Now, a card that lets you 'buy' savings!

Anil Kumar Chennai: No doubt, everyone wants to save for future. That is also the key learning from the recent recessionary trend. However, despite scrimping, impulsive yet necessary purchases end up emptying the wallets with little money to save. This is true even for poor households. But what if you can actually 'buy' savings just as a mobile recharge card, for things you want to possess. For example, if you want to get a new cycle, how about "buying savings" with a cycle printed on it so that it reminds you of your aspiration every time.

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Welcome to the world of savings card, an innovative financial model proposed by the Chennai-based Centre for Innovative Financial Design - the research arm of Institute for Financial Management and Research (IFMR-CIFD) that translates the act of saving money into a commodity that can be purchased locally.

Recent studies indicate the lack of self-control to curb impulsive purchases, even among poor households. They indicate that the poor cannot avoid the current consumption, as it seems to be more tempting than savings to them. There are far more moments of impulsive purchases but no moments of impulse savings.

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"However, if savings are offered as commodity then it would have greater acceptability among the poor as it does not try modify/change the behaviour of the poor (from consumption centric to savings centric)," says Anil Kumar, Head, Product Design and Operations, IFMR-CIFD.

Thus in line with the consumption trend, CIFD has come with the idea of a 'savings card' that tempts people, especially the poor, to forgo their current consumption for consumption in future.

Savings card

Here's how it works. The savings card, with images of aspirational consumption items (e.g. Gas stove, cycle, etc), is available in various denominations of Rs 20, 50, 100 for purchase at the local village grocers identified and trained by CIFD. As one buys it in the shop, the grocer puts the equivalent amount in their savings account using a mobile device, which connects to the savings bank account.

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Whenever the customer wants to redeem the card, he comes to the grocer and gives the cards back. The grocer uses the mobile device to effect a withdrawal entry in the customer's savings account and pays cash to him.

"People can buy the savings card at the grocery shops and redeem it in future for consumption needs. So in a way, when you buy a savings card, you 'buy savings' rather than 'save savings'. This will prove an excellent savings option especially for poor households as they can 'buy' savings whenever they get money and redeem it when they need," says Anil.

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On the scalability and replication of the savings card, he is of the view that the current backend using the banking correspondent platform and the mobile device technology is sufficient to launch it and scale it up very rapidly. When implemented on top of an existing agent banking business model, it should be a very simple one, he opines.

"Agents need some basic training and some local marketing needs to be done and the project has one time capital expenditure in the beginning with very low operating expenditure. We are hoping that more and more banks will adopt this product to increase the transactions in the savings accounts of their rural customers," he adds.