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

1. Keys to Accelerating
Financial Inclusion:
Assessing Opportunities in
Branchless Banking
Katie Bovitz
Research and Development Analyst
Small Enterprise Foundation

2. The promise of branchless
banking
1.8 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. CGAP, 2011
At year end 2009
◦ 181 million registered customers
◦ 37 million active customers
◦ 16 million savers
At the end of 2010
◦ 238 million customers registered BB
customers
◦ 185 million active users
◦ only 45 million used the services for
saving

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. 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. Will branchless banking realize its
potential?
Key areas in reaching scale:
1. Customer demand
2. Supply side business models
3. Agents and retailers who work with
mobile money
4. Policy and regulatory environment
 Technical platforms
5. Reaching critical mass: G2P
payments

7. Will branchless banking realize its
potential?
Key areas in reaching scale:
1. Customer demand
2. Supply side business models
3. Agents and retailers who work with
mobile money
4. Policy and regulatory environment
 Technical platforms
5. Reaching critical mass: G2P
payments

8. Customer Demand
While 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. 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. PRODUCT INNOVATION
Key to product innovation = strong research
Methods:
Initial
 Focus group discussions
indications,
 Surveys leads
 Data mining
Generalizations
 Surveys
 Financial diaries “Why”
 Ethnographic methods habits exist

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. 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. 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 products
Source: “Understanding the Financial Service Needs of the Poor in Mexico”
CGAP, 2011

14. Customer Demand: Perception and
Trust
Financial 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. Financial education and behavioral
change:
 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. G2P can push BB system to critical mass of
users
 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.  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. 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.  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