Uploaded byNetHopeOrg
Branchless Banking 101
The document discusses branchless banking as a means to expand financial inclusion by leveraging technology to provide services outside traditional bank branches. It highlights the challenges that limit access to banking, such as high costs and low literacy, and presents solutions like agent networks and mobile banking to increase penetration. Key areas of focus include improving customer engagement, regulatory developments, and innovations in service delivery.
More Related Content
Branchless Banking 101
- 1. Branchless Banking 101: Technology& Business Model Innovation in Financial Inclusion Sarah Rotman March 29, 2012
- 2. Agenda 1. The basisof branchless banking 2. The state of the industry 3. Areas of focus moving forward 4. Q&A: of Role NGOs 2
- 3. What are thefactors that limit access? Long distances & low pop density High bank costs rela7ve to income Low educa7on & illiteracy Poor product/ channel design 3
- 4. Financial inclusion requiresscale and presence • Traditional banks have scale, but lack presence in the places where poor people live. • MFIs have a presence in poor communities, but lack the scale. 4
- 5. Achieving scale andpresence with technology Reducing Channel Cost of Banking Infrastructure $250k Traditional branch $50k In-store branch $10k ATM $2k Agent with POS terminal $400 Agent with mobile 1.7 billion people worldwide have a mobile phone but no bank account. $0k No agent (cashless) 5
- 6. Branchless Banking: Whatdo we mean? Branchless banking makes financial services available outside of traditional bank branches through the use of available technologies: cell phones, magnetic stripe or chip cards, and biometric applications. These new business models rely on a widespread network of agents, often retail locations, where customers can go to transact. Agent Client MNO Bank 6
- 7. Branchless Banking: Cash-in Bank Agent opens bank account Client opens 1 (accessible by 1 bank account (accessible by mobile phone) mobile phone) 4 - Agent account debited + Client account credited 2 Cash-‐in Agent Client Electronic 3 value sent 7
- 8. Agenda 1. The basisof branchless banking 2. The state of the industry 3. Areas of focus moving forward 4. Q&A: Role of NGOs 8
- 9. Mobile penetration Mobile ownership has boomed in poor countries since 2000 High-‐income countries Low-‐income countries 5.0 4.5 4.0 3.5 3.0 Billions 3.3 bil unique mobile owners 2.5 2.0 1.5 1.0 1.4 bil 0.5 0.0 Sources: CGAP, Wireless Intelligence 9
- 10. Mobile penetration vs.banking penetration But emerging market consumers are still far from well-connected financially 60% 50% 52% 40% 2x 30% 20% 26% 10% 0% People who have a mobile People with bank account Sources: CGAP, Wireless Intelligence 10
- 11. Provider costs Branchless channels can slash provider costs, enabling them to reach new clients $1.00 Average cost per withdrawal transaction for 4 Mexican and Colombian $0.80 $0.88 banks 51% $0.60 $0.40 $0.43 $0.20 $0.00 Source: CGAP analysis Teller window Agent 11
- 12. Customer costs Still room to experiment with pricing to drive initial uptake, intensive use 50% 40% 30% Axis Title Branchless banking 38% cheaper, on average 20% 10% 0% $0 $100 $200 $300 $400 Axis Title BB Price as % of PPP of value transferred Bank Price as % of PPP of value transferred Source: CGAP analysis; PPP=purchasing power parity 12
- 13. Regulation Regulatory openness and certainty is increasing for branchless banking 50% 40% 30% 40% 36% 20% 10% 0% Countries permiRng banks to contract agents Countries making reforms to branchless Source: CGAP Financial Access (2010, 2009) banking regulaRon 13
- 14. Business model iscomplex Spread of 2 to 11 years to achieve major revenue (3 African MNOs with major mobile money services) MNO 1 MNO 2 MNO 3 0 2 4 6 8 10 12 Years to pass SMS revenue Years to deliver 10% of revenue Source: CGAP analysis, company financial statements 2009 & 2010 14
- 15. Customer insight iscritical Understand customer pain points moving money over time, not just distance 100% $120 90% $100 80% $113 70% $80 60% 50% $60 40% $40 30% 20% 27% $20 10% 0% $0 Sources: BFA and CGAP Lost money via informal instruments Avg. amount lost 15
- 16. Agent management islocal But a universal requirement is understanding the agent’s business case Vincent Denise Hasita KENYA BRAZIL INDIA $4.11 $0.32 $0.91 Source: CGAP analysis Daily Agent Profits (USD) Source: CGAP analysis 16
- 17. Agenda 1. The basisof branchless banking 2. The state of the industry 3. Areas of focus moving forward 4. Q&A: Role of NGOs 17
- 18. Key areas onlearning agenda 1. Consumer Insight & Product Innovation 2. Business Models Ø Agents Ø Activating Customers 3. Government-to-Person Payments (G2P) 4. Policy & Regulation 5. Interoperation 6. Market Ecosystem International Remittances 18
- 19. Consumers: Mobile moneyuse by the poor Kenya: Broad adoption across all levels of the population 19 Source: Jack & Suri, 2012; http://www.slate.com/blogs/future_tense/2012/02/27/m_pesa_ict4d_and_mobile_banking_for_the_poor_.html
- 20. Consumers: Improvements inuser experience Distribution of transactions at a Mexican Bank’s affiliated agents by day of the week and hour1 Percent of total transactions within a sample of agents Business hours at branch network Mon Tue Wed 1.2% 40.2% 36.0% Thu Fri Sat 22.6% Sun 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Business hours at Agent Partner 1. Based on sample of 3,961 transactions 20
- 21. Innovation: Over 20financial institutions linked to M-PESA Microfinance Start-ups Banks Insurance Companies Commercial Banks 21
- 22. Activation: Majority ofregistered customers are not actively transacting Most branchless banking providers struggle with high rates of inactive customers 140 120 120 100 80 While 120 branchless banking 60 implementations have 1 in 6 been launched since 1 in 11 2007 only 11 of those 40 21 have reached 200k 20 11 active users 0 Implementations launched after Implementations with >1 million "Confirmed" implementations 2007 registered with >200k active users In a CGAP survey, 64% of managers said less than 30% of their registered customers were active, and active rates of less than 10% are not uncommon 22 Source: CGAP and Coffey International, data as of Q1 2012.
- 23. G2P: Changes overtime towards electronic payments 23 Source: CGAP Research
- 24. Regulation: Agent liability • Kenya: mobile network operator expressly disavows liability for the agent but . . . since May 2010, banks are liable for their agents • Brazil: banks legally liable for agents 24
- 25. Interoperability: Three levels Branchless banking services can be connected or un-connected at three different levels: 1 Platforms 2 Agents 3 Customer Customers of one account can send money to Agents of one service serve Customers can access their customers of another account customers of another service account through any SIM (cross-network, not off-network transactions) 3 1 2 25
- 26. Agenda 1. The basisof branchless banking 2. The state of the industry 3. Areas of focus moving forward 4. Q&A: Role of NGOs 26
- 27. Advancing financial accessfor the world’s poor www.cgap.org www.microfinancegateway.org