Branchless Banking and Financial Inclusion

Michael TaraziFDICJune 2, 2011

Branchless banking may overcome these constraints

What are the factors that limit access?

Long distances & low pop density High bank costs relative to income

Low education & illiteracy Poor product/ channel design

Bank

Agen

t

Clie

nt

Branchless Banking: What do we mean?

“… delivery of financial services outside conventional bank branches using information and communications technologies and nonbank retail agents.”

Bank

Clie

nt

Branchless Banking: Cash-in

Client opens bank account(accessible by mobile phone)

Agent opens bank account (accessible by mobile phone)

2 Cash-in

3 Electronic value sent

4 Agent account debited

Client account credited

1 1

-+

Agen

t

Bank

Clie

nt

Branchless Banking: Cash-out

1 Electronic value sent to agent

2 Cash-out

3 Agent account credited

Client account debited-+

Agen

t

3

The logic of branchless banking

Use existing retail infastructure

Use existing deployed technology

Any store can potentially be an agent

~28m

~5.7bn

~1m665k500k250k

WesternUnion

Bankbranches

Postoffices

ATMs POS Mobile Phone

Connections

Worldwide points of presence

The power of using existing infrastructure

Sources: CGAP, Wireless Intelligence

3.3 bil unique

mobile owners

1.4 bil

9

2x

Sources: CGAP, Wireless Intelligence

10

Branchin store

$50,000

ATM

$10,000

No agent (cashless)

$0

Agent with POS terminal

$2,000

Agent with mobile

$400

Reducing the cost of banking infrastructure

Traditional branch

$250,000

11

The Global Status of Branchless Banking

12

KEN Safaricom M-Pesa 13.1

TZA Vodacom M-PESA 6.4

PHL Smart Money 4.5

GHA MTN Mobile Money 1.8

PAK UBL Bank Omni 1.6

SAF FNB 1.5

UGA MTN Mobile Money 1.5

GHA Airtel (Bharti Airtel) Money 1.2

KEN Airtel (Bharti Airtel) 1.0

PHL Globe G-Cash 1.0

Branchless Banking Implementations

10 of the Largest Implementations

Reaching the Unbanked

Weighted Average

37%

Bank Agent ClientMobile Network Operator

Nonbank E-Money Issuers

Bank ?

Pooled Account

Regulatory Issues

1. AML/CFT: Can low-income users meet ID requirements?

2. Agents: Who, what services, who is liable for what?

3. Consumer Protection: Price transparency, recourse, education?

4. Moving beyond payments: interest-bearing, insured deposits?

Advancing financial access for the world’s poor

www.cgap.org

www.microfinancegateway.org