Being Able to Make (Small) Deposits and Payments, Anywhere

This paper terms current approaches to branchless banking as version 1.0, and proposes an alternative, systemic approach that it calls version 2.0. It states that:

• Poor people would benefit if they could make small deposits into bank accounts through different cash handling outlets in their neighborhood;
• Banks must take advantage of existing retail distribution networks;
• Currently, branchless banking is based on deposit-taking banks entering into contractual agreements with third parties that serve as retail channels;
• Banks are reluctant to offer branchless banking because as per regulation, they need to take legal and financial responsibility for the actions of their retailers.

The new alternative approach, version 2.0, does not require banks to have contractual relationships with retail outlets. Instead, it uses a mix of technology, business processes, market conduct and consumer protection regulation that work to create flexible retailing strategies.

In version 2.0, retail outlets or agents have a bank account against which all client cash transactions are offset in real time. The agent’s bank assumes responsibility for the transaction, insulating clients from credit risk. Finally, the paper describes the requirements of version 2.0 and highlights its advantages.