According to a 2016 Gallup survey, 24% of Americans still make most, if not all, of their purchases with cash. However, operating in the cash economy has many drawbacks. Not only are cash users more vulnerable to theft, but they are also locked out of beneficial financial services such as expense tracking, budgeting, or automatic savings.

To understand how to help consumers shift from cash to cards, we partnered with Grameen America, an organization dedicated to helping women who live in poverty build small businesses to create better lives for their families.

Behavioral Diagnosis and Key Insights

Grameen America offers low-income women microloans to help them build their businesses, achieve higher family incomes, and develop entrepreneurial skills. The Grameen lending model fosters accountability among its members – the women entrepreneurs it lends to – for their loan repayments.

Members must repay their loans in person during a weekly meeting –“the Center Meeting.” Requests for membership, loans and loan increases must be approved by all members in the group at the Center Meeting. Grameen reports over 99% repayment rates.

Recently, Grameen has started to disburse loans using a card. Their goal is for members to use the disbursement card to buy goods directly from vendors. The disbursement card is a much safer and more secure option for members. More importantly the members need to be comfortable with digital tools. Getting Grameen members to use disbursement cards is one way to shift behavior away from cash and towards cards.

However, currently most members are not using the cards as intended; instead, over 90% of members take out the full amount on the card as cash from an ATM.

In order to understand the barriers to card usage, we observed nine Center Meetings in Brooklyn and the Bronx. Additionally, our team visited four different Grameen branches to observe the loans being disbursed to members. During these visits, we had the opportunity to talk to Grameen staff, members, and branch managers, and 90% of members withdraw the full deposit amount in cash from an ATM get their insights on barriers to using the card to pay directly instead of getting cash. From these conversations, we’ve gathered the following insights:

1. There are no rules of thumb around using cash versus the card. There are no clear guidelines or rules of thumb around how and when cash should and should not be This makes it easy for members to still use cash.

2. Payment method for loan purchases (using the card or using cash to buy goods) is not a visible or social behavior. A great deal of the success of the Grameen model (repayment in particular) is around social forces and accountability to others. Currently, there is little emphasis on how the loan is being spent, let alone the payment method for the loan (cash versus card). There is no real opportunity for members to “see” the payment methods other members use when buying goods and services for their small businesses.

3. Members do not feel that they know how to use the card (even if they have been given instructions) and prefer to spend the way they always have (for many - cash). Members may not have knowledge of or familiarity with digital banking and card usage. As a result, how and when to use the card might not connect with other habits members have previously formed. Some members resort to asking family members to help them use the card to withdraw cash from an ATM because they can then interact with the loan without further assistance. Concepts such as activation, setting a PIN and checking balances may all be As a result, it is not worth engaging with the card directly, when using cash is a readily available and familiar alternative.

Experiment

We are in the process of developing our experiment which we expect to roll-out in 2018. We hope to make two key changes to the current system:

1. Change the weekly meetings to make the payment more visible to other members. During the weekly meetings, members who just had a loan disbursed will be asked if they used the card to pay for goods or services and why they did or did not use the card. These questions will be asked “out loud” in the presence of other members. This approach will shed some light on self-reported barriers to using the card and help create guidelines and norms around using the card. Grameen is in the midst of rolling out these changes to seven Grameen markets in New York, Texas, Massachusetts and California.

2. Send text message reminders to members the same week that their loan is disbursed. This is when members are most likely to be making purchases. We will test the efficacy of the reminders on card utilization, testing different messages. We expect to start pushing text messages at the end of 2017 to members in seven Grameen markets. Based on loan terms and current membership, we expect to send over 10,000 text messages to members in the seven markets within six months after launch.