Rules of the Road for Branchless Banking in the Year 2020

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. I had a chance to catch up with David Porteous, founder and director of Bankable Frontier Associates, a consulting firm focused on financial strategy and policy. David is co-author of the CGAP/DFID Focus Note Scenarios for Branchless Banking in 2020.

What is the key purpose of having a scenarios session for policymakers during this seminar? The key has been to get people to focus on what the consequences of certain policy directives might have on how much – or how little – branchless banking truly increases access to financial services for the unbanked poor in the next decade. For example, for some countries which aim to go from a low income country to a middle income country status in the next ten years, doing so might require growth by a factor of 100 the number of banking service points. Does that mean a change is in order around who can open a bank account, or what the requirements are for an unbanked person to get a bank account? Probably.

What has surprised you the most as you talk to officials from around the world? I’m struck by the fact that a number of countries are creating long term visions and associated plans for financial inclusion which take into account the importance of branchless banking. For example, Kenya is looking at a plan for 2030 – how to repeat the Asian tiger model and grow quickly in the next 20 years. Nigeria has a “vision 2020” program. These visions usually have a financial inclusion component – there’s broad agreement that access to basic banking services is a requisite for economic growth. An objective of the scenarios process has been to stimulate even deeper thinking on the issue, and challenge assumptions. For example, if a country needs to increase the number of people who have bank accounts by a certain date, that would require a dramatic surge in bank branch construction – or – more branchless banking, which requires enabling policy and regulatory frameworks.

A few weeks ago, CGAP’s Greg Chen blogged about a session you facilitated in Dhaka which looked at how branchless banking might play a key role in the so-called “Digital Bangladesh” initiative for the year 2021, the fiftieth anniversary of Bangladesh’s independence. In Bangladesh, like many countries, there’s a lot of awareness of the potential of branchless banking. But in my view there is some misapprehension among the different players. For example, this idea that mobile banking means a telecom operator will be cannibalizing the business of the banks.

So how does the scenarios process help? The latest and most promising mobile money implementations very much focus on partnerships and different kinds of business models. The scenarios process can help people play through different possibilities, and perhaps get to an “aha moment” where they can really play to conclusion the implications of different policy decisions. A great upside to this is that, for example, rather than simply viewing branchless banking as widely promising or overhyped, a scenarios process can help decision makers really understand the choices they need to make to see branchless banking go to scale.

What’s the role of the private sector in all of this? Scenarios work can get public players in the same room with the service providers – financial sector – telecoms, and so on – into the same room and around the same table. This makes it easier to see how shared objectives can translate into sensible decisions on both sides. It’s a way of envisioning the future and helping market actors, especially policymakers, catalyze decision-making.

-David Porteous, as told to Jim Rosenberg