key issues and models in branchless banking in the pacific

Key issues and models in branchless banking in the Pacific

James Le Compte and Erik AelbersAccess to Finance Expert

Pacific Branchless Banking SeminarADB Pacific Liaison and Coordination Office, Sydney, Australia 19th – 20th November, 2013

Contents

1. Constraints to financial inclusion in the Pacific

2. Opportunities for greater financial inclusion in the Pacific

3. Branchless Banking (BB) Models

4. BB Implementations in the Pacific

5. Discussion on Issues

No one said it would be easy…

Geographically dispersed & challenging terrain

11 million people (0.15%) across 85 million sq. km. (17%)

Relatively weak physicalinfrastructure

Low population density

PNG has 17 people per sq. km.

Tonga has 138 people per sq. km.

Philippines 329 people per sq. km.

Bangladesh has 1,034 people per sq. km.

Products that don’tmeet the needs of customers

Long queues at branches and ATMs, account opening and KYC barriers, high fees and distant location.

Contents

1. Constraints to financial inclusion in the Pacific

2. Opportunities for greater financial inclusion in the Pacific

3. Branchless Banking (BB) Models

4. BB Implementations in the Pacific

5. Discussion on Issues

0 5 10 15 20 25 30 35

13

18

20

23

25

30

Not enough money

Too expensive

Family member already has account

Too far away

Lack of necessary documentation

Lack of trust

Self-reported barriers to use of formal accounts

Non-account-holders reporting barrier as a reason for not having an account (%)

The gradual decline and re-emergence of rural banking

Commercial Bank Branches (per 100,000 adults)

ATMs (per 100,000 adults)

Mobile PhoneConnections

PNG 2 (2009) 5 (2009) 2,600,000 (2012)

Solomon Is 7 (2011) 11 (2011) 302,147 (2012)

Fiji 11 (2011) 37 (2011) 940,190 (2012)

Samoa 18 (2011) 28 (2011) 217,406 (2012)

Australia 30 (2011) 167 (2011) 30,600,000 (2012)

Bank and Mobile Phone Access in the Pacific

Supportive Regulatory Environment

Contents

1. Constraints to financial inclusion in the Pacific

2. Opportunities for greater financial inclusion in the Pacific

3. Branchless Banking (BB) Models

4. BB Implementations in the Pacific

5. Discussion on Issues

Hallmarks of a Bank-led Model- Traditional providers of financial services

- New delivery channel for existing or new financial product

- Leverages bank infrastructure & where it exists a national payments system

- Relies on MNO infrastructure for mobile communications

Strengths of a Bank-led Model- Existing processes for financial service discipline

- Engagement with regulatory bodies

- Experienced in running transactional platform

- Branches can support agent liquidity

Hallmarks of an MNO-led Model- Non-traditional financial service providers- Leverage existing agent networks and experience managing agents- A new product in a suite of products delivered over mobile channel - Customer funds tied to SIM and held in trust or individual bank account

Strengths of an MNO-led Model- Mass-market brand- Agent know-how- Experienced in running transactional platform- Innovative

Contents

1. Constraints to financial inclusion in the Pacific

2. Opportunities for greater financial inclusion in the Pacific

3. Branchless Banking (BB) Models

4. BB Implementations in the Pacific

5. Discussion on Issues

Branchless Banking Implementations

TIMOR-LESTE

VANUATU

In the Pacific

TIMOR-LESTE

VANUATU

Fiji: Two MNO-led implementations

PNG: MNO & Third-Parties

TIMOR-LESTE

TIMOR-LESTE

VANUATU

Regional: MNO-led implementations

Regional Bank-led roll out

TIMOR-LESTE

VANUATU

What will it take to gofurther with branchless banking?

Operational Challenges:Driving Usage - Managing Agent Networks - Attracting New Customers

What will it take to gofurther with branchless banking?

Enabling Regulation:Customer Registration - Principal and Agent Agreements – Transparency – Consumer Protection and Market Conduct

What will it take to gofurther with branchless banking?

A Need for Further Learning:What is Best Practice – Adequate Investment and Resources - Innovation

Discussion on Key Issues

Thank you.

More information contact :

Pacific Liaison and Coordination Officewww.adb.org/offices/pacific/main psdi@adb.org

Asian Development Bank6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel + 632 632 4444

Port Moresby Resident Mission Level 13, Deloitte Tower Port Moresby, PNG