PRODEM FFP Case Study Interview

Digital Dividends interviewed Yerina Mugica, a student at UNC's Kenan-Flagler Business School and one of the members of the research team that wrote the Digital Dividends case study on PRODEM FFP in Boliva.

DD: What kind of services does PRODEM provide?

YM: PRODEM is a private financial fund that provides banking services primarily targeted at the low income and informal sector of the Bolivian population. PRODEM offers micro-credit services, savings accounts, and national and international money transfers to its bottom of the pyramid (BOP) customers. PRODEM also offers loans to small- and medium-sized enterprises (SMEs) and lease financing for items such as televisions and computers.

DD: What are some of the features of PRODEM’s technology that allows them to serve bottom of the pyramid markets?

YM: PRODEM’s use of technology is aimed at meeting its customers’ needs. Since many of PRODEM’s rural savings account customers run micro-enterprises and need to have access to their money during non-banking hours, PRODEM recognized that ATMs would help serve its customers’ needs for round-the-clock access to their funds.

PRODEM also recognized that a traditional ATM system that requires customers to read the screen display and memorize a PIN would not be effective for its customers, many of whom are illiterate or would have difficulty remembering a PIN, and who may have a distrust of using a PIN. Since, many of PRODEM’s rural customers had never used (or even seen) an ATM before PRODEM was free to create a completely new system that would be intuitive, easy to use and meet the needs of its specific target market.

DD: How long has PRODEM been using smart ATMs? What drove them to develop the technology?

YM: PRODEM began installing ATMs in 2002. The implementation was driven in part by simple demand. The lines at some of PRODEM’s branch offices were getting too long and the ATM was a way to reduce traffic in the branch office as well as a way to provide its customers with top quality service.

DD: How many ATM kiosks are currently deployed, and where are they typically located?

YM: At the time of our visit in May 2003, PRODEM had installed 15 ATMs and was planning to install 12 more before the end of the year. In fact, the number of installed ATMs continued to grow while we were visiting PRODEM; we observed the installation of a new ATM in one of the Santa Cruz bank branches.


DD: What effect has this technology had in developing a competitive edge in the bank’s market? What percentage of new customers can be attributed to the ATMs?

YM: The ATM technology has positively impacted PRODEM’s competitive edge. While the research team does not have exact numbers on the percentage of new customers that bank with PRODEM specifically because of the ATMs, PRODEM has received very positive feedback from its customers about the ATMs. There is also a noticeable increase in savings account customers when the ATM is installed. This results in a decrease in customer waiting time because customers can choose whether to complete their transaction with a teller or with the ATM.

DD: Are the ATMs “profitable,” do they provide new revenue for the bank?

YM: Since the ATMs have been installed fairly recently they have not yet been measured in terms of pure profit that they bring in. However, since they are an additional, differentiating service that allows PRODEM to better serve its customers, the ATMs are recognized as a value add that does bring new customers to the bank, although the exact numbers have not been quantified.


DD: What was PRODEM’s “business case” or rationale for implementing a Smart ATM?

YM: What is most interesting about PRODEM’s technology strategy is that every aspect of its technology choices is in direct response to customer and business needs. They are not implementing technology for technology’s sake.


For example, while PRODEM recognized that its customers (the majority of which live in rural areas) needed 24/7 access to their money, PRODEM also knew that having an online ATM network at all its rural branches was cost prohibitive due to lack of infrastructure in rural areas. Therefore, they decided to implement a system of dial-up ATMs in combination with the smart card technology. That way, a customer’s account information can be stored on their smart card. Since the customer’s account balance, last five transactions and finger prints are stored within the customer’s smart card, the ATM does not need to connect to the main terminal to verify the customer’s identity or whether they have sufficient balance in their account to cover their withdrawal amount. The smart card allows PRODEM to provide ATM service without the expense of creating a live online network.

DD: The ATMs use fingerprint recognition, why is this important?

YM: This is important for a couple of reasons. First, a significant portion of the people in PRODEM’s target market, the lower economic sector of the population, are illiterate. This combined with the fact that many of these people have never used an ATM before and are completely unfamiliar with the concept, made it very unlikely that they would memorize and remember a PIN. In addition, PRODEM recognized that there is a sense of mistrust with PINs. People may feel that it is unsafe because if they lose their card they worry that someone will find and and somehow be able to determine their PIN and steal their money from the ATM. By using fingerprint recognition customers are more comfortable with the idea of saving their money with the bank because they understand that if they lose their ATM card, no one can replicate their fingerprint and take their money.

PRODEM not only recognized that their ATM system was a superior solution for its customers, but also recognized that smart card technology was a better solution for the bank because it eliminated the need for a 24/7 customer service staff to help customers that forgot their PIN. The bank chose technology that would be more convenient for its customers and would not create a need for additional and costly customer service staff.

DD: The ATMs use voice recognition in multiple languages, as well as touch screens—how has this impacted the users?

YM: Many Bolivians are indigenous people who speak a language other than Spanish. Quechua and Aymara are the two most common indigenous languages and they are still widely spoken, especially among the rural areas of Bolivia. The ATM "speaks" the three main languages of Bolivia, Castilian Spanish, Quechua, and Aymara. This is important because it means that people that can not read or speak Spanish can still use the ATM. Again, PRODEM uses this technology to reach its target market.

One of the ATM developers told us a story of a Quechuan woman who upon hearing the ATM speak to her in her native language, began to cry with joy. She was so happy because it was a sign of respect and inclusion. Traditionally indigenous people in Bolivia have not been included in the banking community.

DD: What kind of user feedback has PRODEM received about the Smart ATMs?

YM: Most users find the ATM very intuitive and easy to use. At first, customers may be apprehensive about using the machine but PRODEM staff members teach customers how to use the ATM when they open their account. Also, when an ATM is installed at a branch, the branch assigns trainers to the ATM machine to teach customers how to use the ATM.

DD: Do you have any good anecdotes you can share with us from your interviews with the bank customers?

YM: One of PRODEM’s forthcoming print advertisements shows a picture of paper currency with different sized holes in it. Next to each hole is an explanation of what caused the hole. For example, one explains, "This is from termites in the wall." Another says, "This part rotted from a leak in the ceiling." Yet another states, "This one was from the rats under the bed." The ad then goes on to explain that in order for currency to be official and therefore usable, the serial number on either side of the bill and the official signature on the bill must be intact and legible. The ad suggests that in order to avoid having one’s hard earned money be destroyed, one should not keep it hidden in one’s home; one should instead open a savings account with PRODEM where the customer will have access to it 24 hours a day, 7 days a week, and the money will be kept safe from harm.

Originally, I had thought that the logical reasons for not keeping money at home were the simple reasons of risk of theft and lack of interest accumulation. But these other problems of money being eaten by rats or insects or destroyed by water damage are very real problems in Bolivia. This illustration shows the importance of truly understand your customers needs not only so you can provide them with the solutions, but also so that you can effectively communicate those solutions.