New Report Finds Four Forces Will Shape the Future of Mobile Banking

Governments, industry can make choices to increase financial inclusion in the next decade

LONDON, November 18 - The growing use of branchless banking, including mobile phone banking, is
inevitable in most countries. But it's far less certain whether large numbers
of the unbanked poor will use these alternative channels for financial
services beyond payments, such as savings and credit. So says "Scenarios for
Branchless Banking in 2020," a new report from CGAP, a microfinance group
based at the World Bank, and the U.K.'s Department for International
Development (DFID).

UK Minister for Trade and Development Gareth Thomas today said:

"The fact that many of the 2.7 billion people who currently don't use a
bank will have access to branchless banking methods such as mobile phones and
the internet by 2020 is a huge step towards financial inclusion for people in
developing countries.

"The poor are kept in poverty when they are financially excluded. This
means they lack safe places to save money, the opportunity to invest in their
future and cannot reduce the risk of their savings being lost in natural
disasters.

"As this report shows, governments and the private sector both have a
huge role to play in ensuring investment is made to deliver technology-based
financial services to billions of poor people."

The report sets out four scenarios on the future of branchless banking.
In all four scenarios, the adoption and use of branchless banking services is
forecast to be higher in 2020 than it is today. But in two of the scenarios,
bursts of rapid acceleration are followed by periods of falloff or flatter
growth.

"Mobile banking pioneers give us hope that millions of poor people,
especially those living in rural areas, finally might be served by the
banking system. That said, new business models and partnerships that provide
the right incentives to banks and banking agents are vital if we are to move
beyond simple payments and transfers to being able to offer other basic
banking services, especially savings, that poor people need and want," said
Elizabeth Littlefield, CEO of CGAP.

The report is the product of a six month scenario-building project that
engaged nearly 200 leaders from the fields of technology and finance from
more than 30 countries.

    Snapshot of Branchless Banking Today
    - Financial inclusion is growing in most countries. This is often as a
      result of the expansion of conventional banking channels, such as
      branches and automated teller machines (ATMs);
    - Bricks-and-mortar growth is inherently limited by its cost. Branchless
      banking presents a cheaper option but has only modest reach to date in
      most countries;
    - Where branchless banking is occurring, several of the following factors
      are usually at work: (i) industry belief in future profitability; (ii)
      enabling regulatory change; (iii) a dramatic fall in connectivity
      costs; (iv) the creation of cash-handling agents using existing
      networks; and,
    - Current hype about the potential of branchless banking is running ahead
      of reality. Massive sustained success in reaching the poor requires
      more accurate insights on poor people's financial needs and adoption
      behaviour. This is only now starting to become available.

    Four Forces Shaping Branchless Banking for 2020
    - Demographic changes -- including a greater number of younger consumers
      coming into the market and greater mobility at least within countries
      -- will be favourable for the adoption of branchless banking;
    - Activist governments will play a greater role as regulators of the
      financial sector, providers of social safety nets, and providers or
      encouragers of the rollout of low-cost bank accounts and financial
      infrastructure. This expanded role may be helpful for financial
      inclusion;
    - While security concerns about cash crime will continue to drive the
      adoption of electronic transaction channels, the rise of electronic
      crime will affect consumer confidence and test the risk management of
      financial providers; and,
    - Internet browsing via mobile phones will reduce costs of financial
      transactions and enable new players to offer financial services.

CGAP and GSMA researchers have found that across Africa, Latin America
and Asia, the number of people who do not have a bank account but do have a
mobile phone is set to grow from 1 billion today to 1.7 billion by 2012.
These "unbanked mobiled" individuals represent a compelling market
opportunity for service providers.

Notes to Editors

The report will be released today at DFID in London. There will a live
webcast on the CGAP Technology Blog from Washington D.C. on Dec. 1. Learn
more at technology.cgap.org.

The CGAP Technology Program is supported by the Bill & Melinda Gates
Foundation.

CGAP is an independent policy and research centre dedicated to advancing
financial access for the world's poor. It is supported by over 30 development
agencies and private foundations who share a common mission to alleviate
poverty. Housed at the World Bank, CGAP provides market intelligence,
promotes standards, develops innovative solutions and offers advisory
services to governments, microfinance providers, donors, and investors. More
at www.cgap.org.

The Department for International Development is the UK Government's
department that manages Britain's aid to poor countries and works to get rid
of extreme poverty. You can find out more at www.dfid.gov.uk/.

DFID recently launched a Facilitating Access to Financial Services
through Technology (FAST) project to support the introduction of "branchless
banking" to mass-markets in developing countries, such as Kenya, Tanzania,
Pakistan, Nigeria, India, Bangladesh and Ghana. Pilot projects will be
evaluated by teams of finance and technology experts and where appropriate
help and promote increases in scale or spread to different countries.

Jim Rosenberg, +1-202-473-1084, jrosenberg at worldbank.org, for CGAP; or DFID Press Office, +44(0)207-023-0600