Ten years ago, there was no active m-banking. Global cell phone penetration stood at 8% (0% among low income countries). The Central Bank of Brazil was promulgating the first set of regulations which would allow bank correspondents on a broader basis. Microfinance had caught the eye of some beyond its enthusiasts and practitioners, but the cause of financial access was considered a niche not a mainstream policy emphasis.

Now, in 2009, much has changed: branchless banking channels are now widely accepted as a means of extending the reach of the banking system. The potential of m-banking is sometimes described in breathless terms, based in part on the meteoric increase in wireless coverage. Some 80% of the world’s population is within coverage and there are more than 4 billion cell phone subscriptions.

Where will branchless banking be in 2020? CGAP and DFID have launched a scenario building exercise to pinpoint the forces and uncertainties shaping a driving question: “How can government and private sector most affect the uptake and usage of branchless banking among the unserved majority by 2020?”

A conventional view of what is likely to unfold could be quite optimistic. Underlying motivations remain very powerful for providers (reducing transaction costs while expanding to new markets) and on the client side (need for remote transfers and payments, with increasing trust in new instruments such as mobile). Overall, investment in and usage of branchless banking both increase, though rates will vary considerably by customer segment and country. In this view, M-PESA in Kenya is just the first wave of the future. Nonetheless, we believe that we are at least one, more like two or more, generations away from approaching a cashless society.

This is some of today’s conventional wisdom. If this seems like a probable outcome, have we taken stock of the alternatives, which might be driven by low-probability but high-impact events? What could cause branchless banking to veer off in an unexpected direction (either fortuitously positive, or dystopically unpleasant)? Just as branchless banking in 2009 would be a true surprise to a visitor from 1999, we’re likely to find surprises in customer response, regulation, and market structure between now and 2020. How will governments respond to not only the global financial storm, but the pre-existing crises of high food and fuel? What effect for LTE and WiMAX, let alone technologies which are little known today but which may erupt onto the scene?

We all know from recent history alone how misguided the wisdom of herds can be. The scenario building project is designed to test, flex, and adapt our understanding, not necessarily to forecast uptake numbers. Rather, we aim to pinpoint key “pressure points” where action by private industry and public policymakers will have the most effect.

CGAP and DFID will consult industry and regulators on several occasions over the coming months, leading to publications containing the findings in September 2009. And we’ll be engaging you as well for your thoughts and views on this blog and in other exciting ways. Stay tuned.