In ever larger numbers, poor people in developing and emerging market countries are accessing financial services offered by formal providers outside of traditional bank branches. In Kenya, M-PESA provides money transfer services and the equivalent of a small balance transaction account to more than 12 million customers through cell phones and a network of over 16,000 agents. In Brazil, over 170,000 agent points, such as pharmacies, deliver a wide array of services on behalf of banks, processing approximately 2.5 billion transactions a year. Wal-Mart Bank in Mexico is using 1,000 Wal-Mart stores (totaling 18,000 points of sale) as agents to offer its clients financial services, including deposits and payments. These are not isolated examples, but rather evidence of how transformational branchless banking is rapidly changing the access to finance landscape. Giving unbanked and underbanked people the opportunity to access a full range of needed formal financial services could be a significant step toward more equitable and efficient financial markets.
As with conventionally delivered financial services, consumers using branchless banking services face risks and challenges as well as benefits. Transformational branchless banking heightens the consumer-related concerns of regulators and supervisors because it combines the use of agents and technology-enabled devices to serve large numbers of less educated and inexperienced customers, potentially in a short period of time. However, even in markets where they have achieved massive scale, the benefits of such innovative models seem so far to outweigh the risks for consumers.
Regulation—whether created at an early stage or after new models are fully operational—should obey two principles: proportionality and effectiveness.