20th WSBI GENERAL ASSEMBLY

Sparkassenhaus - Berlin, 13 June 2013

Workshop 1 & 2 (in parallel) – 14.30 – 16.30hrs ----

Workshop 2 : The Open Market Opportunity: 2.5 Billion People

At the occasion of the WSBI General Assembly on 13 June in Berlin, a workshop was held under the title ‘the open market opportunity: 2.5 billion people’ with the purpose of exploring how to meet the challenge of providing financial services to the unbanked people of the world sustainably, especially as new and existing competitors enter WSBI members’ traditional market space.

The panel brought together a highly experienced combination of WSBI staff and members as well as topic experts. The moderator wasSukhwinder Arora, Principal Consultant, Oxford Policy Management, Chairman of the UK Microfinance Club and co-author of The Poor and Their Money[1]. Other panellists were:

Panel speaker :

Asare Akuffo, Managing Director, HFC Bank, Ghana

Niclaus Bergmann, Managing Director, Savings Banks Foundation for International Cooperation

Susie Lonie, Mobile Payments Consultant, formerly with Vodaphone and founder of M-Pesa

Stephen Peachey, Programme Technical Adviser, WSBI ‘doubling savings accounts’ programme

Ian Radcliffe, Director, WSBI and Programme Director, WSBI ‘doubling savings accounts’ programme

Irman Zahiruddin, Managing Director, Bank BTN, Indonesia

The session opened with a presentation by Ian Radcliffe to set the scene, drawing on lessons learned from the WSBI ‘doubling savings accounts’ programme. Three key findings were presented:

i)The unbanked market is dominated by the ‘poor’ or ‘near-poor’, but what that actually means varies from country to country – the ‘poor’ also need segmented marketing approaches;

ii)The amount that the ‘poor’ can afford to pay in bank charges and fees is fundamental to the design and delivery of financial services to this market. Affordability is slightly easier in better-off countries than in the least developed countries but is nevertheless still tight;

iii)Reaching out to rural areas is probably beyond us without a tie-up to mobile money.

In reacting, Asare Akuffo thought these findings were “spot-on”. Niclaus Bergmann stressed how important it is to listen to the client not only in designing products and pricing models but also in selecting appropriate delivery channels, citing a non-technology based example from the Philippines. Stephen Peachey illustrated further the research behind the opening presentation by showing that the shape of the demand curve for this target market supports pricing bank charges aggressively low. This was further supported from the floor by Hebert Luiz Gomide Filho from CaixaEconômica Federal do Brasil who briefly described his bank’s experience in drastically cutting bank charges on all products by up to 60%, which encouraged increased activity such that bank profits went up by 17%. Notwithstanding such an experience, Ian Radcliffe commented that it takes a brave CEO to risk his business model in this way but maybe initiatives should be piloted in one or more regions before taking the plunge.

In acknowledging the reservations that some WSBI members have in embracing mobile money, Susie Lonie demonstrated how even with mobile money, Telcos still need a partnership with a bank. Responding to a comment from the floor regarding Telcos not having to comply with regulation in the same way as do banks, Niclaus Bergmann called for a level playing field whilst also stressing the need for appropriate regulation. Susie Lonie said nevertheless that the dice is not necessarily loaded in favour of Telcos. There was some discussion surrounding the use of mobile phones by the many illiterate people included in the unbanked market, noting that they do seem to manage and that this can be aided by the use of voice messaging technology.

In summing up this part of the debate, Sukhwinder Arora emphasised that mobile money should be seen as an opportunity. Savings banks can enter this market and do it better than others. However, banks in general tend to be too cautious, frequently through over-interpretation of regulation. Susie Lonie added that despite the opportunities, entering into mobile money is not necessarily easy and it can be expensive. The options facing banks are either: a) set up a mobile money business of their own, or b) create savings accounts for the poor and near-poor and partner with a Telco.

In wrapping up the workshop, Ian Radcliffe reminded the audience of Bill Gates’s comments during the Global Savings Forum in October 2010 that “…public banks need to be either extremely competent and embrace these things (i.e. technology-enabled partnerships), or you want them to disappear. Savings banks have been the financial inclusion pioneers in many countries, especially on savings but they will have to adapt and change to maintain that leadership position.”

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[1]Practical Action Publishing, 2009.