Bridging the gap in Branchless Banking

This post is the final part in the series on branchless banking, and will provide an overview of the innovations (or gaps that need to be filled) necessary for branchless banking to be viable.  The introduction of this series set up the context.  The first part of this series provides statistics about the industry as is today, which is essentially in a fixed-cost and money-loosing phase.

The following structural changes are recommended to help the industry move from an early-adopter opportunity to a sustainable market which has the green shoots of sustainability and stability:

•  Use of Commercial Off The Shelf (COTS) hardware as a POS device.  This would preferably be a device which the agent already uses, for e.g., a mobile phone.  
• This will reduce the cost of entry for an agent
• Standardized devices will have higher uptime and lower maintenance costs
• Such devices will be interoperable with other service providers' infrastructure
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State of Branchless Banking in India

This post builds on the previous post which setup the context of this series, and will provide an overview of branchless banking as they exist today.  The next post in the series will discuss bridging gaps that exist and will provide recommendations for service providers.

Below are some of the key performance measures of branchless banking in India (based on many sources including CGAP articles from G Chen and K Krishnaswamy et al):

• Account Opening Fees paid by banks for No-Frill accounts, a major revenue stream, does not exist.  Presently, No-Frill accounts are a loss-making proposition.  Consequently, I don't see banks pushing for new no-frill accounts in their current avatar
• Custom hardware devices are provided, as POS terminals, by service providers (e.g., FINO, ALW, Eko) to their agents (e.g., merchants), in lieu of a deposit (typically INR 5000 / $115)
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Analysis of Branchless Banking in India

It is easy to agree that branchless banking is a preferred way to serve rural India.  However, I have been trying to get my business mind to arrive at the same conclusion by looking at the numbers.  I would like to go thru' such an exercise here at the risk of getting beaten up.

I am starting this exercise by leveraging the wonderful work done by CGAP, notably these two publications:
    ○ BC Banking Channels in India - G Chen
    ○ Building Viable Agent Networks in India

Visa getting into acquiring business

SBI is teaming up with Visa International and Elavon (Source) to jump start SBI's acquiring business.  It is a critical win for Visa.  In light of SBI being the 800# gorilla in the India, their choice of Visa is intriguing.  Is this the beginnings of Visa's aspirations in the acquiring space?  When Visa decided to acquire CyberSource, Visa was expected to be measured in its interaction with the merchant community so as to not offend its partners, the acquiring banks and processors.  With Visa's intentions of taking CyberSource international, and its move into acquiring business in emerging markets, we might seeing elements of Visa's strategy for the coming decade (at least in emerging markets).  With SBI's interests in mobile payments (primarily driven by financial inclusion and branchless banking initiatives), Visa's JV with SBI becomes even more significant.

What does this mean for NPCI's aspirations and the IndiaPay initiative?

Look forward to your comments on the implications of the SBI-Visa JV.