Why Banking Beyond Branches

This post is written by Ryan Falvey, an SBI Consultant based in San Francisco, CA.

Mobile money practitioners are a diverse lot. We hail from dozens of countries – both developed and developing – some of us are older, with decades of experience, while others are fresh out of school. Some practitioners believe in the power of markets and are distrustful of government regulation, while others view the market as a force that must be closely regulated. Some practitioners think that conventional banks are the problem, while many believe they are the solution. However, what all of us share is a core belief that improving access to financial services, improves lives. We believe that a safe places to save, improved access to credit, and secure means of transferring funds allows people to live more comfortable, secure and productive lives.

Most of us also believe that the financial system, as it’s currently configured, doesn’t do this – especially in emerging economies. While there are nearly as many bank accounts in the world as people – 6.2 billion – there is in unequal penetration of these accounts. With nearly 3.2 accounts per adult in developed countries – equating to 81% of the population – but only .9 accounts per adult in developing countries — and only 28% banked. Since we know that bank accounts are positively associated with development and physical infrastructure, improving access to the formal financial sector is a priority. (http://bit.ly/qLYZtd)

So, how do we improve it? Unfortunately, there isn’t one clear answer. Certainly, competition is probably a good thing: more players bring more products, lower prices and push to serve more customers. Competition also breeds innovation. The widespread expansion of microfinance over the past two decades focused the attention of many banks in developing countries on the profit potential of serving the poor and unbanked. Similarly, many of those in the development finance “industry” are now looking at the new service offerings of non-banks, such as telecom enabled “mobile money”, to create a viable alternative to banks and provide further innovation, products and financial services to the billions that are still excluded from the formal financial sector.

However, as my colleague Jesse Fripp pointed out in his post last week, there is a tendency to focus on the potential of one solution – in his case mobile payments – to solve a series of intertwined and complex problems – in his example, the lack of financial services for the poor. This isn’t necessarily a bad thing; some developments, of course, are transformative. And, mobile money may seem like it might be one of those developments. Certainly it is easy to get excited about the possibility of tapping into what is certainly a transformative technology – mobile telecommunications – to offer transformative services. However, that process of developing the services and products that are being enabled by mobile telecommunication networks will not be easy. Financial products are relatively easy to design, they are significantly more difficult to market, distribute and service efficiently. Hence moving banking – or financial services – beyond the branch network will certainly require a host of perspectives, innovations and unique developments in markets throughout the world.

As such, one of SBI’s motivations for launching Banking Beyond Branches was to create a forum where practitioners, both those who work with SBI and who work in the field broadly, can share their experiences, highlight significant innovations, and debate the merits of various approaches to the challenge of moving banking beyond branches. Over the next couple of weeks, a series of posts on this site will begin to highlight these challenges – from the complex regulatory environment of India, to the managerial challenges of launching a branchless banking solution, to a discussion of technology infrastructure. Between these lines of discussion, members of the SBI team will also be sharing their thoughts on broader trends in the industry. Of course, we also invite others to comment and share their perspectives as we seek to provide a forum for the industry to present their work, challenge the status quo and, together, move banking beyond branches.


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