Realizing the Potential of Branchless Banking: Challenges Ahead

This paper develops a broad vision for financial inclusion, where payments can be made through an electronic network. Current technology enables branchless banking, which bridges distances, closes information gaps, limits settlement risks and reduces transaction costs. Most people and microenterprises in developing countries rely on physical delivery to make payments. This imposes large costs and risks on them. Branchless banking allows banks to concentrate on product quality and marketing, leaving retail operations to local shops. It offers an opportunity to dramatically slash transactions costs and expand geographic coverage of formal financial services. However, it also raises some policy questions regarding the role of government in building such infrastructure as well as on making choices between:

• Fostering innovation and ensuring system stability;
• Sparking competition and building interoperability;
• Offering customers financial options and protecting them.

The paper states that access to payment facilities is a major enabler for achieving universal access to finance. Challenges include developing attractive services to engage customers and building viable business models that enable organizations to build such payment facilities.