> Posted by Anita Gardeva
Traveling hours to reach the nearest bank branch is common and expensive for the poor
Word of the Week – Branchless Banking: Banking models and delivery channels that deliver financial services to clients through outlets other than full-service bank branches.
Branchless banking refers to mobile banking, correspondent and agent banking, electronic banking, and the use of ATMs. The appeal of branchless banking in context of financial inclusion is its ability to close the location gap and increase affordability through automation.
Spotlight Fact: Studies estimate that branchless banking solutions, such as mobile banking, can drive down the cost of banking for clients by up to 5 to 10 times, just by eliminating the need to travel to the nearest branch. On the side of the providers, estimates show that mobile banking can reduce the cost of delivering financial services by more than 50 percent.
Suggested Resources:
- Mark Pickens, David Porteous, and Sarah Rotman, “Scenarios for Branchless Banking in 2020” CGAP Focus Note, No. 57, October 2009, http://www.cgap.org/gm/document-1.9.40599/FN57.pdf
- Barclays and Economist Intelligence Unit, “Banking for billions: Increasing access to financial services” http://www.newsroom.barclays.com/Media-Library/Banking-for-Billions-report-165f.aspx
For more financial inclusion terms, please visit the Financial Inclusion Glossary.
For more information, sign up for updates from the Financial Inclusion 2020 campaign.
Flickr credit: moyerphotos
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September 14, 2010 at 9:19 am
Fehmeen
Here’s another resource about mobile banking: http://www.cgap.org/gm/document-1.9.43876/Branchless_Banking_Pricing_Analysis_May_2010.pdf.
It’s a paper that concludes mobile banking is almost 20% cheaper than traditional banking.
September 14, 2010 at 10:02 am
Center for Financial Inclusion
Hi Fahmeen,
Thanks for this resource! Its full of good insights. One that I found interesting (in addition to the yours on mobile banking) is their takeaway that, “The lower the transaction value, the cheaper branchless banking is in comparison with banks. For example, at a transactional value of $23,
branchless banking is on average 38% cheaper than commercial banks we looked at.” The high costs that banks have with small transaction amounts is an important hurdle to financial inclusion so the fact above is a persuasive illustration of the value of branchless banking.
September 15, 2010 at 12:14 pm
Fehmeen
That is absolutely correct. Commercial banks must have a lot to learn from branch-less banking operators in terms of cost-efficiency and if they (banks) fail to collaborate with these operators, they may face a significant competitive threat in the long run. An example of a valuable alliance between banks and brachless banking is that of M-Kesho in Kenya.