From Diamond Future to Cool Teens to SWAG: Designing Financial Products for Young People
Adaeze Ume is the Segment Head for Youth Propositions at Nigeria’s Diamond Bank Plc. Her professional experience spans over 16 years across Youth, Consumer, Gender and MSME segments, and she has been with Diamond Bank since 2003. Adaeze led the Diamond Bank Youth segment team to compete for the Child & Youth Friendly Banking Award at G20 and emerged as a global finalist in the G20 Global Inclusion Awards held in May 2017. She was also a speaker at the 2017 Global Youth Economic Opportunities Summit in Washington, for which the Microfinance Gateway was a media partner.
Gateway: In 2015, Diamond Bank launched two new products for youth. Was this the first time that the bank decided to target this segment? How did this idea of targeting youth come about?
Adaeze: Diamond Bank has been serving youth customers since 2004, as the bank has long believed that youth are an important customer segment. Bringing youth into the formal financial system at an early age is a critical factor in increasing their long-term economic opportunities. Forming savings habits and learning how to manage money at a young age can set youth up for a secure financial future and enhance their readiness to enter the workforce.
From a business perspective, our youth proposition enables Diamond Bank to increase customer loyalty and capture customers at a young age, with the goal of serving them over the course of their lifecycle. Studies have shown it is less expensive for banks to acquire a young customer, and that youth customers represent higher Net Present Value over the long term. Beginning a relationship with a youth customer early on thus represents a valuable investment for the bank, despite the fact that the youth-controlled accounts tend to have relatively low average balances, relative to regular adult accounts.
Thus from both a business and a social impact perspective, Diamond Bank remains strongly committed to our youth banking proposition.
Gateway: According to your website, you have three different products aimed at kids, teens and young adults. What are the different goals of these products? How have they been received? Have some been more successful than others?
Adaeze: In 2012, Diamond Bank and Women's World Banking began a collaboration to improve the bank’s youth proposition. Together, we conducted in-depth market research to understand the lives and financial needs of youth and their parents. This research helped us identify several different customer segments with varying financial needs. We subsequently developed a multi-generational youth proposition comprised of three different, complementary savings products, which each target a specific segment:
- Diamond Future is a parent-controlled account where parents can save for their child’s future. This account can be opened by any parent with a child age 0-17, and can be maintained even longer if the parent wants to continue saving for events in their child’s life such as marriage or buying a house. The account includes a special 13th month bonus at the end of each year-long period of saving.
- Diamond Cool-Teens is an account where teens ages 13-17 can save and practice good money management habits, with oversight from their parents.
- Diamond SWAG, or “Students With A Goal,” is an account for university students or members of Nigeria’s youth service corps, designed to help them save and prepare to enter the real world after graduation.
The products have been well-received in the market, with nearly 780,000 Diamond Youth accounts as of October 2017. Diamond Future and Diamond SWAG comprise the majority of the accounts, though many customers enjoy the unique value of the Cool-Teens account as well.
Gateway: At the Global Youth Economic Opportunities Summit, you discussed youth migration strategies, which aim to ensure youth graduate to appropriate products throughout their lifecycle. What types of strategies has Diamond Bank implemented, and why are these strategies important?
Adaeze: Youth migration, also known as transition, is critical to ensure ongoing financial and economic opportunity for youth customers, and also to making the youth proposition a sustainable business line for Diamond Bank. In order for youth to “grow up banked,” youth must graduate to appropriate products throughout their lifecycle, for instance, from Diamond Cool-Teens to a regular savings account. If the bank does not effectively guide youth through these transitions, we risk losing customers who otherwise would have continued to take up more products and services as their financial needs matured. This also puts the youth at greater economic risk, since they lose the opportunity to continue building good money management habits and saving for their future.
In order for youth to “grow up banked,” youth must graduate to appropriate products throughout their lifecycle.
To ensure the bank can continue to serve youth throughout their lives, Diamond Bank worked with Women's World Banking to develop and implement a comprehensive transition strategy. This involved designing a communications framework to notify and educate youth and parent customers about relevant account transitions at the right time, and in the context of the corresponding changes occurring in the youth’s life. We also ensured the bank would be able to track each youth customer’s journey over time within the bank by assigning them a unique customer ID at the time their first account is opened. This will enable the bank to look at the lifetime value of a youth customer and reinforce the long-term business case for the youth banking proposition.
Gateway: What challenges have you faced in transitioning youth to other financial products, and how have you overcome them?
Adaeze: The requirements for updating Know Your Customer (KYC) documentation for transition of minor customers has been a key challenge, as the accounts are being converted from parent to youth control (once the youth turns 18). Customers and branch staff do not consistently understand which documents are required for migration, which may discourage them from completing the transition, rather than just opening a new account.
We are addressing this challenge by integrating information on migration strategy and processes into continuous training for frontline staff, to ensure staff are equipped with the necessary information to guide customers through each key transition point. We are also ensuring transition processes and communications are standardized, and automated wherever possible.