Financial Heuristics

A Guide to Create Better Financial Habits

 

Brief:

To improve the financial and small business management behaviors and practices of micro-entrepreneurs in Ecuador using financial heuristics, or rules of thumb.


Problem:

Banco Pichincha is one of many microfinance banks that are now required by law to provide financial literacy training to all clients, including micro-entrepreneurs who take loans and open savings accounts for both personal and business use.

However, most financial institutions see financial education as a necessary evil, something that comes at a great cost to the company rather than a value-add service that might improve client retention or, better yet, generate revenue. Additionally, there is little evidence that past financial education initiatives work.

To change this mindset, GRID Impact will draw upon recent evidence from the Dominican Republic that indicates a behavioral model of financial literacy training is less costly and more effective than training that focuses solely on knowledge. This methodology is called financial heuristics and uses simple and actionable financial rules of thumb to help micro-entrepreneurs implement good practices in their daily lives.


Audience:

“Corresponsales no bancarios (CNBs)”

CNBs are third parties contracted by Banco Pichincha to provide certain financial services directly to customers. Imagine family-owned and small bodegas, drugstores, bakeries, and minimarts. While the types of businesses are diverse, all of these CNBs are fixed locations and have a proper storefront.

Our target CNBs are located in the two largest cities in Ecuador: Quito and Guayaquil.

 

What do we know about the CNBs?

  1. Use some sound business practices but are not consistent in their behavior
  2. Rely on intuition when making financial decisions rather than rules and systems
  3. Don’t have excess time or mental bandwidth
 
A typical CNB in Quito

A typical CNB in Quito

Keeping the Client in Mind: Banco Pichincha

Through the use of financial heuristics, CNBs are able to better manage and save their money. As a result, they are more likely to open a bank account and be more consistent customers, helping our client, Banco Pichincha, generate revenue.
Making financial literacy training profitable it is not only a win for the audience but for the banks as well, and as such has a higher likelihood of adoption in other markets.


Team & My Role:

GRID Impact is a global research, innovation, and design collective tackling some of the toughest problems in financial services, agriculture, water and sanitation, education, and alternative energy. Their method combines human centered design with behavioral economics to better understand the populations they serve and deliver more predictable results.

Our final products included a cash box (right), training guide (center) and the financial journal (left).

Our final products included a cash box (right), training guide (center) and the financial journal (left).

As a designer, my role was to take the findings from field research and translate them into simple tools that could be easily adopted into the existing financial habits of the CNBs.

I led the development of a financial journal, a 100+ page workbook that contained multiple tools to encourage savings, good credit practices and following a monthly system to maintain the financial health of the CNB’s business.

In addition to the financial journal, I was in charge of designing the curriculum. This was an information architecture challenge because there was so much information to teach the trainers, who would then teach the CNBs. Clarity was important because is is the foundation of a good rule of thumb. If it is not clear, the users will not remember them. The layout was an important way to outline best practices for teaching these rules of thumb, highlighting significant details, and generally keeping the trainers on track.
Working with the project lead, content specialist, an Ecuadorian based researcher and another designer, my role began once the initial research phase was completed and continued through the implementation of our first financial heuristics training program.


Constraints:

Timeline

I was brought onto the project two weeks before the second field visit, leaving very little time for the design, iteration and finalization (including translating and printing) of the financial journal.

Limited User Feedback

As a result of the short time frame, there were only a few opportunities to get user feedback on tools. Asking the right questions was crucial, as was prioritizing which changes to make first.

Now that the initial financial heuristics training has been completed, I will begin a re-design with much more user input.

Language

Each tool needed to be designed with a clear intent so that the translation appropriately reflected its purpose, the context within which it should be used and culturally relevant examples.

 
Clear icons were a successful way to overcome the language barrier.

Clear icons were a successful way to overcome the language barrier.

 

Process:

I have worked with Alexandra Fiorillo, the project lead and principal of GRID Impact, on a variety of projects over the past year. As a result, this project benefited from my clear understanding of her working habits. Initially, her ask is very open-ended. Once something is down on paper, she quickly clarifies the need and gives more specific directions.

Knowing this, I jumped right into making the tools. I started simple, taking on the clearer rules of thumb first, like setting up Credit Rules.

Alexandra, Tanya (the other designer) and I would then talk via email and over the phone about what worked, what didn’t, and how to improve.

The next iteration went to Jimena, who was in the field in Ecuador with the CNBs. Their feedback went into the final version.

I made templates for the general design and layout of the tools so that my work and the other designer’s work would be consistent.
As this project was for print, my tools were pen and paper, IIlustrator and InDesign. I designed the book so that it could be easily re-produced in Ecuador.

The Rule of Thumb Training Guide

The Rule of Thumb Training Guide

Credit Rules Worksheet

Credit Rules Worksheet

Creating a Savings Plan

Creating a Savings Plan


Results:

An entrepreneur looking at the expenses calendar that tracks all outgoing payments, adhering to Rule of Thumb #2 Pay Out - pay yourself and your employees a consistent salary.

An entrepreneur looking at the expenses calendar that tracks all outgoing payments, adhering to Rule of Thumb #2 Pay Out - pay yourself and your employees a consistent salary.

The first financial literacy training was completed this week and based off of the feedback of Banco Pichincha, the CNBs and the facilitators who teach the rules of thumb to the CNBs, I will iterate on the tools in the financial journal.

We tasked the CNBs with adhering to the rules of thumb for 30 days, and CNBs who are successful will be entered into a pool to win an iPad. We are hoping this challenge encourages the CNBs to stick to the rules and implement them over the course of several months to give us time to measure changes in their financial habits.
With successful metrics, we can implement similar financial heuristics training in other markets.