promotion period

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Notes: (1) Voluntary deposits refer to deposits excluding contractual deposits. (2) Growth rate is based on average of monthly year-on-year growth rates for the period.

• Deposit accounts increased by at least 6% during the promotion period

• Post-promotion deposit accounts were higher by at least 26% from the pre-promotion period

Result 3 for Bank A: Promotion increased average balance over the long run

• Deposit per account increased by at least 11% during the promotion• Deposit per account declined slightly within 6 months after the

promotion period but quickly surpassed the pre-promotion level within 12 and 18 months

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Notes: (1) Voluntary deposit refers to all deposits excluding contractual savings. (2) Growth rate is based on average of monthly year-on-year growth rates for the period.

Result 1 for Bank B: Deposits grew rapidly during promotion period

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161 163 169188

Notes: Deposits refer to all voluntary deposits only.

Growth rate is based on average of monthly year-on-year growth rates for the study duration.

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• Deposit balance grows consistently through the promotion period and post-promotion period

• Deposits accelerate during raffle period

Result 2 for Bank B: Raffle Promotion reversed the declining number of deposits trend

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Notes: (1) Deposits refer to voluntary deposits only. (2) Growth rate is based on average of monthly year-on-year growth rates for the study duration.

• Promotion impact on number of accounts are more visible during the promotion period

• Deposit growth trend turns to positive during the promotion period.

Result 3 for Bank B: Depositors boost their account balances since promotion

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Notes: (1) Deposits refer to voluntary deposits only. (2) Growth rate is based on average of monthly year-on-year growth rates for the study duration.

• Average deposit increases during the promotion period and remains higher in post-promotion period compared with the pre-promotion period levels.

• The negative growth of average deposits right after promotion supports the positive impact of a promotion.

Savings Booster Product: Savings Account for Young Depositors

Short-term Benefits:• Serves as brand marketing campaign for

the bank• Cost-effective Corporate Social

Responsibility (CSR) campaignsLong-term Benefits:• Established position as the preferred loan

and fee-based clients for the bank• Goodwill created by the CSR program

• Targets guardian and minor depositors• Establish relationship with potential clients

at very young age• Activities and freebies make the product

more meaningful to depositors

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Microsavings Booster: Public concert with celebrities

• Choice of celebrities will depend on the taste of the local market

• Performers from local market may be equally effective

• Effective in attracting new micro-deposit accounts

• Bank may ask for a minimum deposit to serve as entry ticket

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Summary

• Microsavings serve as long term investments to generate funds for loans, obtain new clients and increase profits

• Designing an effective microdeposit product requires choosing a target market and aligning product attributes with the needs of the target market

• Raffle promotions, Kiddie Savers Programs, and public concerts can boost deposits substantially for the bank

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