The Early Experience with Branchless Banking

Reviewing CGAP’s key observations on branchless banking from 2007, this paper addresses each element and player in the branchless banking delivery chain, including customers, financial service providers, agents, products and technology platforms. The observations apply equally to the use of mobile phones to handle remote transactions (or mobile banking) and card-based branchless banking networks. The paper reviews the following observations:

• Branchless banking can dramatically reduce the cost of delivering financial services to poor people;
• Branchless banking channels are used mainly for payments, not for savings or credit;
• Financial services providers view agent networks as key to achieving their business strategy;
• Most mobile banking projects to extend market reach have been led by mobile operators;
• Mobile banking providers have valued ease of implementation and adoption over richness of functionality, constraining the customer experience;
• MFIs are largely being left out.

The paper also addresses some key questions, related to the acceptance, approach and operational successes of branchless banking. Finally, the paper makes the following predictions for the branchless banking industry:

• Poor people will use mobile banking more than rich people;
• Service providers will manage the operational risks of using agents, and customers will tolerate liquidity shortfalls;
• Shared agent networks will be the key to massively expanding access to finance through branchless banking;
• Mobile banking will be used by large numbers of poor, currently un-served people in about three years, as a result of competitive market entry.