Research & Analysis

Use of Agents in Branchless Banking for the Poor

In a growing number of countries, banks and other commercial financial service providers are finding new ways to make money delivering financial services to unbanked people. Rather than using bank branches and their own field officers, they offer banking and payment services through postal and retail outlets, including grocery stores, pharmacies, seed and fertilizer retailers, and gas stations, among others. For poor people, “branchless banking” through retail agents may be far more convenient and efficient than going to a bank branch. For many poor customers, it will be the first time they have access to any formal financial services—and formal services are usually significantly safer and cheaper than informal alternatives.

Two models of branchless banking through retail agents are emerging: one led by banks, the other by nonbank commercial actors. Both use information and communication technologies, such as cell phones, debit and prepaid cards, and card readers to transmit transaction details from the retail agent or customer to the bank. For example, customers of Caixa Econômica Federal, a Brazilian state-owned bank, can open and deposit money in a current account, make person-to-person transfers, and get loans—all using simple bankcards and card readers at over 12,000 lottery outlets, supermarkets, and even butcher shops. Customers of Globe Telecom, the second largest mobile network operator in the Philippines, can use prepaid airtime dealers to deposit cash into virtual “e-money” accounts tied to their mobile phones. Customers can use their phone to send and receive “G-Cash,” make payments to other people and shops, and store money for future use.