Enterprise Solutions to Poverty
Interim Report on
Alternative Channels and Products
for Inclusive Finance
August 2014
Forty financial and related institutions are participating in
the ESP survey on channels and products for inclusive
finance with 20 analyzed in this report
Commercial banks 17
Banco do Brasil
Bradesco
Caixa Economica Federal
Banco Estado
Bancolombia
BCSC
Citi
Banamex
Banco Azteca
Bancomer
Banco Continental
BCP
Scotia Bank
HDFC Bank
ICICI Bank
SBI
Equity Bank
Brazil
Brazil
Brazil
Chile
Colombia
Colombia
Colombia
Mexico
Mexico
Mexico
Peru
Peru
Peru
India
India
India
Kenya
MFIs 7
FMM
Compartamos
CrediScotia
Financiera Edifycar
Colombia
Mexico
Peru
Peru
MFIs continued
CreditEase
Basix Group
SKS
China
India
India
Related, partner organizations 10
Servientrega-Efecty
Colombia
Sura Inversura
Colombia
Fincomun
Mexico
Globokas
Peru
Alibaba
China
F-Road
China
EKO
India
FINO
India
IFMR Trust
India
Safaricom MPESA
Kenya
Resource institutions 6
CFI Accion
CGAP
MicroSave
Women's World Banking
Asobancaria
ABM
USA
USA
India
USA
Colombia
Mexico
Leading banks and MFIs indicate that they are motivated to take
advantage of a large, untapped, profitable market; help low
income people and small businesses build income and assets,
and cross sell products to a promising client base.
High
Taking advantage of a large, untapped
profitable market opportunity
Helping a substantial number of lowincome clients build income and assets
Helping micro and/or small enterprises
build their businesses, income and assets
Medium
Responding to mandates or strong signals
from government and/or regulators
Low
Building a promising new client base, with
opportunities for growth and cross-selling
a range of financial products and services
Moving down market, since traditional FI
markets are becoming saturated and/or
highly competitive
High
Bank
MFI
MediumImportance
Low
Among leading banks, patterns differ but for
most, BCs and mobile banking are growing
more rapidly than are branches and ATMs
Banco do Brasil
Bancolombia
2012
2013
2014
Banco de Crédito del Perú
Branches
Branches
ATMs
ATMs
ATMs
BCs
BCs
Mobile
(thousands
of customers)
Mobile
(thousands
of customers)
BCs
0
10.000 20.000 30.000 40.000
0
Banco Caja Social
2.000
0
4.000
Banco Estado
Branches
5.000
ICICI Bank
Branches
Branches
ATMs
ATMs
BCs
BCs
Mobile
(thousands
of customers)
Mobile
(thousands
of customers)
ATMs
BCs
0
2.000
4.000
6.000
8.000
0
5.000
10.000
15.000
0
4.000 8.000 12.000 16.000
In Brazil, Mexico, Colombia and Peru, growth in branch
and ATM outlets and transactions is low relative to BCs
and e-banking--but these channels dominateinn most
countries
Brasil
Mexico
% of total outlets
Branches
4%
12%
4%
2%
16%
48%
3%
2%
ATMs
29%
28%
2%
7%
15%
47%
7%
3%
BCs
67%
4%
35%
9%
33%
3%
76%
48%
E-Banking
NA
57%
NA
38%
NA
1%
NA
25%
Colombia
% of total
transactions
Average annual
growth rate
(2008 to 2013)
% growth
outlets
Peru
% growth
transactions
Branches
12%
26%
4%
.3%
13%
35%
10%
1%
ATMs
21%
25%
10%
3%
26%
33%
16%
17%
BCs
67%
3%
56%
64%
61%
26%
36%
35%
E-Banking
NA
46%
NA
20%
NA
6%
NA
30%
Share and growth %
> 50%
26% - 50%
11% - 25%
0 – 10%
For inclusive finance, financial institutions see top management
commitment, a range of products tailored to needs of target
client segments and lower cost, alternative distribution
channels to enable cost effective outreach as important
Measures to succeed
Bank
MFI
Strong top management commitment to build inclusive finance
4.8
5.0
Providing a range of products—payments, savings, insurance and/or loans—
tailored to needs of the target client segments
4.4
4.2
Building lower cost, alternative distribution channels—beyond the normal branch
infrastructure--e.g. banking correspondent agents, ATMs, mobile payments and
banking—to enable cost effective outreach to clients
4.4
4.8
Using mobile channels to get transaction costs down, particularly for low income,
more remote and/or low transaction volume clients
4.3
3.7
Providing payments services—G2P, P2P and/or P2B—as the basis for building
profitable inclusive finance
4.1
3.4
Providing services through alternative channels to all interested clients—poor and
non-poor
4.2
2.7
Building lower cost branches, mini-branches, bank owned points of sale to reach
underserved client groups and to facilitate cash in-cash out with non-traditional
retail operators/points of sale
3.8
4.7
Offering inclusive finance products, with each product designed to be profitable
3.7
4.6
Building cost effective financial literacy and/or product education programs to
build sustained use of inclusive finance products
3.8
5.0
Offering a range of financial products, with the product mix designed to be
profitable even if individual products are not
3.4
4.3
Banks consider G2P payments, enterprise loans, and small
scale deposits to be high value products for low-income clients.
Most leading banks indicate that they have found effective and
profitable ways to provide loan payments, inurance and e-wallet
1,0
2,0
3,0
4,0
5,0
1,0
Domestic
remittances
Life/funeral
insurance
Gold loans-pawn
broking
Flexible savings ewallet
Home
improvement loans
Credit life
insurance
Savings accounts
Health insurance
Consumer loans
Debit cards
Balance inquiry
Credit cards
Bill payments
Foreign
remittances
Pensions/mutual
funds
Payments G2P
Enterprise loans
Small scale
deposits
Loan payments
Programmed
savings
Value of products to low-income clients
Orgs. effectively and profitably provide product
2,0
3,0
4,0
5,0
Most banks indicate moderate to high profitability in
BC functions on: P2P payments, bill payments, cash
withdrawals, savings, and loan products.
Product or
service
G2P payments
P2P payments
Bill payments
Cash
withdrawals
Savings
accounts
Insurance
products
Loan products
Balance inquiries
Colombia Colombia
Bank 1
Bank 2
Méxican
Bank
Peruvian
Bank
Kenyan
Bank
Indian
Bank
Most banks surveyed are planning to expand BCs
relative to branches to reduce costs and expand their
client base, with low focus on multi-product offerings
Expansion or contraction of branches
BBVA
Bancomer
Plans to expand or contract
Contract
Banco do
Brasil
Expand
marginally
Banco Caja
Social
Expand
marginally
Banco Estado
Expand
marginally
Reasons for expansion or contraction
Reduce establishment costs
Urban
Rural
Reduce operating costs
Urban
Rural
Urban
Rural
Increase or maintain control
Expand client base
Build platform for payments
Build platform for multi-product offerings
Expansion of BC retailers
Plans to expand or contract
Reasons for expansion or contraction
Reduce establishment costs
Reduce operating/service costs
Increase or maintain control
Expand client base
Build platform for payments
Build platform for multi-product offerings
Expand
radically
Expand
marginally
Expand
marginally
Expand
radically
Leading FIs see BCs as effective channels for low income
clients in providing payments and basic financial services
to low-income customers.
Bank strategy
MFI strategy
BC agents in established markets provide a means
to serve lower priority customers at lower costs, by
providing an alternative to branch services
BC agents are a profitable and effective means to
provide payment services to low income and more
difficult to reach customers
BC agents are an effective means to provide basic
financial services to low income customers
BC agents are a cost effective means to mobilize
small amounts of savings from a large number of
low income customers
BC agents are effective in providing a convenient
way in which low income people can save
BC agents can be cost effective in offering microinsurance products in origination, premium
payments and/or claims procedures
BC agents are helpful in micro-lending, in loan
origination functions and in providing a convenient
place for customers to repay loans
Most banks focus on payments in their BC model,
while some banks have succeeded in building robust
multi-product offerings through BCs
Model focused on payments
Model focused on multi-products
Products
offered
• Offers to client payment services and
simple transactions
• Offers a variety of products: savings,
insurance, loans, remittance, pensions,
financial education, etc.
Value for client
• Convenience
• Increase in income, assets, and
economic security
Inclusion
• Superficial
• Deep
Basis of
efficiency and
profitability
• Significant number of necessary daily
transactions
• Economies of scale
• Cross-selling
• Dense economies: serving a group
focused on low-income and high class
clients in the same area
Types of agents
required
• Small stores
• Ensure that agents have other sources
of income
• Useful to have agents, mini-branches,
or mobile advisors with time to manage
a variety of products
Alignment of
incentives
• Incentives per transaction, with
minimum number
• Incentives based on number of
products per client and levels of
activity in different products
Complexity
• Low
• High
Scalability
• Easy to use with small stores,
collaborations with corporations or use
of intermediaries
• More difficult. Requires more bank
involvement and more capability in
agents
Some banks and MFIs are successfully migrating to
inclusive finance through the offer of multi-products,
with an increased focus on building income, assets
Movement to
Current
Product and geographical focus
Banking or
inclusive
financing through
banks
Payments:
Bill payments
Government subsidies
Remittances
Mandatory savings
accounts
More urban focus
Microcredit
through
specialized
institutions
Financial services to increase
income and assets of low-income
people.
• Short, medium, and long term
savings
• Payments
• Loans to micro-businesses,
farmers, and consumers
• Life insurance, health insurance,
and crop insurance
• Micro-pensions and mutual funds
Loans
Urban focus in Latin
America, more rural in
Asia and Africa
• Urban and rural focus
Many banks build BC network profitability based upon
payments and then build out other products on the BC platform.
Most MFIs have established profitability based on loan portfolio
Platform with profitability based on payments
Etapa
Establecer
rentabilidad
Stage 1:1:Establish
profitability
Stage
2: Approving
the platform
Etapa
2: Aprovechando
la for
plataforma para multi-productos
multi-products
Mutual funds –> commissions
Products
Payments that can be included: G2P, B2P,
P2P*
Micro-pensions commissions
Institutions
Used by banks working with small stores,
cell phone agents, and companies that
produce consumer goods
Loans to consumers interest
Savings resources
Insurance commission
Keys for success:
* G2P: payments from gov. to consumer
B2P: from business to consumer
P2P; from consumer to consumer
•
•
Training
Agents with time and incentives to
introduce more complex products
Three main BC models: bank working directly with retailers,
bank collaboration with companies with distribution networks,
and banks working with intermediaries specialized in creating
BCs.
Structure
Models
Bank
T
T
T
T
Bank
collaborating
with companies
with wide
distribution
channels
Bank
Specialized
company
Bank
T
Bank working
directly with
small stores
T
T
Bank working
with companies
specialized in
creating BC
networks
Examples
Pros, cons and keys to success
Pros: Bank has direct relationship with
points of sale. Small shops are in lowincome areas
Cons: Difficult to identify and deal with
many independent agents.
KSF: Specialized bank team for BCs.
Pros: Banks can use large retail
networks for rapid growth.
Cons: Stores may not be in lowincome areas. Can be difficult to align
incentives
KSF: Close collaboration on selection,
training, agent support
Pros: Tap companies specialized in
building BCs; can reduce costs.
Cons: Bank can lose control of
strategy, with Company focusing on
short-term profitability.
KSF: Bank should control BC
selection, products and incentive
structure, outsourcing technology.
Brazil
has an
extensive
BC network led by Bank of Brazil, Caixa
Brazil’s
Bank
Correspondent
Economica Federal, and Bradesco. G2P and bill paying
Distribution
Model
is Extensive
dominate,
providing
the platform
for profitability
Why Brazil is leader in banking
agents:
16 years of supportive
regulation encouraging BC and
creation of networks
Banks are required to handle
boletos, installment payment
systems
1 in 4 households receives
monthly G2P payments
Number of
BC agents
Partnerships
41,023
6,261outlets with
Brazilian Postal Service
and MaisBB
(16,440 active)
Total
36,451
33,500 CAIXA AQUI and
lottery outlets
46,427
Supermarkets,
drugstores, and other
retail chains
375,315
Every one of the 5,564 municipalities in Brasil is now reached by a bank branch or a BC
25% municipalities only receives services from BC
Bill payments ≈ 75% of
volume 1.2 billion)
Rural BC agents focus on
deposits and withdrawals:
38% vs. 8% for urban
agents
Some specialize in loan
payments, credit cards
and auto loans
Source: Banco Central de Brasil http://www.bcb.gov.br/?corpais, BFA 2013 Focus Note – “Do Agents Improve Financial Inclusion “
In Brazil, rural BC agents perform fewer transactions
but
provide
array
of services and are more
Agents:
notaawider
unique
solution
profitable than urban agents
In Brazil, rural agents perform fewer transactions but are more
profitable than urban agents
200
150
100
50
0
180
140
106
$77
$21
$18
•6,000 Banco Postal offices
Urban
Semi-urban
Rural
Rural agents are more active with deposits
day urban Daily
profits
andTransactions
withdrawalsper
while
agents
focus on
payments
100%
4%
5%
3%
80%
Combination of two types of
agents:
6%
14%
•14,000 Bradesco Express sale
points: branches and agents
managed 15 different integrators
21%
MOTIVATION
8%
20%
60%
40%
18%
88%
•Independent agents: income
71%
20%
40%
0%
Urban
Bill payments
Deposits
Semi-Urban
Withdrawals
Non-financial
Rural
Account opening
•Small stores: increase in clients
and income
•Post offices: commission
In Mexico, Banamex originally utilized independent stores,
but now focuses on corporate collaborations and
partnerships with CB aggregators
2010
2011
Focus on
Model 1
Focus on
Model 2
Focus on
Model 2 and
3
4,500 BCs
13,500 BC
18,000 BC
17M
transactions
60M
transactions
+ OXXO,
Postal
service
Existing
clients
2013
100M
transactions
+ Barared
Stopped offering
remmitances to avoid
money laundering risks
Partnered with CB
aggregator (Barared) to
increase Banamex aqui
reach
Focus on getting to stores
before other banks - strong
first mover advantages for
service payments
No cash withdrawal offered
in OXXO, due to operational
constraints and risks
Transactions
•
•
•
•
Source: ESP Team Study
Payments
Deposits
Withdrawals
Transfer account
(e-wallet)
Geography, scope
• Eight regional
offices to promote
services among
the population
• Very strong urban
coverage,
relatively weak
rural presence
Believe that their role in the
channel should be mainly
transactional
BC network supports loan
payments for Banco
Compartamos, large MFI
with wide reach in
community microcredit
In Peru, financial institutions have distinct
distribution models including network of retailors and
partnerships with specialized BC aggregator
Distribution
Model
Key
partners
Development of BC’s own
network
Partners of large chains and
small businesses
Demand of exclusivity on the
part of the BC
Mixed network between
outsourced and owned
Outsourced network to
Globokas (KasNet)
No exclusivity demand for BC
Owned network with separate
brand (Agente Express)
BC network outsourced to
Globokas (KasNet)
No exclusivity demand for BC
5700 agents, 32% of total
agents in Peru
Most agents are mom and pop
stores with some retailers
52% of agents located in Lima
Total BS at 2000
Globokas (1,500)
Main Globokas client so high
degree of negotiation power
Limited to Globokas network
Due to small size, low
negotiation power with
supplier
+• Control over selection and
Benefits
and
challenges
operations of BC
+• Better positioned to
introduce new products
-• Higher initial investment
-• Required dedicated team
+• Limited fixed cost
+• Only one partner to deal
with
•
- Limited Control on selection
and operations of BCs
+• No fixed cost
+• Only one partner
-• Limited Control on selection
and operations of BC
-• Low level of price/service
negotiation power with
supplier
Bancolombia uses small stores for transactions in
multi-products but has its own mobile advisors for
the origination of products
Bank branch
Mobile advisor
BC
Banking Correspondent
Operates in a BC terminal
Manages and is responsible
for cash
Travels to the branch when
amount of cash exceeds the
limit (US$10,000-20,000)
Prohibited by law to attract
new customers or sell new
products
Receives fixed commission
per transaction
BC
CB
Mobile advisor
Located in areas far away from
branches
Originates new clients
Sells new products
Manages the relationship
between BC and client
Divides time between BC and
clients
Bank employee
Fixed salary with quarterly
bonuses
Population
BC
BC w/
mobile
advisor
<10,000
20%
27%
10,000 50,000
49%
59%
50,000100,000
7%
5%
100,000500,000
8%
5%
> 500,000
17%
4%
Available
transactions
Deposits
Withdrawals
Advances in cash
Loans/Insurance
payments
Transfers within the
network
Bill payment
Banks succeeding in inclusive finance cite several
leading products which lower barriers, facilitate
transactions and use alternative channels
Product
Product features
Channel features
BBVA Bancomer
Debit cards
Ability to open account without
visiting a branch, low fees
Easy to open accounts
Receipt and
disbursement of
government payments
Debit cards for social programs,
low commission
Easy to receive government payments
Balance inquiry
Via SMS
Mobile service for cell phones
Consumer loans
Pre-approval, immediate
availability, modifies to various
channels
Easy access to products and services,
electronic operations, customer service
available through phone and online
Credit cards
Payment plans, home delivery of
products
Flexible customer service hours, electronic
payments, and customer service available
though phone and online
Banco do Brasil
Payments
Payments with a card, extensive
Banco de Crédito del Perú
network through which to use
Savings accounts
Low fees, limited transactions in
high cost channels, no minimum
beginning balance, low interest
rates
Flexible hours of availability
Availability of low cost customer support
channels
Banks succeeding in inclusive finance cite several
leading products which lower barriers, facilitate
transactions and use alternative channels
Product
Product features
Channel features
ICICI Bank
G2P payments
No fee to open account, no
maintenance fee, accessible
through biometric information
Adaptation and automation by government
Domestic remittances
Immediate fund transfer, minimal
fees, minimal KYC requirements
Areas with high concentration of
immigrants
Savings accounts
Minimal KYC requirements,
introduction done through BCs,
zero cost to open and maintain
account, accessible through
biometric information
Zero balance, up to 8 free
transactions
BC networks can perform basic operations
Debit cards
Maestro debit cards that work at
any BC point of the bank, and any
ATM
Instant issuance
Balance inquiry
SMS alerts, can be checked via
mobile
Automatic SMS alerts
HFDC Bank
Savings accounts
Door step service, instant account
opening, relaxed KYC
FIs consider the most important BC functions to be electronic
bill payment, cash in-cash out, accepting of savings deposits,
receipt and disbursement of G2P payments, and loan
repayments
Product or service
Bank
MFI
Electronic bill payment
5.0
4.0
Cash in-cash out with savings accounts
4.6
5.0
Cash in functions for products offered
4.5
n/a
Accepts savings deposits
4.4
5.0
Cash out functions for products offered
4.3
n/a
Receives and disburses government payments
4.2
4.0
Domestic remittances-cash in and cash out
4.0
4.0
Accepts loan repayments
4.0
5.0
Opens savings accounts, within simplified KYC requirements of
regulators and bank
3.8
5.0
Receives insurance premium payments
3.8
4.0
Originates loans-helps in paperwork, recommends
3.6
2.0
Balance inquiries
3.4
4.0
Handles e-payments
3.3
2.0
Originates insurance products—paperwork, rec
3.3
2.0
International remittances-cash out
3.2
3.0
Banks, MFIs and partner organizations consider optimum
phase 1 offerings by BCs to include P2P payments, bill
payments, balance inquiry, loan payments and savings products
Product or service
Financial institutions
Financial institutions focused on low-income
clients
BC partner
organizations
P2P payments
1.0
1.5
1.5
Bill payments
1.0
1.0
1.5
Balance inquiry
1.0
1.0
1.0
Loan payments
1.3
1.0
1.5
Savings products
1.3
1.0
1.0
G2P payments
2.3
2.5
1.0
Insurance products
2.8
1.5
2.0
Loan origination
3.0
1.5
2.5
Most institutions consider second phase product offerings by BCs to
include loan origination and insurance products.
The introduction of multi-products needs to be
phased, to generate profits for the bank and to
respond to needs of low income clients
Focus on building shared value with low income clients
•
Need to develop product offerings which include: payments, loans, savings, insurance,
mutual funds, micro-pensions
Need to create client focused information systems, with databases and with systems
which help the bank identify clients eligible for cross selling of other products.
•
To accomplish the transition from a transaction model to a wealth-generating model, it
is necessary to
Tailor
products
It is important to design simple products with features or marketing tailored
to the particular needs of different client segments eg loans against jewelry,
money market mutual fund
2
Increase
the range of
products
offered
Expansion of the range of products based on ability to pay
Phase 1: Payments products. Transition from liquid savings products to
long-term products, recognizing demand for longer term savings among low
income customers r
Phase 2: Move from services centered on transactions to more complex
services focused on wealth creation and risk mitigation: loans, insurance,
pension products
3
Train
agents
1
Orientation and training of agents, with cost effective approaches to
financial literacy
In building effective BC networks, leading FIs see importance of bank
engagement in BC selection, product priorities and design, and
incentives structures. These FIs see need for specialized staff dealing
with BC arrangements and selection of capable BC partners.
Bank
MFI
FI needs to be engaged in selection criteria of BCs, product priorities and
monitoring results regardless of the BC arrangement.
5.0
4.0
FI should have specialized staff dealing with BC arrangements.
4.8
4.5
FI needs to structure win-win-win-win incentive structures which are
aligned to ensure that the bank, BC network organizer, BC agents and
clients view the BC arrangement as profitable.
4.8
5.0
FI needs to design product offerings which are tailored to the needs of
lower income, harder to reach BC clients.
4.4
4.5
FI needs to push the envelope on moving to e-transactions, using mobile
technology, with cash-in, cash out functions, if the costs of providing
financial services to low income customers are to be lowered enough to
enable profitable solutions.
4.2
5.0
FI needs to ensure that the BC network provides cost effective education of
clients on product features, values and use.
3.8
5.0
FI needs to ensure that its BC network partners—whether retail chains or
specialized intermediaries—are capable of doing the BC retail selection,
training and ICT integration with the retailers and the FI.
3.7
5.0
FIs cite modest constraints to BC development in government push to
offer unprofitable products, regulations, and difficulties developing
profitable products beyond payments
Constraints to growth in BCs
Bank
MFI
Push by government and/or regulators to develop products for low
income customers, for which there is inadequate demand or which are
very expensive for the FI to provide
3.6
2.0
Regulatory constraints on what a BC can do and/or on what time of
organizations can be BCs
3.4
5.0
Lack of profitable product opportunities beyond payments services in
which BCs can add value
3.2
2.0
Low interest by retailers in devoting the time needed to educate potential
customers on product features and to do the work needed by a BC
2.6
3.5
Inadequate commitment and resources from FI senior management to
build channels for low income, harder to reach customers
2.2
2.0
Difficulty finding retail chains with adequate numbers of outlets to create
efficiencies in building BC networks
2.0
5.0
Inadequate focus by the FI in building the selection criteria, training
and/or ICT systems to build out successful BCs
2.0
2.0
Lack of adequate intermediaries specialized in organizing BC networks
1.8
4.0
Leading banks plan rapid expansion of mobile and internet
banking with more modest expansion of BC networks and
ATMs.
Bank planned expansion
MFI planned expansion
Internet banking
Mobile banking/e-wallet
BC retailers - smaller cities
BC retailers - major cities
ATMs/kiosks-major cities
ATMs/kiosks-smaller cities
Full branches in major cities
Full branches in smaller cities or rural areas
Banks plan to maintain or contract branches in major and smaller cities. Financial
institutions focused on low-income clients indicate plans to more radically
expand BCs in major and minor population center, mobile banking and ATM
Three major e-wallet models: one bank-one telecom,
one bank-multiple telecoms, and multiple bankstelecoms
Models
Structure
Examples
C
Bank
Tel Com
C
C
C
Tel Com
C
C
Bank
Tel Com
C
Tel Com
Bank
Tel Com
C
C
C
Bank
Tel Com
C
Bank
Tel Com
C
One bank, working with
one telecommunication
company to reach
multiple customers
One bank, working with
multiple
telecommunication
companies to reach
customers
Multiple banks (all
financial institutions),
working with all
telecommunication
providers
Peru Model - WIP
Bancolombia’s Ahorro a la Mano is aimed at the
unbanked BOP population with a focus on
increasing savings and simplifying P2P transactions
Main Characteristics
Main purpose: savings
Four Carriers: Movistar, Tigo, Claro, Uff
Linked to mobile phone – free transfers to any
Bancolombia account
Variable interest payments depending on balance
No minimum balance, no management fees
Hospitalization insurance for accounts with > USD175
How does it work?
Open:
Easy process using internal SIM card menu
Cash in:
Deposits in Bancolombia branches and BCs
Salaries paid electronically by employers
International money transfers
Cash out:
ATM (without a card), Bank branches, Bank agents
Mobile transfers to third parties
Invoice payment with partner companies
Source: ESP with Bancolombia data. Exchange rate: $1 USD = $ 2.000 COP
Fees
Cost (USD)
Opening Fee
Free
Management Fee
Free
Transfer fee
Free
Deposits - Branch and BC
Free
Withdrawals - ATM and BC
$0.5
Balance Inquiry (Mobile)
Free
29
The advantages of Ahorro a la Mano model for
customers and growth trends and potential
opportunities going forward
Advantages to customers
Low cost access to banking services, including mobile access
Broad network of cash-in and cash-out points
Interest payments for savings
Safe e-transfers of salaries, remittances
Easy transfers to other account holders
Easy e-payment for services
Potential cross-selling of insurance, loans
Growth and opportunities
Achieving social impact: 41% of account holders are below poverty line
Aggressive growth projections for 2014 to reach 420,000 accounts by year end
Average account balance has grown from US$6 to US$31, with continuous efforts to build
trust and account balances
Only 4% of account holders now qualify for hospitalization insurance, due to requirement
that have US$175 account balance.
Need more marketing by existing and new rural personnel, and increased education
Source: ESP Study
Banamex Transfer is a transactional platform backed
by major players in the banking and telecom sectors
Main Characteristics
Main purpose: transactional
Banks: Banamex (18% MS) and Inbursa (5% MS)
Carrier: Telcel (70% market share)
Account linked to mobile phone with optional
debit card
Money transfer to any Telcel mobile phone or
other banks (via SPEI)
How does it work?
Fees
Cost (USD)
Opening fee
Free
Management fee
Free
Transfer fee
$0.08
Deposit with bank agent
$0.54
Withdrawal without ATM card
$0.54
Balance inquiry(SMS, CB, ATM,)
Free
Access: by calling from a Telcel mobile phone
Cash in: deposit with bank branches, bank agents
and transfers.
Cash out: ATM (without a card), bank branches,
bank agents, P2P and payment at retail
establishments
Source: ESP Team analysis with information of Transfer and CNBV Exchange rate: $1 USD = $ 13.00 MXN
31
Banamex has generated a large number of account openings
but transactions and account balances remain low. Pros
include the ease of making payments and increased access.
Performance to date and forecasts
Transactions per account and
average account balance
Opened Accounts
(000’s)
•
•
Inbursa
Banamex
+218%
1,502
2 Transactions per account per month
Average account balance is less than $60 USD
Pros and cons: current customers
Easy transfers to other account holders
Increased convenience, ATM without debit card
1,381
473
354
118
*2012
Additional services not provided, loyalty not
rewarded
Pros and cons: new customers
122
Lower cost local remittances
2013*
Open accounts at remote locations
Active accounts
While total active accounts remain at high levels
(~80%), accounts that were opened in the first
months have a lower percentage of active
accounts (~70%)
Source: ESP Team analysis with information of Transfer and CNBV
Low cost access access to banking, though high
relative transaction costs
Safe electronic transfer, e-payments and other
account holders
Potential cross-product selling of insurance and
credit-but not yet offered
BBVA Bancomer’s Cuenta Express in Mexico is a transactional
platform that use Dinero Movil to transfer money to any person
without having a bank account or a particular carrier
Main Characteristics
Main purpose: transactional
Bank: Bancomer (18% MS)
Account linked to mobile phone with debit
card
Transfer to any person, regardless of whether
account holder, using Dinero Movil service
Cuenta Express
How does it work?
Fees
Cost (USD)
Open: only at bank branches
Opening Fee
$3.85
Cash in: bank branches, bank agents and
transfers.
Management Fee
$1.15*
Transfer fee
Free
Cash out: ATM (without a card), bank
branches, bank agents, P2P and payment at
retail establishments
Deposit with Bank Agent
Free
Withdrawal without card ATM
Free
Balance Inquiry(SMS, CB, ATM,)
Free
Source: ESP with Transfer and CNBV data. Exchange rate: $1 USD = $ 13.00 MXN
33
The number of account openings under Cuenta Express is
declining. The number of active accounts three months from
opening is less than 50% of accounts opened. Transactions are
migrating to bank agents.
Performance to date and projections
Opened Accounts vs Active Accounts
(000’s)
Transactions per channel and average
account balance
700
600
500
1S1
2
2S1
2
1S1
3
400
300
200
100
0
1M
3M
321
Other
460
Teller
125
244
Bank
Agent
2012
2013
178
485
Account Balance Average:
USD 39
Source: CNBV and BBVA Bancomer
34
In Mexico, BBVA Bancomer has launched a cardless
money transfer service that encourages the
unbanked to get closer to banking services
How does it work?
Good for one-time and recurring P2P payments:
1) Account holder sends money from ATM, online
banking or m obile app
2) Sender receives a 4-digit confirmation number
Shares it with receiver
3) Receiver receives a 12-digit withdrawal key
4) Receiver withdraws money from any BBVA
Bancomer ATM by typing in confirmation number
and withdrawal key. No plastic card needed.
Exponential growth in use since launch in October 2012
Leverages on large ATM blueprint: more than 8,000 ATMs
Average transaction = $100 MXN, about USD 80
Has not been monetized yet – waiting to reach critical uptake mass
Can be used for B2P and G2P payments--salaries and money transfers
Potential to offer other products to unbanked population by understanding product usage
Product aimed at financial inclusion in unbanked BOP, but proving to be useful for higher
income segments due to simplicity
Source: ESP Team Study
Peru’s e-wallet initiative aims to increase population
within the financial system by creating a
mutliplatform, multibank solution
Main Characteristics
Platform Manager
Service Provider
TBC
Main purpose: increase outreach to unbanked and
under-banked customers. Aim is to reach 1 million
users in the first 18 months.
Banks: All banks within the financial system
Banks
TelCo’s
Three carriers: Movistar, Claro and Nextel
Linked to mobile phone – free transfers to any
account within the system
How does it work?
Open: at exclusive bank correspondents (40 to
50,000) nationally and at bank branches
Cash in: deposits in any bank branch or BC, free for
customer, paid by banks
Cash out: at any bank branch or BC, cost per
transaction
Product sold: mainly basic saving accounts, with
S/.1000 maximum (~$370)
Source: ESP Team interviews in Peru
Fees
Cost (COP)
Opening Fee
Free
Management Fee
Free
Transfer fee
Free
Deposits - Branch and BC
Free
Withdrawals - ATM and BC
TBD
Balance Inquiry (Mobile)
Free
36
Main risks and risk mitigating mechanisms for
Peru’s e-wallet initiative
•
Telco
Negotiation
Consumer
adoption
Business
model
•
•
Experience elsewhere indicates that telcos may increase prices as ewallet solutions expand
Telco’s launch of e-wallet products may undercut Fis
37 with regulator seek prices in line with int’l levels
Negotiation
•
•
Low bank penetration and use of financial products
No familiarity with e-money and distrust among customers
•
Participants budgeting high market spend for financial education
•
•
Cost distribution formula among banks not fully determined in January
Profitability expected to come from new customers to financial system
and cross selling
• Pilots to be conducted to test business strategies
•
Cash incash out
BC model
Source: ESP Study
•
Rate of expansion of BCs, needed for cash in-cash out, projected to be
50,000 BCs in Year 5, may limit outreach
SBS reports 21,000 BCs, but may be double counting due to nonexclusivity
Safaricom M-PESA, the first and largest mobile money
transfer system, has successfully fostered financial
inclusion in Kenya
Number of M-PESA accounts
M-PESA provides five different payment services
to individuals and businesses
Customer-tobusiness (P2B)
for merchant
payment of
goods and
services
Person-toperson (P2P) for
domestic and
cross border
remittances
17,1
14,9
13,8
FY12
Bill payment
(electricity,
water,
school fees)
M-PESA
account
holder
FY10
9,5
6,1
FY08
eCommerce
for online
purchases
Business-tocustomer
(B2C)
M-PESA, launched in 2007, is used by over 18.2
million Kenyans, or more than two-third of its
adult population. In addition, around 25% of
Kenya’s GDP flows through this system.
2,1
Individuals and businesses use MPESA for micro payments
Per month value of
77,3 transfers (Ksh. bn)
9,9
7,6
P2P
C2B
B2C
M-PESAs success in Kenya has seen
the service launched in other markets
2008: Tanzania by Vodacom
2008: Afghanistan, Vodafone partnered
with Roshan mobile operator
2010: South Africa, Vodacom partnered
with Nedbank
2011: India, Vodafone India partnered
38
with HDFC Bank and ICICI Bank
M-PESA has expanded and evolved its basic model by
introducing innovative products, the latest being MShwari, the first paperless banking service geared to
providing savings and lending services
M-PESA partnered with Commercial Bank of Africa (CBA) to launch M-Shwari in 2012 to
deepen financial inclusion
• M-Shwari is a paperless financial service provided by M-PESA
• The M-Shwari account can be operated using mobile phones via M-PESA
without the need to visit a bank
• As little as Ksh. 1 can be deposited; interest earned ranges from 2% to 5%
• Micro loans for a minimum Ksh. 100 can be availed, with instant credit into
M-PESA account.
• M-Shwari does not require an application form, and has no ledger fees, limit
on the frequency of withdrawals, minimum operating balance or fees to
transfer money between M-PESA and M-Shwari account
Nov. 2012: launched
Mar. 2013: 1.1 million active customers
Sep. 2013: 2.5 million active customers
Loans disbursed: over Ksh. 7.8 billion
Deposits received: over Ksh. 24 billion
Enables small, informal sector
businesses to borrow small amounts
Maximum loan amount:
Ksh. 20,000 for small, working
capital credit and personal
requirements
Facilitation fee charged: 7.5%
based on a 30-day loan
“To me, M-Shwari is just a new year's gift. With it, I am sure I will be able to achieve my 2013 goal to
expand my business and rent a stall where I can operate.”
--Michael Maina, artisan who bakes and sells bread, Nairobi, Kenya
In China, distribution of G2P and P2P payments and
regulatory changes are driving branchless banking.
BCs and other innovations are emerging
Drivers of branchless banking
BC agents
• Government transfer payments and subsidies.
Medical insurance subsidies require government
to reach 900 million people.
500,000 currently. Total agents peaked at
620,000 after the People’s Bank of China
started project in 2011.
• High account penetration, 64% of adults, and the
ease of opening account
Key players
• 1,600 townships are branchless
• Regulatory framework for branchless banking is
evolving to support wide range of activity. This
includes new institutions to serve low-income
clients, and regulation to encourage innovations
like the use of electronic payments, debit cards,
and mobile money in rural areas.
Organizations developing approaches to reach
underserved population
People’s Bank of China developed policy
driving BC agents, and acts as regulator of
branchless banking project
Rural Credit Cooperatives, Agricultural
Bank of China and Postal Savings Bank
of China are the companies most active in
BC agent networks
China Union Pay provides interoperable
POS systems to BC agents
• Commercial banks
• E-commerce companies
• Credit cooperatives
• Third-party payment
companies
Challenges
•
Low transaction volumes
• Microfinance
institutions
•
Demand for deposits and other
services, not just payments
• Mobile network
operators
F-Road SIM overlay technology allows banks and
customers to access secure, SMS based system
provided by banks and is usable on 97% of mobiles
Bank clients
SIM technology,
Installation and
training
Fee per
user
Secure, easy to use
m-banking system,
bank distributes SIM
Rural credit cooperatives (RCCs) and
rural commercial banks that serve
unbanked or underbanked, RCCs
serve 77 million customers
Benefits
No investment
technology
in
creating
own
No need to partner with mobile carrier
As of March 2013
Fee per
text
Bank partners
Customers, 2012
Typical services available
•
Payments, including intra and inter account, bills
•
Balance checking
•
Loan disbursements and repayments
Customers,
estimate end 2013
Presence
Monthly transaction
volume
1,100
4.3 million
7 million
27 of 31
provinces
$ 11.3 billion
AliFinance provides SME vendors on TaoBao an
online shopping platform, access to finance through
the use of data to assess creditworthiness.
TaoBao, 2013
Vendor members
SME vendors
16 million
14.4 million
Largest online shopping platform in
China with 70% share of e-marketplace
Vendors have access to loans
through AliFinance.
Creditworthiness is assessed
through platform data, including
revenues, transaction data, user
ratings, usage levels and repeat
buyers
AliFinance, 2013
Borrowers
Outstanding portfolio
Average loan size
Default rate
Presence
410,000
$17.2 billion
$3,250 to $4,870
Under .1%
Nationwide
AliFinance is the first financing available to many SMEs operating on TaoBao.
Large amounts of data allow AliFinance to accurately assess creditworthiness
resulting in very low default rates, while originating and collecting loans at low
costs by avoiding traditional financial processes.
350 million Chinese use mobile platforms and apps to
bank but few commercial banks currently target or
effectively serve low-income segments.
Large and medium commercial banks are serving current clients with mobile banking. However
this may change as the technology becomes widely dispersed and lower cost.
Mobile banking customers at major Chinese Banks, 2013
Mobile banking Annual mobile
Bank
customers
growth
China Construction Bank
117m
38.90%
Industrial and Commercial Bank of China
100m
49.50%
Agriculture Bank of China
83m
n/a
Bank of China
52m
24.60%
Online banking
customers
291m
390m
320m
101m
Total
customers
291m
432m
320m
n/a
*Shrader and Duflos, A New Paradigm in Branchless Banking? CGAP
Mobile user transactions totaled $768 billion in Q4, 2013
Factors driving mobile banking
• 1.1 billion mobile phone subscriptions, 84% of the population
• 280 million smart phones
• Only 5% of the rural population
• 564 million internet users
• 420 mobile internet users
• Regulatory restrictions on e-wallets, $160 per year in
transactions, limit mobile network operator opportunities
Leading banks do not see major barriers to
expanding mobile banking
Constraints: 5 considered major constraint, 1 considered not a constraint
Telecom companies see their mobile offerings and agent networks as the
dominant source of value add and insist on too high a margin to make it
worthwhile for the bank.
Most customers, particularly low income customers, are not willing to
retain value in e-money, meaning that most mobile banking business is
likely to be limited to money transfers and that Over the Counter OTC
approaches are likely to be more successful than e-wallet approaches.
Telecom companies do not see mobile payments and banking as
sufficiently profitable to make the needed investments and build
partnerships with banks.
There are inadequate numbers of BC agents for mobile-agnostic mobile
banking to work—for cash in, cash out.
Regulations on BCs and/or e-money prevent or undermine the
introduction of mobile payments and banking.
The costs of mounting a mobile payments and banking platform are too
high relative to the uncertainty of the volume and profitability of the
business which would be generated.
Banks are not sufficiently committed to a major expansion in financial
services to low income people, and therefore have not invested in
building viable models.
Banks are not willing to share margins with telecom companies and
agents.
Bank
MFI
3.8
n/a
3.8
3.0
2.8
2.0
2.8
3.0
2.6
3.0
2.4
5.0
2.0
3.0
1.8
2.0
Lack of confidence in bank services by low income
people is a barrier to increasing financial inclusion
According to ABM and others, a strong focus on providing
financial literacy will be essential if the low income population is
to be integrated to the financial system. There cannot be financial
inclusion without having education at the core of any strategy.
Some concerns of the unbanked population which need to be
addressed to increase financial inclusion:
Why do I have to pay a commission to handle my money?”
“What benefit do I get by having my money in the bank?”
“Not only is my money illiquid when in the bank, they also charge me for
storing it!"
“The government will be monitoring me closely if my money is in the bank. I
rather stay out of the system.”
Source: ESP Team Study
To widen and deepen financial inclusion, many
leading financial institutions see financial education
of BOP customers as key. Some lessons from India.
Successful financial education models should be scalable, self-sustaining and impactful.
Traditional classroom methods are too costly.
Product specific vs. general financial education is more effective in increasing demand.
Banks have the incentive to pay for cost effective financial literacy: clients with financial
education are more likely to use multi-products and are less risky.
BC agents can be important vehicles for financial educations, particularly on product
benefits.
Technology can lower costs of financial education through SMS messages to clients and
BC agents-enabling ongoing vs. one time training, found to be more effective.
Messaging should be simple, with core principals and simple descriptions of product
attributes. Ideally banks should do client segmentation enabling targeted messages.
Need to incentivize BCs to gather customer segmentation data and to provide sustained
financial education-not one time sale of products
Incentives to customers important in entry and use of products and in some cases can
substitute for financial education.
Mass media can be used to provide general financial education-comics, TV and radio
Most Fis indicate that regulations support BC development in
performing cash in-cash out functions, receiving and disbursing
savings, enabling a range of institutions to operate as BCs and
integrators, bank oversight of agent selection, operations. Incentives
Regulatory impact on key functions of BCs
BCs can disburse cash payments
BCs can accept and disburse savings in client’s saving account
The range of entities which can be BC agents e.g. independent stores,
chains, telecoms, MFIs, ambulatory agents
BCs can receive cash payments
Bank liability for and oversight of agents’ operations
Compensation of BC networks and BC agents.
Criteria and due diligence in the selection of BCs
BC engagement in KYC, client identification, id verification
Banks can work with specialized BC network managers, integrators
BCs can open savings accounts in the banks name, with conditions
Allowing non-bank led and bank-led models for BC networks
The determination of which entities can issue e-money
Ability to use specialized managers of BC networks
BCs required to be exclusive to one bank
BCs allowed to be exclusive with one bank
BCs allowed to be involved in loan origination, pulling together paperwork,
recommending loans
Criteria for location of BCs
Application of domestic AML/CFT rules to BC agents, with less burdensome
treatment for small accounts
BCs can make small loans within agreed parameters
BCs allowed to operate insurance products—origination, payments
Bank
MFI
5.0
5.0
5.0
5.0
4.8
4.0
4.8
4.8
4.3
4.3
4.0
4.0
4.0
4.0
4.0
3.8
3.8
3.8
5.0
n/a
5.0
5.0
5.0
5.0
5.0
4.0
n/a
4.0
1.0
5.0
3.8
1.0
3.3
5.0
2.5
1.0
2.5
2.0
1.0
1.0
The future
New combinations of technology and touch are emerging. Still difficult to predict
speed of development of electronic banking but this is likely to be ultimate
answer for profitable financial transactions with BOP
BCs, ATMs, mobile and internet banking will be important channels for
transactions with some roles in account origination
Relationships, repayment push and algirithms for lending
Banks need to challenge themselves to deliver on where see potential with low
income customers: multi-products including payments, savings, loans, other
to increase value
Strong, mission driven financial institutions focused on serving low income
entrepreneurs have an important future—if they can build strong risk
management on lending, create multi-products for borrowers and nonborrowers, forge effective collaborations with banks, corporates and telcos—
and if they stay focused on productive finance.