Comments

  1. Scott Bales says:

    Brett. So happy to read this article, its been a tough battle that I’ve faced in dozens of countries since I first started in Mobile Money back in 2008. I think you covered this very issue from a different perspective a couple years back when you said the issue is not AML or Identity Theft, is the framework banks use to determine identity. Noting the concept of identity is now redundant, and demands a new model in today’s connected, mobile centric world.

    Risk relevant KYC/IDV has been a long time challenge for financial inclusion. Its a huge issue in Indonesia, Nigeria, Egypt and Brasil where a large majority of the world’s unbanked reside. One of the best practitioners in the space is WING’s former Head of Risk, Michael Joyce who developed some awesome frameworks around relevant KYC. He is currently in Indonesia focusing on this very issue. Happy to connect you two if you haven’t spoken before.

  2. Michael joyce says:

    Hi Brett,
    Great analysis. I find the stats for the highly developed countries with low branch densities interesting. Once people are included in the system, they use other channels and have highere levels of activity, but no longer need the branches for these transactions. It would be great to see a curve over time, I’m sure at some stage these countries did have higher densities but it’s no longer required.
    And it’s definitely true that KYC regulations or internal bank compliance policies about KYC are one of these biggest obstacles to inclusion. Sometimes these requirements (face to face, hard signature, branch staff, branch premises) are written into regulation, but just as often they come from overly cautious bank compliance staff who are unwilling to try new verification models. The FATF recognises risk based approaches to KYC, but there’s still a long way to go to turning this theoretical recognition into practical implementations.
    Two promising approaches are to outsource KYC to an accredited organisation, typically a Post Office, or to have a “verified once verified everywhere” rule. If you can show that you are a customer of Bank A, bank b will give you a very light Kyc. An example is PayPal verifying your bank account by making a small deposit and asking you to tell them how much it was. PayPal doesn’t need to meet you, they’ve got sufficient comfort from the fact that Bank A has verified you. This doesn’t help those who are fully excluded, but it does open the doors to branchless models.

  3. Sudhir says:

    I broadly agree on the point of the relationship (or lack of one) between financial inclusion and branches. For the developing country markets this most likely will not make sense. Also the needs in rural India are likely to be different from other parts of the world. I do think this is what really helped mPesa take off in a big way in Africa. Focus needs to be on the needs and the regulations need to support it.

  4. Talha Ibrahim says:

    Dear BK
    Nice Article. Though are we not missing out on the relationship between Land Area and Financial Inclusion. For that reason, I see a direct relationship between Financial Inclusion and Number of Branches. I will explain why. US has a larger geographic area than Spain. More people will visit the branches if they are conveniently located than a branch further away from the consumer. With 330/million for US vs 900/million for Spain we can assume that branches are more conveniently located for end user whereas that is not the case for US. Same is the case for Singapore compare its land area to that of Germany and you see that the reasoning may become weaker. Maybe a valid comparison could be the number of branches per square mile of territory. That would be interesting to figure out. You article certainly was thought provoking. I would love to hear your thoughts.

    Best
    Talha

    • Brett King says:

      Tahla,

      No, that’s not correct. Financial Inclusion in the United States and Spain is actually worsening, not improving. So the driver for this is clearly not availability of the branch, nor convenience. The branch is not contributing to inclusion in any meaningful way beyond access to financial services for those who already use them. In fact, the rise of pre-paid debit cards, payday lending, and other alternative financial services are leading more and more potential customers away from mainstream banking. Patently, branches are NOT leading to inclusion, even in developed economies.

      In developing economies the situation is actually far more absurd. In Africa 25% of the population couldn’t qualify for a bank account in a bank branch because of documentary requirements, and more than a third of the African population would have to spend more than their monthly wage just in transport costs to get to a physical branch to make a deposit – clearly not a viable solution. In countries like India the situation is even worse.

      No, branches will not lead to financial inclusion in either developed or developing economies. The mobile phone, however, could resolve this issue with much greater success than branches, but it requires a regulatory approach that is cognizant of the real needs of the economy – which is not to support banks, but to support individuals with access to financial services.

      Brett

Speak Your Mind

*