Postal Savings Banks Reinvigorated by Increased Competition
Postal banks in South Africa and Kenya are celebrating their 100th anniversary. Long live the postal bank! But the environment has changed dramatically with the advent of mobile money and increased interest from commercial players in the unbanked market.
At the annual forum of postal savings banks organized by the World Savings Banks Institute (WSBI) in South Africa, savings bankers from across the world discussed the changes in the landscape for the delivery of financial services to the poor. Whereas savings banks, and particularly those using the post office network, have for many years been the banks closest to poor people operating in the most remote areas, mobile money networks are now reaching people even closer, in their places of work and where they live. Proximity may no longer be enough for savings banks to best serve their clients.
Partnerships between mobile money operators and banks are emerging such as the new suite of financial services offered jointly by Kenya’s M-PESA and Equity Bank under the M-Kesho brand. At the same time, banks are starting to serve the population traditionally targeted by savings banks with new and innovative low cost products, as Al Bahrid and Tanzania Postal Bank have both found.
For those of us who care about improved access for the unbanked, this is actually great news. For the savings banks themselves, the challenge is to turn this competitive threat from mobile money into an opportunity focusing on savings banks’ key comparative advantages and values. The Bill & Melinda Gates Foundation supports 10 savings banks to more than double their accounts for poor people from 5.5 to 13.3 million accounts by 2014. The project, implemented by WSBI, aims to build the business case and find new models for mobilizing small balance savings and “fight the economics” of small transactions. Building on savings banks’ value proposition– user-friendly and affordable savings services for poor people living on $1 or $2 a day–the project provides technical assistance and capital investments to introduce new technologies to reduce the costs of delivery. Many postal savings banks still have a long way to go. Institutional reform and an appropriate regulatory environment are required. But more importantly these banks need to rethink product design, delivery, and marketing to respond to poor people’s needs and improve the value proposition. The modernization and expansion of postal savings services is coming, but mobile network operators and other private sector players are moving fast.