In her opening remarks, Elizabeth Littlefield used the example of Brazil to illustrate two points. Since the government began allowing use of banking agents to deliver financial services several years ago, 98% of the municipalities now have easy access to financial services. That number is enviable by all standards. At the same time, one network manager experienced an 85% turnover in agents during the first few years.

While this number was down to 16% by early 2007, it exemplifies the immense operational challenges of implementing new channels. Elizabeth’s comments on the promise of new technology were coupled with a cautionary tone that has been a resounding theme of many presentations at the Next Generation Access to Finance conference this week. And we haven’t even heard from the regulators yet!

In the first day’s sessions on credit bureaus and bank-end systems, moderators and presenters made the convincing case that infrastructure is critical and must be in place before embarking on other technology-enabled delivery approaches. We’ve also heard from MFIs actively using credit scoring, m-banking, and agents.

Based on conversations with MFIs over the past two days, conference attendees lie on the spectrum from those without solid back-end systems or from countries without much financial infrastructure such as payment systems and credit bureaus, to those already using m-banking, scoring, and other advanced technology approaches. While some MFIs are mingling with the technology vendors on display and discussing their m-banking plans, others are interested in pursuing these ideas but know that they and the markets in which they work need to put some basics in place before it will be possible.

Despite the different starting points, several issues are emerging as critical to the sucessful planning and roll-out of technology approaches:

1. Strong back-end systems and regulatory clarity are the foundation to introducing advanced technologies.
2. “Ecosystems” where people can readily transact electronically or convert cash into electronic units will be important to develop scale.
3. Financial education is key to customer adoption.
4. Interoperability improves the value proposition to the agent (more traffic means more commission) and client (more points of sale) but can be challenging to implement.

All the cautions and challenges aside, the mood at the conference remains optimistic. Technology alone will not magically bring the millions of unbanked into the formal financial system, but coupled with the customer-focused approach that microfinance is known for, it just might.