For the unbanked, is mobile money cheap enough? CGAP releases pricing study across 16 providers in 10 countries

by Jim Rosenberg : Monday, May 24, 2010

What does mobile money cost for the unbanked and underbanked? CGAP releases pricing study across 16 providers in 10 countries

What does mobile money cost for the unbanked and underbanked? CGAP releases pricing study across 16 providers in 10 countries

My colleagues Claudia McKay and Mark Pickens have pulled together a comprehensive global pricing study on banking services targeting poor, unbanked and underbanked people in Africa, Asia and Brazil (pdf). The study examines pricing for services targeting unbanked and underbanked poor people in 10 countries.

The conclusion: mobile banking and other forms of branchless banking are cheaper than traditional banking, but the gap between the two may not be as wide as some may think.

On average, branchless banking is 19% cheaper than banks. Why isn’t the pricing gap wider? Mobile money providers might be keeping profits for themselves and not passing them on in lower costs. There could be a good reason.

It is possible that establishing a successful, scaled branchless banking service could be more expensive than expected. Some branchless banking providers want to leave room to come down on prices as more competitors enter the market.

Other highlights:

  • The lower the transaction value, the cheaper branchless banking is in comparison with banks. For example, at a transactional value of $23, branchless banking is on average 38% cheaper than commercial banks the study looked at.
  • Branchless banking is 54% cheaper than informal options for money transfer.
  • Customer usage is influenced not only by absolute prices but by the way a service is priced. For example, in order to encourage trial of money transfers, some services offer free deposits, which make branchless banking an affordable way to save.
  • Average branchless banking price is $3.90 per month.
  • Informal providers charge double the price for a money transfer than a branchless banking provider.
Services analyzed:
  • Afghanistan: M‐Paisa
  • Brazil: Bradesco and Caixa
  • Cambodia: WING Money
  • Cote d’Ivoire: MTN Mobile Money, Orange Money
  • India: Eko
  • Kenya: M‐PESA and Zap
  • Pakistan: easypaisa
  • Philippines: GCash and Smart Money
  • Tanzania: M‐PESA, Zap
  • South Africa: MTN Mobile Money, WIZZIT
The study found that by comparing 26 branchless banking pioneers and traditional banks with products aimed at the same kind of customers, on average, branchless banking is 19% cheaper across eight use cases:

1. Sending Money Transfer
2. Receiving Money Transfer
3. Short‐term safekeeping
4. Medium‐term saving for asset
5. Bill Payments
6. High Usage (as a proxy for financial inclusion)
7. Average monthly transactions per M‐PESA user in 2008
8. Average monthly transactions per Kenyan banking customer in 2008

-Jim Rosenberg

TAGS: Afghanistan, Africa, Brazil, Cambodia, CGAP, Customer adoption, East Asia-Pacific, India, Kenya, Latin America, Mobile Banking, News, Philippines, South Africa, South Asia, Tanzania

Comments: Comments and trackbacks are open.

9 Comments RSS 2.0

  1. May 25th, 2010 at 9:18 pm, Financial Inclusion ()

    FINOis into designing and implementing innovative technology solutions – systems, services and networks – that will enable a greater range of Financial Inclusion Consulting financial services to reach the un-banked masses at a lower cost.

  • May 30th, 2010 at 4:11 pm, Navin ()

    Thank you for the very detailed analysis on the cost of Mobile Money vs traditional banks. It would be interesting to put a value to the convenience of anytime/anywhere feature of mobile money. In India, you can easily add atleast 30 minutes and around Rs 6 (Rs 3 basic bus fare x 2) to the cost of a traditional banking activity/bill payment.

  • May 31st, 2010 at 10:54 pm, For the unbanked, is mobile money cheap enough? CGAP releases pricing study across 16 providers in 10 countries : State of Telecom Industry in Pakistan ()

    [...] more of the story at the CGAP Technology Blog. Category: Emerging Markets Telecom, M-Commerce, M-banking, Mobile Trends, Pakistan, [...]

  • June 25th, 2010 at 9:37 am, Mark ()

    Hi Navin,

    It’s obvious that branchless banking’s anytime, anywhere capability is useful to some clients, and saves them money and time. But probably not for all clients. The evidence that is available indicates a lot of people combine multiple activities into their trips to town, to market, downtown: they may go shopping, hit the post office, and go by the bank. Does branchless banking really save them time and money, if they would still go to market and the post office and pay for that trip anyhow?

    There needs to be more, better research on this. But one study I have heard about is a Safaricom analysis of M-PESA users: they say 47% of M-PESA customers save an average of 3 hours in transport time and USD 3 in transport costs.

  • July 27th, 2010 at 5:46 am, Anil ()

    The mobile banking will take time to grow as people have to trust the system. The approximate savings will differ from person to person and event to event and hence it will be difficult to arrive at a approximate savings for the person.

    Will be person pay the monthly fees initially, needs to be checked as they will not be sure how effective will be the system be. We need different strategies to attract the users.

  • November 8th, 2010 at 8:23 am, Nikhil ()

    Now that mobile telephony has reached areas where no grid electricity is available, is the convenience and cost of re-charging a hindrance to mobile use in general or to mobile banking in particular?

  • January 19th, 2011 at 2:17 pm, Importance of Third Party Technology Players in Microfinance | Red Cloud Money Blog ()

    [...] Understandably; credit bureaus are well positioned to fill in this void as they have the infrastructure in place and by adding information regarding microfinance borrowers and other clients, credit bureaus can offer to significantly reduce credit risk for microfinance institutions. Real time integration between credit bureaus and MFIs is enabled through the telecommunications sector, which also have a role to play in enhancing service outreach while controlling transport and other costs. Mobile banking can significantly lower the cost of delivering these services, as stated in a recent CGAP report. [...]

  • January 29th, 2011 at 1:10 pm, Casaria ()

    Mobile banking is still in its infancy. It will take time for people to have confidence before even talking price. IMHO.
    Casaria – credit pour rsa

  • April 21st, 2011 at 10:42 am, Where Mobile Money Matters ()

    [...] (a text message is also known as an SMS in some countries) capital of the world. According to research by CGAP, these are also two of the cheapest services [...]

    • Leave a Reply