Realizing the Potential of Branchless Banking: Challenges Ahead

01 October 2008

Being able to make payments conveniently and securely is an essential ingredient in modern life and commerce. It enables economic livelihoods and supports many social relationships (remittances between geographically split families and friends), communal support actions (e.g., joint buying of staples), and public welfare programs (payments to needy families). Yet most people and microenterprises in developing countries must rely on physical delivery of cash or actual goods to make payments. This imposes large costs and risks on those beyond the reach of modern payment networks.

The lucky few have more efficient means of exchange: checks, money orders, direct bank transfers, credit cards, debit cards, and so forth. All these cut down on the need to carry cash, making consumers and their money more secure. Even handling and exchanging cash is a lot easier: consumers have debit cards with which they can exchange electronic value for cash at any number of conveniently located automated teller machines (ATMs).

Affluent people have access to these payment facilities through the banking system. Should that remain a privilege, or should we start conceiving of retail payment networks as a utility much as we think of access to water, electricity, or phones? What would it take to provide every person with the option of participating in modern payment networks—that is, to provide them with transactional accounts that enable transactions right from their home, or at least from specified outlets in the neighborhood, affordably?