Pensioners in Argentina are struggling to access their main source of income
By: Rosa Aranguren, Guest author, Fintech For Longevity
The demographic trend of aging in Argentina indicates that the older population will continue to rise over the next few decades. In 2010, the proportion of older adults (60+) of the total population was 14% and the UN estimated that it had reached 15.5% in 2019. This trend is expected to continue to grow in the coming decades, similar to many other countries in South America and the rest of the world.
At the same time, the digital transformation, including those used in the banking industry, is expected to accelerate further. Given these two trends, the digital gap between the older and the younger generations is expected to widen substantially.
As part of my thesis, recently approved by the Department of Sociology of the Catholic University in Buenos Aires, I wanted to further understand the barriers experienced by older adults and their usage of electronic banking. More specifically, I was curious to investigate why, after almost ten years from the date the social security agency started to pay pensions through the banking system, there is still a group of older adults that face difficulties with electronic banking, and prefer to get payments through a cash teller. In my analysis, I took into account the legal environment and socio-demographic profiles of the older adults that were interviewed.
To better understand how older adults engage with banking, we conducted 37 in-depth interviews with a group of pensioners to learn about their selected method of interaction to withdraw their pensions. While a pension is the only source of income among many retirees, we were especially interested in understanding the challenges that they faced in accessing their pensions.
Interestingly, some of the people that were interviewed did not have a bank account before they retired. Namely, this group of pensioners turned from “unbanked” to “banked” in favour of the utilization of their pension rights. Before the new legislation, the “unbanked” used to collect their pensions straight from a government agency, in cash.
In the interviews which where were conducted before the Pandemic (2018–2019), we focused on pensioners who lived in the Greater Buenos Aires area. We interviewed ten pensioners who chose to receive their pensions at the bank branch via a teller. This group was made up entirely of women, with 80% being 70 years or older and just 20% being between 60-69. In addition, we interviewed 11 pensioners who have been using an ATM to withdraw their pension and another 16 interviews with people who used either an ATM or “home banking”. The latter stands for people who use either a mobile phone or a desktop.
In general, laggards or late adopters are defined as those who take a long time to decide, before accepting an innovation. I wondered to what extent older adults qualify in this category, and if it is possible for them at some point, to be able to adjust to the digital transformation. Therefore, we conducted in-depth interviews to better understand what are the barriers affecting older adults to use electronic banking.
What is the problem?
Collecting a state pension at a bank branch has been a monthly routine for pensioners in Argentina since 2012. The timeframe to pick up that money is limited, as after two months, if there is a delay in collection, the banks return the money to the pension fund. Therefore, there was always an urgent need to collect the money within the timeframe, so as not to cut the only source of income for many older adults.
Since 2012, there have been three ways to collect the pension from the social security administration; 1) Travel to the bank branch and withdraw the money through a teller; 2) Withdraw the money from an ATM by using a debit card, or; 3) Use electronic banking by using a mobile phone or a desktop, defined as “home banking”.
In contrast to physically going to the branch, or using an ATM, the advantage to home banking is to provide safety and comfort of sending and receiving money right from the couch, i.e. older adults do not have to risk leaving their homes to withdraw funds. Home banking also saves the time and trouble of learning the ATM system and eliminates the fear of the money being returned to the pension fund.
Choosing the right path to withdraw the monthly pension
Based on our interviews, our findings show that the group that received their pension by travelling to a bank branch, accounted for less than a third of the study population (10 out of 37 retirees). This group included some living primarily alone, compared to those who used ATMs and “home banking”. In contrast, the retirees who were using ATMs (11 out of 37 retirees) didn’t have to go to the bank on a fixed date to collect money, as they are able to access ATMs at any branch, including the added bonus of getting cash in some supermarket chains.
At the time when the research was conducted, it was found that most adults were savvy about ATMs and debit cards. However, their main issue was that they were not ready to accept any new innovation as they felt they had already adapted to enough technology. Most of the ATM users either felt they had reached an age where they were no longer interested in adapting to more technology or they found it challenging to learn new ones. Those who could use “home banking” were more likely to have a higher socioeconomic status and a greater level of education. The latter group however, were younger compared to others, with 27% of them being 75 to 79.
We also found that the choice to go to the bank branch and not use an ATM was associated with additional issues such as specific physical or cognitive limitations that prevented older adults from using an ATM or Home Banking. These issues included mobility struggles, a lack of fine motor skills, and difficulty comprehending or remembering passwords. Another aspect that made it difficult for some to visit the ATM, is security - there is a concern of theft while exiting an ATM, particularly after working hours.
Passwords are a major barrier
We found that one of the major barriers to using an ATM is the dependency on using a password. The most common complaints from older adults included the complexity of establishing a password to use at the ATM, the usage of a mobile password, and the lack of assistance when a debit card is locked at the ATM.
Why is a debit card so important for pensioners?
A debit card provides people with more freedom to withdraw their money when and where they choose. In Argentina, most people withdraw cash from an ATM as needed, and frequent chains that will take cash for utility payments or other bills, such as Pago Facil. Old people, especially those with a better understanding of an ATM, could pay their bills in the same ATM instead of going to a Pago Facil, thus eliminating the need to travel from one location to another. They can use their debit cards to make purchases in the same way that credit cards are used. In Argentina, one can pay bills at an ATM, but because the menu of the ATM is rather complex, older people prefer to extract cash from the ATM and then go to a Pago Facil to pay their bills in cash.
Also with debit cards comes the freedom of online banking, where older adults can quickly pay their utility bills and perform other transactions without leaving their homes.
Closing the digital divide
We found that currently there is a divide between the use of technology for communication and for banking. While older adults don’t mind learning the ins and outs of Skype and the use of alternative messaging to communicate with their children abroad, understanding banking applications is made more difficult with the use of passwords. They are not afraid of using the internet for social purposes, but at the same time, we found that older adults are afraid of making a mistake or losing their money if they were to use the internet for financial transactions.
The final conclusion from our research is that rather than wait and see what will become of the groups who have been ignored by the rapidly progressing technology, banks and financial institutions should instead adapt to their needs and make their online services easier to understand and more accessible for older users. Technological tools such as facial recognition and/or digital prints can help identify older people, by providing them with the extra help of easier menus so they can feel more convenient with their daily finances.
About the author: Rosa Aranguren is a former banker, working in Citi Bank for 37 years. After retiring from Citi Bank, Rosa studied for her Masters in Sociology at the Catholic University in Argentina.