A few weeks ago, CGAP released a study comparing the prices of 16 branchless banking pioneers and 10 traditional banks across eight use cases. We found that the average monthly cost of using a branchless banking service is $3.90 (PPP adjusted) compared with US$4.80 when using a traditional bank. The conclusion: branchless banking is cheaper than traditional banking, but the gap is not as wide as some may think.

However, these high-level numbers mask significant differences between providers, use cases and transaction values and volumes. Providers make numerous pricing decisions that impact the end price for different customer segments. For example, I’ve blogged before about the pros and cons of offering discounts for airtime purchased via a mobile banking service. Four of the 16 providers in the study offer airtime discounts of between 5 – 10%. As a group, their average price across eight use cases is 25% lower with the discounts than without and the discounts more than offset the prices of transfers and bill payments in several cases.

In the medium-term savings use case, a customer deposits small amounts weekly and withdraws the entire amount ($75, enough to buy a basic sewing machine or bicycle in most countries) after six months. Although many providers are excluded from offering and marketing a deposit product, customer surveys (for example, by MIT/FSD Kenya and Olga Morawczynski/CGAP) reveal that customers are storing value via their mobile wallet accounts. At $1.6 average a month (and just $0.7 median) the medium-term savings is the cheapest use case of all. Why? Many providers offer free deposits in an attempt to encourage higher usage for transactions like transfers and bill payments. So, customers who use the service primarily for deposits and minimize expensive transfers and withdrawals can access a savings service that is almost free.

One of the most interesting results points to branchless banking’s potential appeal for low-income people. This is the large gap between branchless banking and banks at low transaction values (BB is 38% cheaper at about $20 average transaction size). However, branchless banking quickly becomes very expensive for customers dealing with either high volumes or values. Shopkeepers in Kibera (Kenya’s largest slum where there are no ATMs or bank branches) told me last month that they use M-PESA for safekeeping, depositing store funds every evening and withdrawing every morning. Even if the average amount stored every night is just $100, the monthly price for this service is $50 – far higher than a bank account. Providers should perhaps consider loyalty programs or a bundled option for the intensive user customer segment.

How does the price of your service compare with those of the 16 in our study? We are releasing a spreadsheet which includes all the pricing details for the 16 branchless banking providers and 10 banks in the study (accurate as of April 15, 2010). In addition, you can plug in your own prices for 6 of the use cases and see how your prices compare. Go ahead and try it, and we look forward to hearing your feedback.

-Claudia McKay