In a previous post on credit-building products, I talked about how consumers can fight back against the hair-trigger nature of credit scores. The potential is there for strong benefits, but it does require credit-building product adoption. It seems simple enough: “Hey! Start doing this to build your credit.” But consider this example, a hypothetical using Extra Debit Card, a credit building product.
Justin was a die hard cash user. When paying for coffee, groceries, gas, really, life’s everyday items, he pulled dollar bills out of his wallet. His attitude was, “I can’t get into trouble if I limit my spending to what’s in my wallet.” But given his interest in buying a new car, he wanted to build his credit. When he looked at Extra’s debit card-based credit building product, he decided not to enroll. After all, he’d have to change his behavior to get its benefits. The budget discipline of using cash had served him well.
As they say, you can lead a horse to water but you can’t make it drink. For the universe of consumers who would be interested in credit- building products, what factors drive adoption?
There are two frames that offer insight on adoption:
These two drivers are related, and winning credit-builder products deftly navigate these issues to increase adoption. A brief look at each of them follows.
Integration with existing behavior
A 2007 blog post by McKinsey’s Michael Idinopulos, In-the-Flow and Above-the-Flow, has stuck with me for years. He wrote about people’s behavior and its effect on using the social software, wikis. But I’ve always thought the concept is applicable across a range of products and services.
In-the-flow: A product is in-the-flow when it fits with activities and behaviors the person already does. The product replaces something else in the consumer’s activity, or enhances what the person already does. The beauty of in-the-flow is that it requires minimal-to-no change in what the person already does. This is very beneficial from an adoption perspective, as the battle is half-won.
Above-the-flow: A product is above-the-flow when it requires new behaviors in order to be used. This makes adoption tougher, but isn’t a disqualifier. Every existing behavior we have was once a new behavior for us. When Yahoo introduced its online search engine, that was above-the-flow. People didn’t have existing search behavior. But the ease and utility of Yahoo Search caused consumers to adopt it. By the time Google came along, it provided much better search results, and was in-the-flow of existing behavior.
Points of Friction
Friction describes the barriers to doing something. Dan Ariely has expressed it as, “Where do we have too much friction so it’s slowing people down from acting on it?” Other terms for friction include: barriers, hurdles, red tape, etc. Friction takes different forms. It can be extra steps required for an activity. Overcoming inertia, Unexpected costs. Too much time required to do a thing. Even having something that requires a new behavior (above-the-flow) can be friction.
Sign-up: All credit-building products require some kind of sign-up. In consumer financial services, these can be fairly involved processes sometimes. Requirements to remember account information, for Know Your Customer (KYC), providing supporting documentation, etc. The easier this is, the higher the adoption.
Usage: After enrollment, the more seamless the usage experience, the more durable the consumer adoption. Generally, the usage friction is much less than the sign-up friction. A big source of usage friction is a product that isn’t part of one’s recurring habits, an above-the-flow product.
To give life to these drivers of adoption, let’s look at three examples of credit-building products.
Kikoff: easy-above-the-flow
Kikoff provides its customers with a revolving line of credit. This line is usable only for Kikoff’s online store of PDF content (includes learning about financial health), similar to a department store credit card.
Sign-up: Kikoff isn’t an account one uses with other merchants. Enrollment is pretty simple, initially consisting of name, address, phone, email. Kikoff does perform KYC verification with a social security number. Generally, Kikoff is able to keep sign-up a low-friction affair.
Usage: Buying PDF content that isn’t part of one’s daily activities does make adoption tougher. Kikoff has mitigated this friction in three ways:
- Low dollar amount required to use the service: $5/month.
- Consistent dollar amount to be paid each month.
- Use of autopay make usage and forgettable default behavior each month.
Consider Kikoff’s offering is an above-the-flow product, they’ve done a good job making adoption easier.
Extra Debit Card: best when it’s in-the-flow
Extra provides a new debit card to its customers. When the customer pays for something with the debit card, Extra fronts the money to the merchant. The next day, Extra withdraws the dollar amount from the customer’s bank account. Extra floats a very short-term loan to the consumer, which is always paid off the next day.
Sign-up: Because Extra needs an ongoing connection to the customer’s bank account, the enrollment process is more involved than that of Kikoff. They have partnered with Plaid to access the customer bank account. Aside from KYC verification, they need to perform a deep analysis of the customer’s account to determine the daily spending limit. Given the nature of what Extra’s product does, their sign-up inevitably is a point of friction in the process.
Usage: Go back to the hypothetical example at the start of this post, about Justin the cash-only consumer. For him, Extra isn’t part of his normal routine. He would need to adopt a new behavior – paying via debit card – to benefit from Extra. As I said earlier, every in-the-flow activity for a person started as an above-the-flow one. But behavioral change, a change in preferences…these are harder to achieve. However, for a consumer who already uses a debit card regularly, Extra is an easy-swap to their existing card. Adoption is much easier.
eCredable: invisibly in-the-flow
eCredable is a credit-building service that reports your utility payments to one of the three consumer credit bureaus, TransUnion. FICO credit scoring models have always accepted utility payments as inputs, it’s just that they aren’t reported typically. eCredable has a found a way to get credit building benefit from something people already do.
Sign-up: To facilitate adoption, eCredable works across multiple categories of utilities: power, water, gas, waste, certain mobile phones, cable TV, satellite TV, internet, and landline phone. The friction comes in populating each utility account to eCredable’s product. The consumer must have an online account already with the utility, and then remember the login credentials of each utility service. This is a straightforward process, but it is a source of friction.
Usage: eCredable is deeply in-the-flow for the customer. It’s really invisible to her. She makes the payments she always does on her utility accounts, and gets the credit building benefit. There’s nothing incrementally different than her normal behavior. eCredable’s usage model makes adoption very easy.
These three examples – Kikoff, Extra, eCredable – put flesh on the bones of the adoption drivers framework. As one considers each credit-building product, keep in mind this top issue: will consumers adopt it?
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