Technology and Business Model Innovation Program
Over the past few years, industry and governments have begun to embrace branchless banking as an opportunity to reach people who do not have access to formal financial services. In response, the global environment for technology-enabled business models has quickly evolved into a fertile incubator for innovation. A recent global survey found that at the end of 2011 there were 148 active branchless banking businesses worldwide and 26 of these businesses had more than 1 million customers.
In this rapidly evolving context, the Technology and Business Model Innovation Program at CGAP works with banks, microfinance institutions, mobile network operators, retail stores, and regulators to deliver financial services through new technologies, such as mobile phones, magnetic stripe or chip cards, and biometric applications. The Technology Program pursues three complementary activities to encourage robust markets for branchless banking:
- We build knowledge on issues such as customer needs, agent networks, and business models.
- We strengthen markets so that promising branchless banking services can thrive.
- We promote policies and regulations that allow branchless banking to expand and reach unbanked populations.
Building knowledge: Banks have struggled to serve poor customers in part because so little is known about the financial lives of poor people. What types of products will they use? How must those products be priced so that customers can use them? Will poor customers embrace branchless models? The Technology Program builds knowledge on these customers so that we can answer these questions. This work includes better understanding how social transfer programs for the very poor can be enabled by the use of technology and how these people can be financially included in the process.
When it comes to branchless banking, we know that a widespread and capable agent network is a necessary success factor. Yet the structures and motivations for agents are not as well understood and vary widely across countries and regions. Branchless banking comes in many forms: banks offering branded services; telecommunications providers processing transactions over mobile phones; or even retailers promoting electronic payments at their stores. We survey a variety of providers to identify the benefits and challenges of different approaches, and we conduct economic analysis to identify the most viable models.
Strengthening markets: When the Technology Program launched in 2006 there were very few branchless banking services, and we focused on supporting those programs that showed the most promise. Since the market has grown to the current scale of over 140 live services with more set to launch, we have shifted into an ecosystem approach of connecting and engaging with policy makers, businesses, and funders to try to create the right conditions for services to thrive.
We concentrate our activities in a limited number of focus countries, where we simultaneously address issues of policy, business environment, competition, and demand. Each of our focus countries has a large number of unbanked people, supportive policy makers and regulators, multiple interested businesses, and regional, if not global, influence. Our focus countries are Brazil, Ghana, India, Mexico, Pakistan, South Africa, and the West African Economic and Monetary Union, though we continue to work with policy makers and practitioners around the world.
Promoting policies: The Technology Program works with policy makers and regulators to promote policy frameworks that enable the safe and efficient development of branchless banking. We collaborate with finance ministries, central banks, and other financial sector authorities to distill and share relevant knowledge, and we offer policy and regulatory advice and assistance.
Program Contact: Steve Rasmussen