Pacific banks go branchless to reach the unbanked

2 January 2014
Pacific Private Sector Development Initiative

Pacific banks go branchless to reach the unbanked
Bankers see it as key driver in financial inclusion*

It might be the woman market stall holder in a city like Port Moresby, who needs security for her daily takings, or the rural Solomon Islands school teacher who must spend up to half his wage in boat fuel travelling to a bank to collect his pay. Both could use a mobile wallet to solve their problems.

Branchless banking, mobile banking, mobile “wallets”, innovations in financial services are seeing thousands of poor and low-income people use their mobile phones to enter the financial system for the first time; to open accounts, get paid, save money and begin to move out of poverty.

And so they came to Sydney last month for the first-ever Pacific Branchless Banking Seminar. From Timor Leste to Tonga, the Philippines to Fiji, from all over the Pacific and beyond. Bankers large and small, central and commercial, were joined by financial service providers, mobile network operators and technology providers to share new approaches to fostering financial inclusion in our region.
Sponsored by the Asian Development Bank’s Pacific Private Sector Development Initiative (PSDI) and the US-based Consultative Group to Assist the Poor (CGAP), the event was the first of its kind for the Pacific. Representatives from six Pacific Islands Central Banks were joined by about 30 more delegates ranging from small commercial banks such as BNCTL (the National Commercial Bank of Timor Leste), to global giants like Visa International.

The meeting sought to identify policies, innovations and practices that are strengthening the enabling environment for branchless banking in the region. Central bankers and the private sector—being the regulators and the regulated—don’t usually interact in this way, but such was the open exchange of knowledge and views, is unlikely this will be the last meeting of its kind.

This was a working meeting and leading discussions were experts Gane Simbe, (Deputy Governor of the Central Bank of Solomon Islands), Pia Roman (Head of Financial Inclusion at Bangko Sentral Ng Filipinas), and Steve Rasmussen (Head of Technology at CGAP).

Let’s take a closer look at some of the issues identified:

• Continuing to increase the different uses for people’s branchless banking accounts is crucial to increase the number of transactions—e.g. enabling people to buy mobile phone credit, pay electricity bills, pay for goods in shops with their account etc.

• The need to build sustainable agent networks. The service provider (such as a bank or mobile phone company) needs to supply both customers and agent’s easy and reliable access to banking products to attract customers. Trust in the product and provider is key - people need to believe that their money is safe, and that they can access their accounts when they want/need to.

• The more we embrace technological solutions to financial inclusion the less opportunities exist for human contact—which in the past has been critical for building relationships and trust between the consumer and the service provider. As many consumers are new to (or uncomfortable with) mobile banking technology this highlights the need to build trust. It also highlights the need to have effective consumer protection measures in place—such as transparent pricing and effective redress mechanisms for consumers that have a complaint.

• There is an opportunity to bring together the regulators of the financial and telecommunications sectors in the Pacific. There is some uncertainty at the regulatory level with regards to who is responsible for supervising the providers of mobile money services, if there are competing priorities of each respective regulator this could compromise the efforts of the financial services industry to promote financial inclusion and the expansion of branchless banking.

• Applied Product Innovation (API) was a popular concept shared at the seminar. Essentially it is taking the concept of user-centered design principles and applies them to the design and implementation of financial products. The main difference with other design philosophies is that user-centered design tries to optimise the product around how users can, want, or need to use the product, rather than forcing the users to change their behaviour to accommodate the product.

• There seems to have been the myth that if technology is there to provide access to financial services, use of it will happen automatically. There is actually quite a lot of technology available in the Pacific but usage does not follow automatically which brings back the human factor into the equation. People do not automatically use services only because they are available. Financial education/client awareness integrated in product implementation was mentioned as a crucial activity.

• New Australian Foreign Minister Julie Bishop has said “microfinance is the best form of aid”, and recently at CHOGM she identified “financial inclusion” as one of three priorities for the new government heading towards the G20 meeting next year in Brisbane. The Australian government was represented at the Sydney seminar and actually facilitated the staging of the event through Australian Aid's major funding support for PSDI, (which is also co-financed by New Zealand and ADB). (see: www.adbpsdi.org )

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*First published in the December edition of Islands Business magazine

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