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Opportunities

Financial institutions may want to closely examine Banco Azteca’s moves and results, not only because of the possibility of short term revenues in many emerging economies, but also because of the value of building long term relationships with consumers who one day WILL have more money to spend.

Providing credit to low-income consumers

Reminiscent of the ‘Small is Sundara’ business idea, which was all about selling consumer goods in smaller doses and packages to low-income consumers (Springwise Newsletter January 2003), Mexican Banco Azteca, which launched in December 2002, is applying this ‘less is more’ approach to 16 million Mexican households who make too little (from $250-$1300 a month) to attract the interest from established financial institutions. These Mexican consumers, even those without a bank account or without solid proof of income, can now apply for a savings account, wire transfers, mortgages, or small one-year loans (sometimes purely based on their personal possessions). The force behind Banco Azteca is Grupo Elektra, Mexico’s largest appliance retailer. Their 800+ appliance stores double as bank branches, and quite often bank clients are loyal Grupo Elektra customers as well, giving them some kind of credit history. As 70% of Grupo Elektra merchandise is sold on credit anyway, it makes sense to convert credit departments into bank branches. Besides the branches, there are also 3000 motorcycle-riding loan agents (source: Business Week). In its first 32 days of operation, 161,000 saving accounts were opened, with an average account deposit of $91.

Opportunities

Financial institutions may want to closely examine Banco Azteca’s moves and results, not only because of the possibility of short term revenues in many emerging economies, but also because of the value of building long term relationships with consumers who one day WILL have more money to spend.