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Overview

Building Financial Systems for the Poor Branchless Banking for All-Inclusive Financial Systems Baku , September 17, 2008 Olga Tomilova, Consultant for Europe and Central Asia. CGAP. Overview. What is branchless banking? Examples of branchless banking solutions

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Overview

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  1. Building Financial Systems for the Poor Branchless Banking for All-Inclusive Financial SystemsBaku, September 17, 2008Olga Tomilova, Consultant for Europe and Central Asia. CGAP

  2. Overview • What is branchless banking? • Examples of branchless banking solutions • Early experience with BB – some preliminary results • Predictions for the future

  3. What Is Branchless Banking? The innovative use of information and communications technologies to deliver financial services through channels that reach beyond traditional bank branches and ATMs • Mobile phones • Point-of-sale devices with card readers

  4. What Does Branchless Banking Offer? For customers, branchless banking is potentially: • Convenient • Efficient • Safe • Inexpensive

  5. Branchless Banking Models Bank-led • Licensed financial institution • Network of retail agents using technologies • Customer interaction through retail agents Nonbank-led • Mobile operator or card issuer • Network of retail agents using technologies • Customer interaction through retail agents

  6. Examples of branchless banking solutions Mobile phone banking and agents POS agent network for banking Institutional Capacity Needed Statistical scoring model for credit Deploying ATMs Issuing payment cards Data collection thru PDAs Joining a shared IS Computerized MIS Potential to Expand Access

  7. High potential technologies Mobile phone banking and agents POS agent network for banking Institutional Capacity Needed Statistical scoring model for credit Deploying ATMs Issuing payment cards Data collection thru PDAs Joining a shared IS Computerized MIS Potential to Expand Access

  8. Branchless banking can dramatically reduce the cost of delivering financial services to poor people • BB can offer basic banking services to customers at a cost of at least 50 percent less compared to traditional channels • BB helps address the two biggest problems of access to finance: • the cost of roll-out (physical presence) • the cost of handling low-value transactions • Opportunity to significantly increase the share of the population with access to formal finance

  9. Transformational Branchless Banking The use of information and communications technologies and nonbank retail channels to reduce costs of delivering financial services to clients beyond the reach of traditional banking. • Philippines • 5 million registered • +USD 1 bil in volume • Link to rural banks • Brazil • Banks opened • 39,000 agents • $940 mil volume • 12 mil accounts • opened in 6 yrs • Reach all 5,561 • municipalities

  10. Promising… but still unproven with clients Agents (Brazil) • Usage - only 6% make deposits • Agent turnover – from 80% to 15% M-banking (South Africa) • Usage: early adopters (~100,000) • Perceptions by non-users: costly (14x actual price) • Perceptions by users: miss human interaction Sources: CGAP’s representative study of banking correspondent usage, Pernambuco state, 2006. “Mobile Phone Banking and Low-Income Customers,” CGAP, UN Foundation, Vodafone Group Foundation, 2006.

  11. Predictions • Poor people will use mobile banking more than rich people. • Providers will manage the operational risks of using agents, and customers will tolerate liquidity shortfalls. • Shared agent networks will be the key to massively expanding access to finance through branchless banking. • Mobile banking will be used by large numbers of poor, currently unserved people in about three years, as a result of competitive market entry.

  12. CGAP Publications on BB (www.cgap.org) • Ivatury and Mas. 2008. “The Early Experiencewith Branchless Banking.” • Lyman, Porteous, and Pickens.2008. “Regulating Transformational BranchlessBanking: Mobile Phones and Other Technology toIncrease Access to Finance.” • Mas. 2008. “Being Able to Make (Small) Deposits and Payments, Anywhere.” • Mas and Siedek. Forthcoming. “Banking Through Networks of Agents.” • Lyman, Ivatury and Staschen. 2006. “Use of Agents in Branchless Banking for the Poor: Rewards, Risks, and Regulation.” • Ivatury and Pickens. 2006. “Mobile Phone Banking and Low-Income Customers.” • Ivatury. 2006. “Using Technology to Build Inclusive Financial Systems.”

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