Mobile Banking

Most poor people in developing countries still have to rely on physical delivery of cash to make payments or access financial services. But with the emergence of new delivery models which drastically alter the economics of banking the poor, that is changing. An estimated 1.7 billion unbanked customers have access to mobile phones. These and other new technologies are now enabling poor people to make financial transactions that are accessible and reliable.

One of the major impediments to providing convenient financial services for the poor has been the high cost inherent in the traditional brick-and-mortar branches model. The rapid growth of mobiles and point-of-sale (POS) devices has now created an opportunity to reach more unbanked people than ever before. Branchless banking encompasses the provision of a broad range of financial services outside conventional bank branches, and often involves agent banking, technologies such as card-reading point-of-sale terminals, or mobile phones to access financial services and execute financial transactions.

Agent banking has become particularly widespread over the past decade because by using retail points as cash merchants, banks, telecom companies, and other providers can offer financial services in a commercially viable way. CGAP found that when comparing 26 branchless banking providers and traditional banks, branchless banking was on average 19% cheaper across eight different ways
 that
 customers use
these products, such as sending or receiving P2P transfers.

Though the early experience with branchless banking is encouraging, it is not a foregone conclusion that such services will reach poor people at scale, or go beyond payments and transfers. The number of branchless banking services has grown rapidly, but the vast majority of registered customers are not actively transacting. Of the over 140 live branchless banking services around the world, only 26 have reached more than a million customers.

One key to success has become clear: branchless banking services depend on a widespread distribution network of non-bank retail agents to foster a positive and consistent customer experience that creates and maintains trust in the system. As a result, CGAP has produced publicly available materials on several of these critical issues such as agent networks, and continues to work in the areas of product innovation and government-to-person (G2P) to help providers develop viable business models that target the poor.

There are several types of branchless banking business models. In some cases, the bank is the main driver of the business. In others, it’s the mobile network operators (MNOs) by themselves or in partnership with other banks and third party providers. The industry as a whole is still working to demonstrate the viability of these different models and partnership arrangements.

Branchless banking provides a path to scale for financial inclusion. For example, by early 2012, M-PESA in Kenya had 16 million customers served by a country-wide network of almost 30,000 agents. Early successes have shown the huge potential that technology can offer, but the journey toward financial inclusion via branchless banking is just getting started.

Topic Contact: Steve Rasmussen

Recommended Reading:

Publications

02 September 2014
This report explores what consumers understand about their mobile data, and how it is being used by financial service providers and what methods for informed consent might help ensure that individual borrowers understand how their information is used.
Download PDF: 
English (610.32 KB)
29 July 2014
bKash launched in the second half of 2011, grew to 2 million accounts by the end of 2012, and shot up to 11 million registered accounts by the end of 2013.
Countries: 
Download PDF: 
English (55.44 KB)
Mobile Formats
iBook (42.26 KB) | Kindle (116.68 KB)

From Our Blog

01 October 2014
7 comments
M-PESA and its 12.6 million active customers have fundamentally altered the landscape of financial services in Kenya. Despite its popularity, there are still some misconceptions about how it works.
24 September 2014
2 comments
Innovators, often in developed markets, are piloting powerful new value propositions for customers building on digital channel attributes. Many of these solutions do not target the poor, but the implications can be easily extrapolated to poor and low-income customers.