This post is written by Khurram Sikander, SBI’s Resident Advisor for UBL Omni in Karachi, Pakistan
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.
In Pakistan, the role of the mobile phone in expanding financial access to the poor has been relatively limited. The number of branchless banking accounts opened compared to active accounts remains low. Moreover, analyzing the transaction behavior of BB account holders shows the use of the mobile account is primarily for mobile airtime purchase. Clients retain small amounts of cash in their accounts in case they need to purchase airtime in emergencies or during late hours when vendors are inaccessible. SBI’s interactions with un-banked people have revealed an apparent demand for diverse BB products and services. The most pronounced need was for a facility that stores money in an account or instrument where a client’s daily or monthly earnings could be safe from criminals. Another need that was latent was saving money in traditional methods like community ‘saving and rotating committees’. Branchless banking propositions in Pakistan are primarily developed to facilitate transactions, such as bill payment, domestic remittance, and mobile account top-ups. Without a large gap in fee structure clients and non-clients find it easier to simply use the agent location to conduct transactions. In addition, agents have an edge in that they provide customers a printed confirmation which can facilitate disputed payments with utility companies.
For standard banking transactions, the prevalent culture in emerging markets is to prefer human interaction over “faceless” technology. This primarily owes to lack of awareness and a weak trust-based environment. Since domestic money transfer transaction is a one-off payment per month for most walk-in or existing customers, there is less inclination to open a mobile account for such a transaction. Walk-in customers prefer to add, for example, a bill payment to their grocery list and are able easily conduct this transaction while buying bread. Simply entrusting the transaction to the agent is more convenient than understanding how a new service works. The agents are glad to facilitate this transaction instead of selling the mobile account or transaction as this means less effort and more commission. In a country like Pakistan where the conventional banking technology infrastructure has substantively upgraded in the last ten years we can feel the impact of a shared electronic financial transaction gateway. With all major banks interconnected to each other, most banked customers are receptive to considering alternative channels to brick and mortar banking. Consequently, with the right incentives for both customers and agents, banks are successfully shifting transactions to various delivery channels. It is in fact quite common to witness customers pushing other customers or businesses to use channels for collections and payments primarily due to the convenience factor.
So what is the way forward? The key will be to proactively encourage agents to divert incoming traffic to open accounts and use mobile or any other channel for day to day transactions. This will be possible by designing an above-the-line marketing campaign that amply demonstrates the value of the product to the masses. This awareness campaign needs to be coupled with extensive below the line activities that show customers how to use the product. The right mix of attractive commissions and BTL efforts will enable agents to effectively sell the value of the account and make customers comfortable and accustomed with this new technology.
Over the short horizon, the agent and over-the-counter transactions will dominate the financial landscape until a system emerges where all the banks, MFIs, telcos, government agencies, and service providers become open to interoperability, creating a universe where mobile money is considered the norm rather than a choice.