This is an excerpt from a recent CGAP paper, The Early Experience with Branchless Banking. The paper synthesizes the observations and research of the CGAP Technology Program. Gautam Ivatury and Ignacio Mas wrote the paper, with substantial input from the entire program team. This blog series will cover seven observations, four uncertainties and four predictions for branchless banking - what we call mobile banking and other technology-enabled banking solutions.

In developed countries, bank customers have access to several channels, each supporting a range of services. Bank cards offer convenient cash dispensing where ATM deployment is widespread. The Internet offers convenient access to more complex bill paying or remittance services. Checks can be deposited by mail. Telephone banking provides instant access to account balances and recent transaction histories. Customers also can do all of this with a more personal, higher touch service at a branch. Therefore, mobile banking struggles to achieve customer relevance, beyond simple informational services (e.g., balance inquiry), notifications (SMS alerts), and, once phones have “contactless” card capabilities, micropayments for public transport or vending machines.

The situation is, a priori, very different in developing countries, where there is less deployed infrastructure (fewer branches, ATMs generally co-located to relieve branches, low broadband penetration). For many customers in these countries, the mobile channel with banking agent sin principle could offer a much clearer convenience advantage over alternatives (travel and queuing at branches or cash-based savings). Hence, there is more reason to believe that mobile banking will find more than a niche application and could, in fact, become the primary banking channel for large segments of the population. For this to happen, some of the key uncertainties mentioned earlier would need to be resolved favorably.