Panel2 katie bovitz

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PowerPoint presentations from Fundación Capital's South-South Knowledge Exchange Forum, organized with support from IFAD "Leveraging Opportunities to Encourage Financial Inclusion"

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Panel2 katie bovitz

  1. 1. Keys to AcceleratingFinancial Inclusion:Assessing Opportunities inBranchless BankingKatie BovitzResearch and Development AnalystSmall Enterprise Foundation
  2. 2. The promise of branchlessbanking1.8 B people with access to a mobile phone but not a bank Increased financial inclusion for the poor Increased revenues for service providers of all types Launch of M-Pesa in Kenya in 2007
  3. 3. CGAP, 2011At year end 2009 ◦ 181 million registered customers ◦ 37 million active customers ◦ 16 million saversAt the end of 2010 ◦ 238 million customers registered BB customers ◦ 185 million active users ◦ only 45 million used the services for saving
  4. 4.  Biggest branchless banking operations in Russia, Brazil, India, and Kenya ◦ Use of ATMs for cash-ins as well as cash- outs Active deployments in each region (2011):  Sub-Saharan Africa: 51  Latin America and the Caribbean: 19  East Asia and Pacific: 15  South Asia: 10  Middle East & North Africa: 1  Europe & Central Asia: 1
  5. 5. The reality: A closer look 22 branchless banking services with more than 1 million registered users; 70 others which have not reached that threshold (as of Q1 2011) ◦ That’s about 1 in 4 1 out of 15 services launched since 2007 with >250,000 active users The Kenya case has been exceptional and encouraging ◦ But Kenya for the moment is the exception Most branchless banking services still focus on P2P transfers and payments Mobile banking = opportunity ◦ As yet no guarantee that products will reach the poor at scale
  6. 6. Will branchless banking realize itspotential?Key areas in reaching scale:1. Customer demand2. Supply side business models3. Agents and retailers who work with mobile money4. Policy and regulatory environment  Technical platforms5. Reaching critical mass: G2P payments
  7. 7. Will branchless banking realize itspotential?Key areas in reaching scale:1. Customer demand2. Supply side business models3. Agents and retailers who work with mobile money4. Policy and regulatory environment  Technical platforms5. Reaching critical mass: G2P payments
  8. 8. Customer DemandWhile we may know a lot about the supply side of financial inclusion, the demand side remains poorly understood ◦ How BoP clients manage cash flows ◦ How they manage emergencies ◦ Why do they save? ◦ Why do they borrow? ◦ What perception and trust issues are there and how do these impact behavior?
  9. 9. Customer Demand If BB products are not gaining traction, is the product part of the problem? Mobile banking is an opportunity ◦ Will only lead to benefits if there are appropriate and affordable products Key barrier to financial inclusion: design ◦ How are products created? ◦ How are they positioned? ◦ How is targeting/marketing employed? ◦ How are delivery channels used?  This includes two-way channels: ATMs that accept deposits (Banco Popular, Dominican Republic)
  10. 10. PRODUCT INNOVATIONKey to product innovation = strong researchMethods: Initial Focus group discussions indications, Surveys leads Data mining Generalizations Surveys Financial diaries “Why” Ethnographic methods habits exist
  11. 11. Early testing in the design process &pilots Waiting to test at scale is costly/risky Common elements to new successful innovations include early testing and feedback phases ◦ CGAP Product Incubator Labs  Prototyping products, testing ideas before launch ◦ Citi: Innovation Lab in Singapore  (ICTs in BB for ToP) ◦ JipangeKuSave, Kenya, 2010  Like Stuart Rutherford’s P9 but mobile only Generates real data: impact analysis ◦ Reduce risk around new concepts (lower costs) ◦ Make a case for scaling successful pilots
  12. 12. RCTs and natural experiments Innovations can be simple Tobacco farmers in Malawi ◦ Brune, Giné, Goldberg, Yang (2011) ◦ Access to commitment savings products led to increased savings, expenditure on agricultural investments, and profits But when and how to apply them must be well understood Challenge: identify in which context, for whom, when and what type of products work best
  13. 13. FACTORS DETERMINING PRODUCT NEEDS: • Livelihoods • Locality • Level of income • Money management strategies and income structures are strongly connected • Similar research would be useful for MM productsSource: “Understanding the Financial Service Needs of the Poor in Mexico”CGAP, 2011
  14. 14. Customer Demand: Perception andTrustFinancial education and behavioral change: Behavioral economics shows us that people often think and act irrationally ◦ Perceptions may be based on some level of reality, but can also be completely inaccurate Perception-Trust link Trust fundamental for any sustained behavioral change ◦ Branchless banking
  15. 15. Financial education and behavioralchange: Inaccurate perceptions only begin to change as customers are exposed to accurate reality through repeated interactions ◦ Mobile money ◦ Interactive technologies ◦ Etc. Low education and literacy Apparent complicated nature of bank products themselves ◦ Financial education clears up myths and misperceptions around banking system ◦ Protects clients: information about rights
  16. 16. G2P can push BB system to critical mass ofusers BB system using G2P Demand for remittances & P2P transfers will not drive to scale MM platforms in all countries  Remittances in  Kenya  Ghana  Phillipines
  17. 17.  G2P payments can promote financial inclusion if they land in: 1. Accounts that allow recipients to store funds and use them for other transactions 2. Accounts that are accessible to customers in terms of cost and proximity
  18. 18. Mobile phones and G2P Mobile phones can also transform CCT programs ◦ Take paper out of conditionality process  Less bureaucracy, less time = reduced costs  In some ways make CCTs more viable for the African case
  19. 19.  USAID 2011 study of >100 mobile money deployments around the world main take away point:  Private sector cannot do it alone  Governments cannot do it alone  Donor community cannot do it alone  Coordinated action to achieve scale

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