Tag Archives: mobile banking

Expanding the Boundaries of Mobile Banking: Reaching the Rural Poor

This post is written by Lee Babcock, Managing Director, Mobile Strategy for ACDI/VOCA.

Photo credit: ACDI/VOCA

Photo credit: ACDI/VOCA

I work at the intersection of mobile banking and the rural poor. For nearly 50 years my organization, ACDI/VOCA, has created market linkages for smallholder farmers to reduce poverty and expand economic opportunities. The people we work with are not usually near a city and they have few resources, often making only a subsistence living off of their crops. But increasingly, they do have a mobile phone.

For a development practitioner, the proliferation of cell phones among the rural poor is a golden ticket, a new infrastructure directly into households at the base of the pyramid. Even beyond mobile finance, cellphones can provide solutions at every link along the agricultural value chain—e-vouchers, credit scoring, SMS broadcasts of weather and prices and much more—to help lift smallholders out of poverty.

The rural poor are a huge and untapped market. ACDI/VOCA’s research on mobile finance for agriculture and our mobile banking projects are helping build this rapidly emerging body of knowledge. In Indonesia, for example, we’ve brought together a commercial bank, input suppliers (e.g., seeds and fertilizer) and a large cocoa buyer to help cocoa farmers access high-quality inputs while mitigating credit risk for the bank. The bank distributes the loan to the input supplier so the farmer can buy inputs. At harvest, the farmer delivers cocoa to the large cocoa buyer, and when accounts are reconciled, the profit is electronically transferred to the mobile wallet account the farmer has with the bank.   Continue reading →

Mobile banking and microfinance: Lessons from Pakistan

This post is written by Afsheen Shakoor, SBI-Pakistan Resident Advisor for an MFI branchless banking project. This post also appears on SBI’s blog.

Photo credit: ASASAH

Photo credit: ASASAH

Convenience.

It’s one of the greatest requests and laments of Pakistan’s microfinance clients. In surveys and informal interviews, clients say they want closer offices and quicker meetings. In this environment, little wonder that microfinance institutions (MFIs) are experimenting with mobile banking. But is mobile banking really the answer to clients’ prayers?

Well, maybe.

With mobile banking, instead of going to a branch office to make repayments, clients pay through designated agents of the partner bank or MFI. These agents may be local shopkeepers, pharmacists, or mobile retailers, and are ideally closer to the client than the MFI branch.

But in the case of Pakistan, agents haven’t been closer to the clients. Instead, they’ve clustered near the MFI and bank branches. So the gains in terms of speed and convenience have been modest, averaging as little as ten rupees. Continue reading →

What lies ahead for Peru’s branchless banking sector?

This post is written by Ali Gross, currently an MA student at Johns Hopkins University School of Advanced International Studies and an ADC intern at SBI. 

Within Latin America, Peru is generally considered a relative success with regard to expanding financial services to the poor.  In addition to a strong microfinance sector, branchless banking has grown rapidly since regulation changed in 2005 to allow banks to offer financial services through third-party agents.

Spending time working in Peru’s branchless banking industry, it became apparent that banks (particularly industry leaders like BCP, BBVA and Interbank) have much larger agent networks than MFIs and cajas municipales.  In addition to banks’ large agent networks, third-party platforms, such as GloboKasNet, have emerged to link various banks, MFIs and cajas to a common payment platform, meaning that one KasNet agent may offer services on behalf of multiple financial institutions.

In addition to the entry third-party platforms, the regulatory environment for branchless and mobile banking in Peru has been steadily improving, providing a huge opportunity for the expansion of financial services to the poor.   Until recently, regulation required new clients to open accounts in a formal bank branch, prohibiting the creation of new accounts by agents.  Recently, however, regulation changed to permit agents to open simplified accounts which have maximum account balances and low daily withdrawal limits.  Continue reading →

Are remittances through mobile banking the key to financial inclusion in ECA?

This post is written by Anna Fogel, SBI Associate Consultant.

Photo credit: enrin.grida.no

With more than 215 million people living outside their countries of origin, remittances play a major role in the economic development, GDP and poverty alleviation efforts of many countries. An estimated $350 million in remittances was received by developing countries last year, according to the World Bank, which is three times the amount of official development assistance and exceed foreign direct investment in many countries.  The trend of increasing remittances continues to grow and is projected to reach $1.5 trillion by 2016. This impressive volume has attracted attention from mobile banking operators, whose business model depends on high-volume, low-cost transactions. CGAP’s Chris Bold, in December 2010, dubbed remittances the “final frontier” of mobile banking.

In Europe and Central Asia, remittances have a particularly prominent role in the regional economy. Many of the top remittance recipients in the world, measured as a percentage of GDP, are in this region, including Tajikistan where remittances were equal to more than 35% of GDP in 2009 and Moldova where remittances equaled 23% of GDP in 2009. According to World Bank calculations, which measure official flows and therefore are generally undercounting, remittances equal more than ten percent of GDP in six countries in the region (Tajikistan, Moldova, Kyrgyz Republic, Bosnia and Herzegovina, Serbia and Albania). IFAD estimates than 30% to 40% of remittances flow to rural areas, critical in many Eastern European and Central Asian countries which have agrarian-dominated economies and high percentages of rural populations. Continue reading →

The Psychology of Pricing

This post is written by Debbie Watkins, SBI’s Resident Advisor in Dhaka, Bangladesh

A customer’s propensity to acquire or use a product is in part driven by pricing – combined with convenience, trust and accessibility. ADC implementations around the world have experimented with a number of different pricing options, which (hopefully!) have been calculated using a combination of different factors, including pricing of competitive products in their market, relative convenience and accessibility over the formal or informal channels people are using right now.

The important part of this sentence is “are using right now.” If you remember back in my second article, “Adding constituent value,” I stated that it must be remembered that whatever you’re offering is not “new” to them; it’s an alternative to what they’re using already, and you have to improve on that. I also mentioned that low-income people are pretty savvy when it comes to determining the true value of something, and if your pricing doesn’t cut it, they’ll just vote with their feet.

Pricing can also motivate people to behave in different ways. Here are a few possible scenarios to consider:

-          Flat pricing encourages fewer, larger transactions. This can result in liquidity problems for agents if they are dealing with infrequent but significant deposits or withdrawals. It also may mean the client is keeping the money in cash under the mattress until they have a lump sum to send, and the sender is then withdrawing the whole amount in one go and keeping it under THEIR mattress. Continue reading →

Agents or Mobile: What’s the channel of choice?

This post is written by Khurram Sikander, SBI’s Resident Advisor for UBL Omni in Karachi, Pakistan

Photo credit: Ryan D'Mello

In most emerging markets, the term “mobile banking” tends to be used interchangeably with that of “branchless banking.” As a result, branchless banking service providers may have overestimated the importance of the mobile channel while underestimating the importance of the agent channel when rolling out solutions.

Service providers have tended to dedicate significant efforts to developing the mobile aspect of their branchless banking propositions. For instance, in markets with a pervasive presence of smart phones, the mobile device has a significant impact on user experience and preference. As such, it ends up being a key consideration when a customer signs up for the service. By contrast, in less developed markets with low literacy rates, a face-to-face interaction with an agent is preferred. Human assisted transaction is paramount to the success of a branchless banking deployment whereas the role of a mobile essentially narrows down to a transaction authorization and alerts channel.

Continue reading →

Charging the channel: How are we keeping the wallets on?

This post is written by Sam Grant, an SBI consultant based in Brisbane, Australia

Original Drawing by Sam Grant

Low Battery, beep beep beep, power down. It has happened to all of us, out and about during our busy daily lives, conversing with friends or business colleagues, when all of a sudden our mobile phone battery dies, and with it our ability to receive the latest tweet, SMS or Facebook status update. Now imagine that your cell phone is also your wallet and when it turns off so does your access to cash.

One of the benefits of a traditional wallet is that it will never display a “low battery” message and does not require an electrical outlet. A vital, if somewhat peripheral input in every alternative delivery channel (ADC) system is electricity. Without reliable, affordable access to electricity the advantages offered through mobile enabled financial services is severely restrained. If the path to improving access to financial services is tied to portable electronic devices then this path must also encompass issues surrounding access to energy.  Cell phone ownership has permeated most urban environments around the world but growth in rural areas is constrained by network coverage and access to energy. In rural areas where population density is low, villagers often must walk great distances to charge their mobile phones. Many of these cell phone users only turn on their phones when a specific need arises. In order to tap into the expansive amount of activity and innovation taking place in the “banking beyond branches” ecosystem, rural populations and financial service providers must find a way to overcome the charging challenge.

Continue reading →

It’s just data! Why “mobile money” will become “internet banking”

This post is written by Ryan Falvey, an SBI Consultant

We’ve all read the stories about how telecom-based mobile money services – such as M-PESA – are allowing new

Photo credit: WhyGo Business

players to shake up financial services in developing countries, besting banks and providing a superior alternative to cash. While there is certainly some truth to this, there is also a lot of hype. After all, with the exception of M-PESA, no telecom based offering has come close to achieving either the scale or the penetration of Safaricom’s mobile offering.  A question that many in the space have been asking is why. I propose that part of the reason may have to do with the fact that it isn’t mobile money that people want; it’s efficient, useful and inexpensive financial services.  Unfortunately, most MNO solutions are built on extremely expensive, awkward and limiting technologies: SMS and USSD.

SMS might be both the world’s most expensive way to send data and one of the least efficient. An SMS costs, on average about $0.10 per message, yet it only allows an individual to send 140 bits of data. USSD can transmit a bit more data and the costs are, usually, a bit lower. However, both technologies are absurdly expensive when compared to the cost data plans. In most countries, these are between $10-$50 for 2GB of data. 2 GB of data on SMS at 10 cents a message would cost a user $3,072,000. Even if USSD cost 1/10 of the price of SMS (which it doesn’t usually) it’s clear that both technologies are completely inappropriate for sending and receiving data.  They’re the equivalent of the compact disc: an expensive, awkward, and, eventually, obsolete technology for transmitting and storing data. As such, mobile money platforms built on SMS and USSD are expensive, awkward and limiting. Continue reading →

SBI hosts summer reception on mobile banking and innovation for financial inclusion

On the evening of July 21, SBI, through its partnership with the Bill & Melinda Gates Foundation, had an opportunity to host a summer reception focusing on mobile banking and innovation for financial inclusion and featuring its partner in Pakistan, United Bank Ltd (UBL).  The event featured Abrar Mir, Executive Vice President & Group Head for Branchless and e-Banking, who was able to provide updates on UBL’s groundbanking branchless banking platform, Omni. UBL Omni is reaching beyond traditional bank networks and extending access to financial services to millions of unbanked Pakistanis, just a year after its official launch.

Why M-PESA may be a one hit wonder: the regulatory angle

Picture credit: SodaHead

This post is written by Shital Shah, SBI Associate Consultant.

The advent of M-PESA, a successful mobile money deployment in Kenya, raises the question of why such efforts have difficulty replicating in countries that are seemingly ripe for the use of mobile phones to increase access to financial services. If a large chunk of the population has a mobile phone in their hands, but they don’t have access to bank accounts, then they should be able to link the two together and solve the problem. This sounds reasonable in theory, but financial services are not offered in silo – they are primarily informed by regulations and a legal framework, which varies from country to country.

One reason why M-PESA may be a one hit wonder is due to Kenya’s regulatory environment with regard to mobile money, which was non-existent when Safaricom, the largest telecom operator in the country, first started M-PESA. As a result, regulations in Kenya were created as a reaction to a telecommunications company offering banking services, rather than a proactive central bank guiding the development of a banking innovation. By the time regulations came out of Kenya, M-PESA had reached scale. The likelihood of a similar trajectory happening in other countries, where banking industries may be more active in influencing policy or where regulators are proactively putting in place measures to control financial services beyond bank branches, is slim. Continue reading →