New Report Finds Four Forces Will Shape the Future of Mobile Banking

Governments, industry can make choices to increase financial inclusion in the next decade

LONDON, Nov. 18 /PRNewswire-USNewswire/ -- The growing use of branchless banking, including mobile phone banking, is inevitable in most countries. But it's far less certain whether large numbers of the unbanked poor will use these alternative channels for financial services beyond payments, such as savings and credit. So says "Scenarios for Branchless Banking in 2020," a new report from CGAP, a microfinance group based at the World Bank, and the U.K.'s Department for International Development (DFID).

    UK Minister for Trade and Development Gareth Thomas today said:

"The fact that many of the 2.7 billion people who currently don't use a bank will have access to branchless banking methods such as mobile phones and the internet by 2020 is a huge step towards financial inclusion for people in developing countries.

"The poor are kept in poverty when they are financially excluded. This means they lack safe places to save money, the opportunity to invest in their future and cannot reduce the risk of their savings being lost in natural disasters.

"As this report shows, governments and the private sector both have a huge role to play in ensuring investment is made to deliver technology-based financial services to billions of poor people."

The report sets out four scenarios on the future of branchless banking. In all four scenarios, the adoption and use of branchless banking services is forecast to be higher in 2020 than it is today. But in two of the scenarios, bursts of rapid acceleration are followed by periods of falloff or flatter growth.

"Mobile banking pioneers give us hope that millions of poor people, especially those living in rural areas, finally might be served by the banking system. That said, new business models and partnerships that provide the right incentives to banks and banking agents are vital if we are to move beyond simple payments and transfers to being able to offer other basic banking services, especially savings, that poor people need and want," said Elizabeth Littlefield, CEO of CGAP.

The report is the product of a six month scenario-building project that engaged nearly 200 leaders from the fields of technology and finance from more than 30 countries.

    Snapshot of Branchless Banking Today
    --  Financial inclusion is growing in most countries. This is often as a
        result of the expansion of conventional banking channels, such as
        branches and automated teller machines (ATMs);
    --  Bricks-and-mortar growth is inherently limited by its cost. Branchless
        banking presents a cheaper option but has only modest reach to date in
        most countries;
    --  Where branchless banking is occurring, several of the following
factors
        are usually at work: (i) industry belief in future profitability; (ii)
        enabling regulatory change; (iii) a dramatic fall in connectivity
        costs; (iv) the creation of cash-handling agents using existing
        networks; and,

    --  Current hype about the potential of branchless banking is running
ahead
        of reality. Massive sustained success in reaching the poor requires
        more accurate insights on poor people's financial needs and adoption
        behaviour. This is only now starting to become available.

    Four Forces Shaping Branchless Banking for 2020
    --  Demographic changes -- including a greater number of younger consumers
        coming into the market and greater mobility at least within countries
        -- will be favourable for the adoption of branchless banking;
    --  Activist governments will play a greater role as regulators of the
        financial sector, providers of social safety nets, and providers or
        encouragers of the rollout of low-cost bank accounts and financial
        infrastructure. This expanded role may be helpful for financial
        inclusion;
    --  While security concerns about cash crime will continue to drive the
        adoption of electronic transaction channels, the rise of electronic
        crime will affect consumer confidence and test the risk management of
        financial providers; and,

    --  Internet browsing via mobile phones will reduce costs of financial
        transactions and enable new players to offer financial services.

CGAP and GSMA researchers have found that across Africa, Latin America and Asia, the number of people who do not have a bank account but do have a mobile phone is set to grow from 1 billion today to 1.7 billion by 2012. These "unbanked mobiled" individuals represent a compelling market opportunity for service providers.

    Notes to Editors

The report will be released today at DFID in London. There will a live webcast on the CGAP Technology Blog from Washington D.C. on Dec. 1. Learn more at http://technology.cgap.org.

    The CGAP Technology Program is supported by the Bill & Melinda Gates
Foundation.

CGAP is an independent policy and research centre dedicated to advancing financial access for the world's poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors. More at http://www.cgap.org.

The Department for International Development is the UK Government's department that manages Britain's aid to poor countries and works to get rid of extreme poverty. You can find out more at www.dfid.gov.uk/.

DFID recently launched a Facilitating Access to Financial Services through Technology (FAST) project to support the introduction of "branchless banking" to mass-markets in developing countries, such as Kenya, Tanzania, Pakistan, Nigeria, India, Bangladesh and Ghana. Pilot projects will be evaluated by teams of finance and technology experts and where appropriate help and promote increases in scale or spread to different countries.

For further information: Jim Rosenberg, +1-202-473-1084, jrosenberg@worldbank.org, for CGAP; or DFID Press Office, +44 (0) 207 023 0600 Web Site: http://www.dfid.gov.uk