New Models in International Remittances and Branchless Banking

CGAP and Dalberg Global Development Advisors just finished its third study on international remittances through branchless banking. Discover how in only a year this sector has changed.

CGAP and Dalberg Global Development Advisors (strategic firm) just finished the third update of their studies about international remittances through branchless banking (internet, mobile banking...).

It is possible to see the report on this link. Then, we can observe the evolution of the market in a year with the emergence of new competitors and new models on the market and see their impact on financial inclusion.

If we take a closer look at international remittances made ​​in 2012 perspectives are good and will be in 2013 despite of a number of significant challenges identified by operators and experts.

Today, the whole industry seems to be attracted to international transfers on a larger scale and expand it to more countries so the poorest populations can have access to the banking system.

For example, deployment of remittances via m-wallet has doubled compared to last year, from 15 deployments in 2012 to 32 deployments in 2013 (see graphic below) . These deployments were developed through partnerships with key intermediaries such as Western Union for example.

However, the number of mobile-based deployments has grown tremendously, transactions volumes and revenues generally remain low. This is due to a variety of attractive and repulsive factors. Among the repulsive factors, senders are uncomfortable with using digital means and prefer a more conventional mean.

Digicel in South Pacific has notice a 40% increase in transaction volume over 2012 but acknowledged the current difficulties to impose this type of transfer so they have recently invested in retail stores as a way to reach more potential customers.

Despite the fact that the integration of mobile payment is slow, a significant number of new competitors has appeared on the market, introducing new models on the international remittances market. Some of these models go beyond the model of "cash out" to restrict remittances to particular uses, through gift cards to a specific store, as with Regalii in the Dominican Republic, or to make needed bill payments for recipients, as with Willstream in Senegal.

A new model has been used recently for some transfers online: social networks. In this field have emerged senders such as Azimo or FastaCash. These new models offer significant advantages for the customer (ease of access, use, etc ...) especially since the internet is growing fast in developing countries.

However, like prepaid card, further reflexion is needed to determine how these new services may allow greater access to financial services. Many questions remain about the way these models could serve as a bridge to greater financial inclusion beyond cheaper and more convenient payment transfers.

Despite their potential to reduce poverty, those transfers (remittances to retail gift cards or to pay bills directly) do not expand access to other financial products for the unbanked.

A year later, experts are still wondering : "Are international remittances through banchless banking helping enable access to a range of financial services for the unbanked ?" And the result from this 2013 study is "not yet".

Source : CGAP, Presentation by CGAP

Tags : branchless banking, CGAP, DalBerg Global Development Advisors, microworld, mwallet, banking services, international remittances