A recent blog post running on PCWorld highlights the idea of delivering aid via mobile phones. No doubt there’s real potential – we certainly think so. Consider how social protection grants are getting to some of the world’s poorest via bank cards in South Africa, Malawi and Kenya.

Going electronic can knock down costs of getting help to people who need it. The bar isn’t set very high: 65% of USAID’s food aid budget is consumed by the cost of delivery, for example. Handing out cash grants could be much more cost-effective, while boosting demand for local farm production. Using direct deposit with a debit card can also reduce corruption – light fingered officials siphoning off funds for the poor. So branchless banking should help with the relief industry’s traditional stumbling blocks of cost and corruption.

But maybe the most exciting opportunity is also creating access to banking, permitting the poor to manage their money better, with demonstrated results on family health, nutrition and education. But this seems to be where at least some relief programs stumble in using technology. For example, consider the pilot program in Malawi cited in the PCWorld post – where Concern Worldwide teamed up with a local microfinance bank (OIBM). OIBM-issued smartcards and an OIBM truck-mounted mobile branch were used to distribute five cash payments to 10,500 recipients during the 10 month program. The principal aim of the program is to permit households to meet their “food entitlement” by giving them the purchasing power sufficient to buy the necessary maize from markets, traders or farmers with stocks. DFID provided financing support.

The blog post points to the successes, especially due in part to smartcards, but there were some hard lessons, too, a lot of which are available in a report by Roland Pearson and Craig Kilfoil. CGAP also looked at the pilot when in Malawi last year. While the smartcards are 4 times more expensive than a standard magnetic stripe debit card, the project didn’t really take great advantage of the technology. The number one advantage of a smartcard is that you can operate in a completely offline environment without connectivity back to the bank. Instead, client data is stored on the chip in the card. But OIBM and Concern drove a truck with an ATM loaded on the back, essentially bringing the bank to the village. So magstripe cards might have worked just as well, but at 25% of the cost. In the end, the smartcard expenses added up to a whopping 20% of the US$ 50 distributed during the pilot. Better than US food aid’s flabby 65% deliver expense, but far from lean.

Instead, the main use of the smartcard was to make client identification easier. The smartcard comes with biometrics. This should be a big plus with illiterate clients and help ensure money gets to intended recipients. But instead of clients carrying their own thumbprint data on a smartcard, OIBM and Concern could have used a single thumbprint reader hooked up to a single PC on the truck. Off the shelf technology might read prints with a higher error rate, but OIBM and Concern staff were on site and could sort these out.

Access to finance benefits were mixed, at best. Clients intuited that it made little sense to leave money on the card, since there was nowhere else to transact in the countryside with this special smartcard, at least until OIBM came back in 2 months with the truck. Instead of using the card to save, or as a landing spot for remittances, most clients took all their funds out in one go. It would be interesting to hear if behavior has changed since the pilot. Some clients seeking a very illiquid deposit service might actually prefer not being able to get to their funds. But that wasn’t apparent in data from the pilot.

So, in reality, the best features of the smartcard weren’t taken advantage of – namely the ability to operate in the most remote, rural areas, without a landline or mobile signal back to the bank. But that’s mainly the result of choosing to drive a truck out to the clients. By bringing the bank to the client, the smartcard was largely redundant. But if Concern and OIBM had instead installed card-swipe POS terminals at local merchants, suddenly the smartcard looks very useful.

In fact, we think agents is the real lynchpin to making technology useful to the poor. It gives them everyday easy access to turn cash into electronic value, rather than have it locked on a card or in a phone. It may have been difficult to find suitable agents in the pilot area in Malawi, and we understand there was a lot of pressure to get the grants out quickly. But we also understand OIBM is now thinking hard about building a network of its own agents across the country for its more than 100,000 microfinance clients to use their smartcards at. Agents are central to making branchless banking work.