Customer Adoption
It is common to say that branchless banking reaches poor and unbanked people or has great potential to do so. Yet to date our ability to verify this claim is very limited. In 2008, CGAP estimated that just 1 in 10 branchless banking users were poor and previously unbanked (Mas and Ivatury, 2008). Enough anecdotal evidence existed to say that many poor people used branchless banking in Brazil and Kenya, but not much more. Beyond that, little data-driven evidence was available. We did not know how deeply branchless banking reaches down the income ladder, what poor people do with it, and whether they are even the majority of users.
With the recent publication of several studies, we now have sufficient evidence to show that branchless banking does in fact reach large numbers of the unbanked poor, at least in the major reference countries where branchless banking reached scale first (Brazil, Kenya, the Philippines and South Africa). The evidence is based on six surveys involving 6657 respondents who have access to 7 branchless banking services: GCash, M-PESA, Smart Money, WIZZIT and the agent-based banking services of Banco Bradesco, Banco do Brasil and Caixa Economica in Brazil.
Branchless banking reaches poor people
Branchless banking has enabled entrepreneurial individuals to create financial institutions which in several years reach as many of the poor as traditional players which have operated in the same country for decades. In the Philippines for example, 26 percent of active mobile money users live below the poverty line. Taken as a group, these 390,000 clients are equal to the customer base of the largest MFI in the country, CARD.
However, we should be careful not to overstate the impact. Most users of the seven branchless banking services (GCash, M-PESA, Smart Money, WIZZIT, and the agent-based banking services of Banco Bradesco, Banco do Brasil and Caixa Economica in Brazil) are neither unbanked nor poor. Branchless banking appeals to the better-off and already banked as well as the poor and excluded. For example, according to research conducted by MIT, 70 percent of M-PESA users have an account with another formal financial institution, and the average user reports annual expenditures 67 percent higher than those of non‐users. Half of WIZZIT’s users fall into the upper half of the South Africa’s socio-economic strata, as measured by the Living Standard Measure (LSM) classification used by FinMark Trust. The majority of GCash and Smart Money clients are not poor. Only in Brazil, where branchless banking agents are the preferred method of making utility and other recurring payments, do low-income consumers make up the majority of users. Brazil suggests that it is possible for branchless banking to penetrate deeply. But this is not yet the case in most countries.
Services and products for poor customers
Though most branchless banking systems we see have been built by banks or MNOs with payments and transfers mostly in mind, we are seeing considerable uptake and usage as a way of saving. In some cases—e.g. Kenya—this means consumers are using the products in ways that were never marketed, nor perhaps what regulators wish would happen. But consumers are voting with their feet.
In Kenya, 75 percent of users say they store funds in their M-PESA wallet, and 21 percent say M-PESA is their most important saving instrument; 90 percent say it is one of the three most important. The most popular suggestion for what users would like to see added to M-PESA is the ability to earn interest.
In the Philippines, without any marketing and with a poor network of agents in many areas, 1 in 10 unbanked mobile money users already stores an average of US$31 in his or her mobile wallet. They report this amounts to one-quarter of their household savings. When asked what additional services they would be likely to try beyond mobile money, more than half of existing mobile money users said savings (54%).
In Brazil, our agent research shows that though rural agents do nearly as many transactions per day as urban ones, deposits and withdrawals to bank accounts make up a much larger proportion of transactions (38% of the transactions in rural agents, compared to 8% in urban agents). This suggests rural agents are an important way people are accessing and operating bank accounts.
Furthermore, Brazilian banks have used the nationwide network of branchless banking agents to expand consumer credit in a major way: agents are the preferred way for mass market consumers to pay back the USD 450 billion in consumer credit lent out in 2009.
We may yet see more saving and credit products as mobile operators tie up with banks. For example, in the Philippines, Globe Telecom and Bank of the Philippine Islands have bought equal shares in a new bank specifically designed as a “mobile microfinance bank” which could provide credit as well as deposit and payment products.
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