Branchless Banking

Mobile phone subscription has seen explosive growth in all over the world. Total subscription now reaches to 109 billion across customers in all income segment, and growth continues apace. In contrast, banking accounts are owned by approximately 125 million customers, largely belonging to high income segments. The fast mobile penetration and its continuing strong growth fuels expectations that transformational branchless banking (BB) models would prove a game-changer in improving access to finance all over the world.

Hitherto, lack of a sizable distribution network had been a major challenge in broadening access to financial services. Developing brick and mortar branches is a costly proposition. Even handling field operations from such branches has proved expensive owing to ever-increasing associated costs. As a result, a large segment of the population that lives in rural and remote areas remained deprived of banking services. An important imlication of this exclusion is that this large populace has been overwhelmingly reliant on cash-based transaction, thus causing myriad obvious negative impacts on documentation of the economy, the tax-base, efficency of economic transactions, etc.

Although Branchless Banking Regulations only allow bank-led model, it encourages multiple approaches for developing partnerships. The partnership models include one-to-one (one bank having joint venture/agency agreement with one teleco/non-bank), one-to-many (one bank with many telcos), and many-to-many (many banks with many telcos) this is aimed to create space for experimentaiotn as well as to keep prudent supervisory oversight. The permissible activities under branchless banking are opening BB account, fund transfer, cash-in and cash-out, bill payments, merchant payments, loan dusbursment/repayment etc. These activities may be offered through a variety of channels such as mobile phones, retail agents, ATMs, smart cards, and POS.