To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar. One session on branchless banking from the consumer’s point of view (download the presentation here)  was chaired by Daryl Collins, a Senior Associate at Bankable Frontiers and co – author of the influential Portfolios of the Poor: How the World’s Poor Live on $2 a Day. The book draws on year-long surveys of financial diaries from families in Bangladesh, India and South Africa. The surprise conclusion: many of the people they tracked were not living hand-to-mouth. Rather, the poor often rely on a variety of complex tactics and tools to manage money. In preparation for the session, Daryl reviewed household survey data from Brazil and Kenya – what experiences the poor have had with branchless banking and how this might inform the choices that regulators make when it comes to branchless banking. This is the second part of a two-part interview I conducted with her.

How are consumer experiences with branchless banking driving the policy debate?
What we are trying to do is to talk about the evidence on the ground. A lot of times what drives policy is perception – through the media, what people may hear about rather than systematic evidence. So we conducted a bespoke survey on correspondence banking in Brazil and looked at an exsisting surveyon M-PESA to look at the incidence with which the poor have problems with branchless banking.

So is branchless banking a problem when it comes to consumer protection?
Not based on what we’ve seen. The surveys show that the incidence of problems is not as high as we thought, especially when you compare to other types of outlets, for example ATMs.  In Brazil we found there was a lot of use of correspondence agents, especially to pay bills, and that those were used mostly by people who could be considered vulnerable, with low levels of literacy and income. We don’t see transactions happening at agents going wrong any more often than at other places, for example at an ATM or in a bank branch. We found no real difference when it comes to availability of cash – for agents vs. for ATMs.

Where is there room for improvement?
What we really see is that when something does go wrong, people don’t know how to seek redress for the problem. In those instances, a relatively high number of people didn’t do anything because they didn’t know what to do or didn’t think anything could be done.

That’s Brazil. What about Kenya?
According to a 2008 FSD Kenya survey on M-PESA, people are using M-PESA mostly to send remittances. M-PESA really drowns out the other ways of sending money. What is surprising about M-PESA is that people reported incredibly little loss of funds on both remitting money and saving with M-PESA.  Only 1 in 100 M-PESA savers lost money as opposed to 5 in 100 losing money in savings clubs. The incidence of loss is really minimal. More importantly, those who have lower levels of income and literacy aren’t having any more problems than the less vulnerable.
What is the key takeaway for the people who make the rules?
It is the job of regulators to worry about what could go wrong – are there risks for vulnerable poor people? There’s nothing in our results that should present a red light for branchless banking. Rather, in those rare instances where things go wrong, it needs to be made more clear to the customer what her rights are, how to seek help. It’s more about a type of financial education. A lot of consumers are today getting services from formal institutions and don’t know how to complain or get a problem solved.

-Daryl Collins, as told to Jim Rosenberg