Financial Literacy in China as an Innovation OpportunityJan Brejcha, Ph.D.Independent researcher, UX consultantCzech Republic

HCI International 2016, Toronto, July 20, 2016

Contents

• Research Rationale• Financial Inclusion Opportunities• Design Space• Competitive Analysis• Results• Design Opportunities• Use Scenarios• Initial Screen Sketches• Discussion

Research Rationale, 1/3

The purpose of the study is to get insights of the financial knowledge, behavior, and attitudes of the young generation of Chinese (Millenials, Little Emperors, Generation 80+90, i.e. born between 1980-1995). Financial literacy is defined as follows: “A combination of awareness, knowledge, skill, attitude and behavior necessary to make sound financial decisions and ultimately achieve individual financial wellbeing.” (Atkinson and Messy, 2012).By improving financial literacy we can improve the overall financial wellbeing of users. (TAFT, Marzieh Kalantarie; HOSEIN, Zare Zardeini and MEHRIZI, Seyyed Mohammad Tabatabaei, 2013) To end poverty is a #1 item of the United Nation’s sutainable development goals (http://www.un.org/sustainabledevelopment/poverty/).

Research Rationale, 2/3

There is also a positive effect of financial inclusion in general: „Financial inclusion has been broadly recognized as critical in reducing poverty and achieving inclusive economic growth. (…). Studies show that when people participate in the financial system, they are better able to start and expand businesses, invest in education, manage risk, and absorb financial shocks. Access to accounts and to savings and payment mechanisms increases savings, empowers women, and boosts productive investment and consumption. Access to credit also has positive effects on consumption—as well as on employment status and income and on some aspects of mental health and outlook.” (The Global Findex Database, p. 2)Moreover, “[i]n developing economies 110 million adults with an account—5 percent of account holders—are savers but save only semiformally, by using a savings club or a person outside the family. Designing appropriate savings products tailored to their needs could encourage these account holders to use their account for saving.” (The Global Findex Database, p. 68)

Research Rationale, 3/3

“The findings (...) highlight a large proportion of individuals who could benefit from initiatives designed to change their behaviour. In almost every country surveyed, at least 3 in 10 respondents exhibited fewer that 6 of the 9 positive behaviours discussed.” (Atkinson and Messy, 2012:12)Positively modifying user’s behavior is especially important, because people are exposed to the cognitive biases of instant gratification and loss aversion, which prevents them to save, or to save enough for their needs. Also, millenials in particular face problems of low financial literacy, and of not having enough money to save. The research has cross-cultural potential, in that financial attitudes are cultural markers that can be studied in different cultural and linguistic environments (e.g., the factor of time and its representation in grammar). Thanks to global surveys on financial literacy (e.g. by the World Bank, OECD, financial institutions) we can quickly compare the data across cultures.

Financial Inclusion Opportunities, 1/2

• The development of other mobile financial services including mobile insurance, savings and credit will allow service providers to deepen financial inclusion by offering services beyond money transfer and payment.

• Mobile credit services became much more widely available in 2014 fuelled in part by new partnerships between mobile operators and banks. Of the 32 live services across the globe, 12 launched in 2014. Mobile credit services are now available in 15 countries globally.

• Mobile insurance services are now scaling, as the industry appears to have found the right partnership and commercial models. Sixteen new mobile insurance services were launched in 2014, taking the total to 100 live services, and as of June 2014, 17 million policies had been issued.

Source: GSMA. The Mobile Economy 2015. Copyright © 2015 GSM Association. URL: http://www.gsmamobileeconomy.com (cit. 2015-11-22)

Financial Inclusion Opportunities, 2/2

• Financial services companies and mobile operators are increasingly making use of the mobile money infrastructure to offer saving facilities: 10 million dedicated mobile savings accounts have been opened worldwide. Some service providers are beginning to pay out interest accrued on the trust or escrow account, thereby incentivising customers to use their mobile wallet.

Source: GSMA. The Mobile Economy 2015. Copyright © 2015 GSM Association. URL: http://www.gsmamobileeconomy.com (cit. 2015-11-22)

Mobile-enabled products and services in the developing world

Source: GSMA. The Mobile Economy 2015. Copyright © 2015 GSM Association. URL: http://www.gsmamobileeconomy.com (cit. 2015-11-22)

Design Space, 1/2

• Consumers are skipping straight from cash to mobile finance. (Oster, 2015)• While many banked people already use mobile banking in China, the

country also has the potential to emerge as an important success story for branchless banking and financial inclusion and potentially a new paradigm.

• Moving forward, there is untapped potential to draw on low-cost, accessible channels, such as mobile wallets, particularly for younger, technology-savvy populations and millions of domestic migrant communities that face high costs in the banking sector.

• New models in agent banking, digital payments, e-commerce, and mobile money have promise to be transformational, but must be supported by meaningful products and viable business models to drive a new phase of technology-enabled rural growth and poverty alleviation. (Shrader and Duflos, 2014)

Design Space, 2/2

• Importantly, the utility financial services through social media could be a driver to reach the unbanked. New client acquisition, data analytics, increased lending and group buying are just the beginning of the range of services that could well result.

• Both Alipay and Tencent have already introduced their first financial services products, including investment products or “savings like” places to store capital and generate a return backed by leading investment firms, but with no minimum investment. Millions of clients have flocked to these sites, forcing banks to adapt. (Shrader, 2014)

• Weixing (WeChat): allows smartphone users to send messages and share news, photos, videos and web links. By introducing free mobile games — with virtual items available for purchase — and a payment feature that can be used online or offline, Weixin could soon develop into a profitable business with little or no advertising. The company is now experimenting with use of Weixin to book taxis, hotels and airline flights, and even to control televisions and home appliances. (Barboza, 2014)

Competitive Analysis, 1/3

A total of 21 app were found and analyzed, including:• Budgeting (Suishouji, Timi Acounting, Mitira, Pochi Reco)• Loan (Phone Loaning, Huala Huala) • Payment and financial products (YiFuBao, Alipay, Wechat Pay,

YiQianBao, Wing Payment, JingDong Wallet)• Installment (QuFenQi, FenQiLe, UFenQi)• Finance and investment (Tongbanjie, Jinyuanbao, Borrowing Treasure)• Aggregation of financial products (Wacai)• Banking (Industrial and Commercial Bank of China, China Construction

Bank, …)

Competitive Analysis, 2/3: Budgeting

Suishouji• Total income• Total expenses• Budget balance• Today• This week• This mouth• This year• Bill• Account• Graphic• Financial

transactions• More

Timi Accounting• Information• Daily accounting• Photo• Income• Expenses• Add accounting

• Take the time axis, take photos to account for the characteristics, record income and expenses.

Competitive Analysis, 3/3: Mobile Application StatementBased on a modified Design brief template by Microsoft we created a report for each mobile app containing:Screenshot: Present and describe the presented iconsAudience: To whom is the app communicating (sometimes also defined

by what the audience has in common). Product: What is the app making? (functions)Objective: To define/illustrate/educate/entertain/compel/inspire? Proposition: What is the single most important benefit? What is its value to

the audience? Proof of Proposition:

How is the proposition supported (through execution, e.g., special design elements, patterns, special engineering)?

Tone: How does the app feel? (e.g., formal, playful)Style: How does the app look? (e.g., fresh, modern, solid)Monetization: How is the app financed? (simplified business model, e.g.

Collect full price before download, Free trial versions of paid apps, In-app products, In-app advertising, Third-party transactions)

Results, 1/2

• We gathered our findings around the main topics of our research: Financial knowledge, financial behavior, and financial attitudes.

• We triangulated the financial literacy data from different sources: S&P results (global survey from 2014 with more than 150000 respondents), University of Economics and the Czech Ministry of Finance (in 2012, 212 university students of non-economic fields).

• The score from students rank higher than the general population in each of the compared countries. Also, Czech students ranked higher compared to students in China, which is mirrored in the comparison between the general population. Our data has thus passed this plausibility check.

Results, 2/2

CZ (OECD) CZ (S&P) CN (our) CN (S&P)

Risk diversification 89 % 56 % - 37 %

Inflation 73 % 64 % 87 % 36 %

Numeracy (interest) 97 % 71 % 87 % 45 %

Compound interest 73 % 54 % 77 % 45 %

Design Opportunities:Financial Knowledge,1/2• Insight: They make their day-to-day decisions about money usually

themselves• How might we help the users to get advice from friends?

• Insight: Only around half the users keep a budget to track their income and expenses

• How might we help the users to keep better track of their finances?

• Insight: The preferred method of saving is in cash or in a bank/savings account

• How might we assist users in learning to use also other products?

• Insight: Mostly the users would be able to cover an unexpected expense.• Insight: However, the income sometimes does not quite cover the living

costs, and when that happen, users tend to borrow from family or friends• Insight: The income usually covers the expenses of 1-4 weeks• How might we help users build an emergency fund?

Design Opportunities:Financial Knowledge,2/2• Insight: More than half of the respondents did not have any financial goals,

but the most frequently cited were traveling, buying a house, or a car• Insight: The financial situation limits their ability to do things important to

them, although most of them are rather satisfied with their situation• How might we help users to achieve their financial goals by setting a

plan?

• Insight: Students will rely on their workplace pension plan together with the governmental

• How might we help users to rely also on private savings/investments?

• Insight: The mostly known and used financial products are bank accounts, insurance, and mobile payment (wallet)

• How might we help users get most from their money?

• Insight: Most of the students were tricked to provide financial information (scam)

• How might we protect the users from being scammed?

Design Opportunities: Financial Behavior

• Insight: Buying decision tend to be pondered carefully• Insight: The products are chosen after thoroughly comparing different

offerings, mostly according the product information, or by friends advice• How might we assist users to compare financial products more

quickly?

• Insight: Although they are willing to take some risk with their money to save/invest, they keep a close watch on their finances, pay bills on time, and avoid debt whenever possible

• How might we help users to keep their money under control?

• They see their financial knowledge about or below average, and would find it helpful to receive some advice

• How might we improve users’ knowledge about finances?

Design Opportunities: Financial Attitudes

Insight statements about attitudes and quiz:• Respondents mostly understand, how interests and inflation works, but are

prone to cognitive biases, such as loss aversion• Most budget under 1875 RMB a month, and spend usually half on food• Entrepreneurs are being admired• Household finances should be taken care of by wives• Credit cards are being used, by make sense to pay them full every period

Design Opportunities: Discovering

Design Opportunities: Card Sorting

Design Opportunities: Main Areas

Use Scenarios: Budgeting

While shopping around, Alley found a very special and elegent bag from LV, the price was as high as ¥5400 for Alley!

She calculated her own income---two thousand RMB every month.There must be some expenses in daily life, and there not much left. but she extremely wanted to buy this bag!

Initial Screen Sketches: Budgeting

Discussion

• Our findings show there is a need among the young generation of Chinese students for mobile applications that would help them cope with their financial matters, and make the most of the money the have at disposal. The currently available apps in the financial domain does not address all of the pressing problems our users face.

• Besides a comprehensive functionality targeted at user’s needs (what I need the app to help me with?), the mobile application should address user’s aspirations (where I want to belong? Who I want to be in 5 years?).

• We believe we can deliver useful, usable, and appealing solutions to our target group with a thoughtful application of user-centered design techniques together with semiotics to solve problems of financial knowledge, financial behavior, and financial attitudes.

Questions?

Get in touch

Jan Brejcha, Ph.D.Tel: +420 602277588, Twitter @jbrejcha

Email: jan@brejcha.name, Web: jan.brejcha.name