Branchless Banking 2010 : whos served? at what price? whats next?

New research reveals that low-income families in Bangladesh, India, and South Africa use an average of eight different financial instruments each year to move money over time, and that active management of their money is necessary to basic subsistence. Given this reality, branchless banking and its accompanying lower costs has a high demand in developing nations, with Brazil and Kenya leading the way. This note takes a close look at data from 18 branchless banking providers with a combined client base of more than 50 million customers. One of its findings is that contrary to what some believe, branchless banking does not replace, but instead, complements microfinance institutions (MFIs). On average its services are also 19 percent cheaper than comparable services at regular banks. One study goes so far as to show that it can offer these services for at least 50 percent less than what it would cost using traditional channels. The tentacles of branchless banking do indeed reach far; already it has attracted unbanked consumers in many developing nations. Potential consumers are most likely to be people who currently adopt a piecemeal method to managing their finances, some of which are tenuous at best and more costly than using branchless banking. Research also indicates that clients want more than just payment services. Taking heed, several providers are already beginning to meeting this need. The authors are cautious, however, about the new products and services beyond payments that mobile network operators (MNOs) are offering, citing lack of regulation and knowledge as reasons to doubt their eventual success. This note does recommend seeking out atypical clients, not just typical ones, in future research in order to generate new product ideas that will meet the needs of the unbanked, rather than simply improving upon existing ones.