branchless banking pricing analysis - propakistani€¦ · branchless banking pricing analysis...

BRANCHLESSBANKINGPRICINGANALYSIS

ClaudiaMcKay,MarkPickensMay2010

CGAPTechnologyProgram

14projectsin10countries,13policydiagnos=cs

•  Research,policy,advisoryandgrantfunding•  Learningandknowledgesharing•  Co‐fundedbytheBill&MelindaGatesFounda=on,CGAPand

theUKDepartmentforInterna=onalDevelopment

•  FindusonlineathOp://www.cgap.org/technology

Whatwedo• Demonstrateinnova=onandscaleinbranchlessbankingprojectsresul=ngfromCGAP’stechnicalassistanceand/orgrantfunding.

• Improvebroadindustryknowledgeandprac=ceintheareasofcustomers,agents,businessmodelsandregulatoryframeworks.

• Harnessexis=nggovernmentpaymentsandremiOanceflowstoprovidebankingservicestolargenumbersofunbankedpeople.

• Helppolicymakersdevelopregula=onsthatsupporteffec=veuseofmobiletechnologiesforfinancialinclusion.

Ques=on:Isbranchlessbankingcheaperforlow‐incomepeoplethanformalbanking?

Methodology:

1.  Comparepricingof16leadingbranchlessbankingservicesacross8waysthatcustomersusebranchlessbanking(“usecases”)

2.  Comparepricingofthesebranchlessbankingservicesagainst10formalbankstarge=ngthemassmarketaswellasinformalmoneytransferop=ons

BRANCHLESSBANKINGSERVICES

BANKS

Bradesco(BN) ABSA(ZA)

Caixa(BN) Bradesco(BN)

Easypaisa(PK) Caixa(BN)

EKO(IN) Ecobank(CI)

GCash(PH) Equity(KN)

M‐Paisa(AF) ICICI(IN)

M‐PESA(KN) K‐REP(KN)

MTNMobileMoney(CI) SBI(IN)

MTNMobileMoney(ZA) Standard(ZA)

Orange(CI) UBA(CI)

SmartMoney(PH)

VodafoneM‐PESA(TZ)

WINGMoney(CAM)

WIZZIT(ZA)

ZAP(KN)

ZAP(TZ)

Note:8usecasesare:1)SendingMoneyTransfer,2)ReceivingMoneyTransfer,3)Short‐termsafekeeping,4)Medium‐termsavings,5)BillPayments,6)HighUsage,7)M‐PESACustomer,8)KenyaBankCustomer

HeadlineFindings:Slides5‐9

DetailedFindings:Slides10‐55

Appendixwithaddi=onaldetails:Slides56‐60

KeyTakeaways

•  Onaverage,branchlessbankingis19%cheaperthanbanks

•  Thelowerthetransac=onvalue,thecheaperbranchlessbankingisincomparisonwithbanks.Forexample,atatransac=onalvalueof$23,branchlessbankingisonaverage38%cheaperthancommercialbankswelookedat.

•  Branchlessbankingis54%cheaperthaninformalop=onsformoneytransfer.

•  Customerusageisinfluencednotonlybyabsolutepricesbutbythewayaserviceispriced.Forexample,inordertoencouragetrialofmoneytransfers,someservicesofferfreedeposits,whichmakebranchlessbankinganaffordablewaytosave.

Averagebranchlessbankingpriceis$3.9permonth

1.01.52.22.32.82.9

3.74.14.34.34.44.44.44.9

6.38.2

‐1.02.03.04.05.06.07.08.09.0

Zap(KN)

EKO(IN)

GCash(P

H)

M‐PESA(K

N)

WINGM

oney

(CAM)

SmartM

oney(P

H)

Caixa(BN)

Vodafone

M‐PESA

(TZ)

Bradesco(B

N)

MTN

Mob

ile

Mon

ey(C

I)MTN

Mob

ile

Mon

ey(ZA)

M‐Paisa(A

F)

OrangeMon

ey

(CI) Zap(TZ)

WIZZIT(ZA)

easypaisa(PK)

Note:AllpricesarePPPadjustedsotheyarecomparableforcustomersinverydifferentmarkets–seeslide17formoredetails.Thisaverageisforallprovidersacrossall8usecases.Nominalaveragepriceis$1.50average.

Price(US$PPP)

Average$3.9

Onaverage,branchlessbankingservicesare19%cheaperthanbanks

Note:Pricesarebasedononemonthusageofservices.Datawasreceivedonactualaveragetransac=onsbyM‐PESAandKenyaBankcustomerstodeveloptheseusecases.

6.5

2.9

7.4

3.4

1.6

5.2

2.1

2.4

3.9

7.5

3.3

8.4

6.9

3.3

3.7

2.8

2.8

4.8

0 2 4 6 8 10

KenyaBankCustomer

M‐PESACustomer

HighUsage

BillPayments

Medium‐termsavings

Short‐termsafekeeping

Receiving

Sending

AVERAGE

Banks

BranchlessBanking

12%

24%

‐43%

50%

%BBcheaperthanbanks

14%

12%

12%

50%

19%

Price(US$PPP)

Thelowerthetransac=onvalue,thecheaperbranchlessbankingisincomparisontobanks

3.03.9

7.0

4.8 4.8 4.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Low Medium High

BranchlessBanking

Banks

%BranchlessBankingcheaperthanbanksacross8scenarios

38% 19% ‐45%

DepositAmount $23 $69 $207

Price($USPPP)

Transac=onValue

Averagepriceacross8usecasesbasedonlow,medium,highvalues

InformalproviderschargedoublethepriceforamoneytransferthanaBBprovider

0

2

4

6

8

10

12

AverageBBprovider AverageInformalProvider

4.9

10.7

PriceforMoneyTransfer(SendingandReceiving)

BBis54%cheaperthaninformalop=ons

Note:Totalpricetosendandreceive$62($160PPPvalue).$4.9istheaveragepriceforsendingandreceiving(notincludingothertransac=onslikeair=metop‐up)acrossall16providersin10countries.$10.7istheaveragetransferpriceforfourinformalmethods(taxi/courier,moneychanger,busservice,postoffice)inthreecountries.Average=metosend/receiveis2–4daysforinformal.

Priceas%oftransfer 3.1% 6.7%

Price(US$PPP)

Agenda

1.  Methodology

2.  Branchlessbankingusecases3.  Pricingstrategies4.  Branchlessbankingvs.formalbanks

5.  Branchlessbankingvs.informalalterna=ves6.  Conclusion

16branchlessbankingprovidersacross10countries

BRAZIL*:BradescoCaixa

(forbothBBandbanks)

COTED’IVOIRE:Orange

MTNMobileMoneyEcobankUBA

TANZANIA:VodafoneM‐PESA

ZAP

KENYA:M‐PESAZAPK‐REPEquity

AFGHANISTAN:M‐Paisa

PAKISTAN:easypaisa

INDIA:EKO/SBIICICISBI

PHILIPPINES:GCash

SmartMoney

CAMBODIA:WINGMoney

Alsoincludes10banksfrom5countries

SOUTHAFRICA:WIZZIT

MTNMobileMoneyABSAMsanzi

StandardBankMsanzi

BranchlessBankingProvidersFormalBanks

*TheBrazilianins=tu=onsareuniqueastheyofferformalbankaccountsoperateden=relyviaagents.Theseaccountshavebeenincludedinboththebranchlessbankingandtheformalbankusecases.

Factorsthatgreatlyinfluencedoutcome

1  Ins=tu=ons Weselectedarepresenta=vesampleofbothbranchlessbankingprovidersandbanksinawiderangeofcountries.Wechosebanksthatspecificallytargetthemassmarket.

2AccuratePricingData

Branchlessbankingpriceschangefrequently(almosteveryproviderhaschangedpricesinthepast6months)andpriceslistedonwebsitesareotenoutofdate.PricesareaccurateasofApril15,2010.

3Choiceofbankproduct

Unlikebranchlessbankingproviders,bankshavemanydifferentaccountsfromwhichtocompare.Wepickedthelowestcostproductwithfunc=onalitysimilartobranchlessbankingproducts.

4PPPadjustments Allpricesarequotedin2005PPPadjusteddollars(mostrecentavailablefromtheWorldBank).

5UseCases Wechose8usecases,orwayscustomersuseabranchlessbankingservice.Theyvarybytypeandnumberoftransac=ons.

6AverageTransac=onAmounts

Wegatheredactualdepositamountsfrom5providerstocalculatethemediumcasedepositof$69.Fromthis,wederivedthelow($69/3,$23)andhigh($69*3,$207)amountsaswellasothertransac=onamounts.

UseCases

•  Eightusecasesweredevelopeddescribingthetypeandvolumeoftransac=onsacustomermightdoinagivenmonth

•  Allcasesincludeonebalanceinquiryandmostincludeanair=metop‐up

•  Forexample,theSendingMoneyTransferusecaseincludes1deposit,1transfer,1air=metop‐upand1balanceinquiry

•  Pricesinthisdeckarenotbasedonindividualtransac=onsbutonamonthlyusecasescenario(e.g.,‘sending’referstothesendingusecaseabovenotoneP2Ptransfer)

UseCases

1.SendingMoneyTransfer

2.ReceivingMoneyTransfer

3.Short‐termsafekeeping

4.Medium‐termsavingforasset

5.BillPayments

6.HighUsage(asaproxyforfinancialinclusion)

7.Averagemonthlytransac=onsperM‐PESAuserin2008*

8.Averagemonthlytransac=onsperKenyanbankingcustomerin2008*

*Actualaveragetransac=onspermonthforM‐PESAusersandKenyabankcustomerswereusedtodeveloptheseusecases.DataonM‐PESAusersisfrom2008surveyof3,000householdsbyFSDKenyaandMIT.DataonKenyabankcustomersisfrom“TechnicalReport:BankPricingStudy,”PreparedforCentralBankofKenya,September2007.

DerivingTransac=onAmounts

TRANSACTION AMOUNT

1Deposit $68.6

1Air=metop‐up $4.3

Fees*(forcash‐in,air=metop‐up,transfer)

$2.4

Amountremainingfortransfer $61.9

TRANSACTION AMOUNT

Amounttransferred $61.9

1Air=metop‐up $4.3

Fees(forcash‐out,air=metop‐up)

$2.1

Amountremainingforwithdrawal $55.5

SENDINGMONEYTRANSFERUSECASE:

RECEIVINGMONEYTRANSFERUSECASE:

*Feesareaveragefeeschargedbyall16providers(e.g.,$2.7istheaverageamountchargedforthe$68.6deposit,$4.3air=metop‐upand$61.6transfer).

$68.6depositamountcomesfromactual

depositaveragesof5services.Thisisthekeynumber(alongwithair=metop‐upvalue)fromwhichother

transac=onvaluesarederived.$68.6isthe‘medium’transac=onvaluewhichisusedforallusecasesunlessotherwisespecified.

(Datafrom:Bradesco(BancoPostal),EKO,M‐PESAKN,MTNZAand

SmartMoney).

PPPmakespricescomparableacrosscountries

Thecountriesincludedinthesamplevaryfromverypoor(Afghanistan,US$800percapita)tomiddleincome(Brazil,$10,200GDPpercapita).PPP(purchasingpowerparity)reflectstherela=vevalueofUS$1acrossverydifferentcountries.

AllpricesarequotedinUS$PPPunlessotherwisenoted.Weprovidethenominal(e.g.,unadjusted)pricesinsomecaseswheredeemedpoten=allyusefultoreaders.

Insomecountries,PPPvaluesareseveral=meshigherthannominal:

TransferpriceinnominalandPPPvaluesfor3providers

Note:Nominalexchangeratescalculatedbasedon5yearhistoricexchangerate.PPPfromWorldBankreport:GlobalPurchasingPowerPari=esandRealExpenditures:2005Interna=onalComparisonProgram

5 4 611 12

21

0510152025

WIZZIT(ZA) M‐Paisa(AF) easypaisa(PK)

$USNominal

$USPPP

US$

Agenda

1.  Methodology

2.  Branchlessbankingusecases3.  Pricingstrategies4.  Branchlessbankingvs.formalbanks

5.  Branchlessbankingvs.informalalterna=ves6.  Conclusion

Averagebranchlessbankingpriceis$3.9permonth

1.01.52.22.32.82.9

3.74.14.34.34.44.44.44.9

6.38.2

‐1.02.03.04.05.06.07.08.09.0

Zap(KN)

EKO(IN)

GCash(P

H)

M‐PESA(K

N)

WINGM

oney

(CAM)

SmartM

oney(P

H)

Caixa(BN)

Vodafone

M‐PESA

(TZ)

Bradesco(B

N)

MTN

Mob

ile

Mon

ey(C

I)MTN

Mob

ile

Mon

ey(ZA)

M‐Paisa(A

F)

OrangeMon

ey

(CI) Zap(TZ)

WIZZIT(ZA)

easypaisa(PK)

Note:Thisaverageisforallprovidersacrossall8usecases.Nominalaveragepriceis$1.5average.EKOwasexcludedfromsomeofthemoreexpensivescenarios(highusage,Kenyabankandbillpayments)astheydonotofferbillpaymentfunc=onality.ZAPTZpricesarebasedonrecommendedcash‐in/outpricestoagentsbuttheymaybehigherthanthosestated.

Price(US$PPP)

Average$3.9

Whoischeapestandmostexpensive?

Whoischeapest? Whoismostexpensive?

ZapKenyaiscurrentlytheoverallcheapestservice.WINGMoneyandtheFilipinoservices(GcashandSmart)areamongthecheapestthirdacrossmostusecases.ZAPandtheFilipinoservicesallprovideair=mediscounts(seeslide35).

EKOisverycheaponthelow‐endbutexpensiveonthehigh‐end

easypaisaandWIZZITarethemostexpensiveservices.ZapTanzaniaandOrangeinCôted’Ivoirearealsoamongmostexpensivethirdacrossmostusecases.

Theseprovidersoperateinverydifferentmarketsandneedtobecompe==veversusactualalterna=vesinthosemarkets.CGAPisnotmakingajudgmentonwhetheraprovideristoocheaportooexpensivebutratherisseekingtounderstandhowprovidersarepricingtheirservices.

UseCase1:SendingMoneyTransfer

Price(US$PPP)SendingScenarioIncludes:

•  1Deposit•  1Transfer•  1Air=metop‐up•  1BalanceInquiry

Averagepriceis$2.4,median$1.9

Thesepricesareformediumtransac=onvalues(depositis$68.6,transferis$61.9,etc.asdescribedonslide16)

(0.2)

0.00.90.91.11.41.61.7

2.12.33.03.2

3.74.3

5.8

7.3

(1.0)

‐

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Note:Zap(KN)appearsnega=vesincevalueofair=mediscountismorethanpriceoftransac=ons.

Average$2.4

UseCase2:ReceivingMoneyTransferPrice(US$PPP)ReceivingScenario

Includes:•  1Withdrawal•  1Air=metop‐up•  1BalanceInquiry

Averagepriceis$2.1,medianalso$2.1

Thesepricesareformediumtransac=onvalues(withdrawalis$55.5asdescribedonslide16)

(0.3)

‐0.50.91.41.51.61.6

2.52.9

3.33.53.53.63.7

4.3

(0.5)

0.5

1.5

2.5

3.5

4.5

5.5

Note:Smart(PH)appearsnega=vesincevalueofair=mediscountismorethanpriceoftransac=ons.

Average$2.1

Onaverage,completetransferpriceis2.9%oftransferamount

TOTALPRICE$USPPP

ZAPKN

GCash

Smart WING M‐PESA(KN)

M‐PESATZ

Zap(TZ)

M‐Paisa

MTNZA EKO MTNCI

WIZZIT

OrangeCI

easyPaisa

Caixa Brad.

.7 1.4 1.8 2.8 2.6 3.3 4.2 4.5 3.9 5.8 4.4 6.1 5.2 10.9 7.4 8.5

PRICE$USNOM

.3 0.4 0.6 0.8 1.1 1.2 1.1 1.6 1.8 1.8 1.4 2.8 2.8 3.1 4.5 5.2

Note:Totalvalueincludestransfervalueof$61andair=metop‐upforbothsenderandreceiverof$4.3($69.6nominal)

(1.0)

‐

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Receivingusecasepriceas%ofvalue

Sendingusecasepriceas%ofvalue

TotalPriceas%ofTotalValue

CombinedpriceofsendingandreceivingusecasesinPPPandnominalUS$:

Average2.9%

Sendersandreceiverssplittransferfeesalmostequally

51% 49%

SenderandReceiverpriceasshareoftotaltransfer

ReceiverShare SenderShare

Althoughonly5providerschargesendersandreceiversequally,theother11varywidelyinchargingsendersversusreceivers–sooverallshareissplitalmostequally

Ingeneral,weexpectsendersto

financethetransac=onastheyhavetheresources

aswellastheresponsibilitytofindawaytotransferfunds

However,someprovidersarecharginghigherfeestothereceiverto

compensateforsendersavoidingtransferfeesthroughdirectdepositsinto

receivingaccounts

Note:Sendershareincludescostofcash‐inandtransferwhilereceivershareincludescostofcash‐out

UseCase3:Short‐termSafekeeping

Short‐termSafekeepingincludes:•  2Deposits•  2Withdrawals•  1Air=metop‐up•  1BalanceInquiry


Incomparisonwithfirstfewusecases,Brazilian‘bundled’accountsaremuchmorecompe==veduetolargernumberoftransac=ons

‐2.22.23.03.13.7

4.35.05.36.2

7.07.07.17.68.1

12.1

‐

2.0

4.0

6.0

8.0

10.0

12.0

14.0Price(US$PPP)

Average$5.2

UseCase4:MediumTermSavingsischeapest

Thisusecaseassumessavingfora$75asset(e.g.sewingmachine/bicycle)over6monthperiod

Averagepriceof$1.6lowestofallusecases,$0.7median• Manyprovidersofferfreedepositsandmakemoneyoffoftransfers• High‐intensitysaversmakingfewwithdrawalsortransferswillpayliOle

Monthlyusecaseincludes4depositsof$4.50and0.2withdrawals(1in6months)of$75

‐0.20.50.50.60.60.70.70.80.80.9

2.43.2

3.74.3

6.5

‐

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Note:Severalprovidersarestrictlyexcludedfromofferingandmarke=ngadepositproduct.However,customersurveyshaverevealedthatcustomersarestoringvalueviatheirmobilewalletaccounts.See:• PoorPeopleUsingMobileFinancialServices:hOp://www.cgap.org/p/site/c/template.rc/1.9.36723/• WindowontheUnbanked:hOp://www.cgap.org/p/site/c/template.rc/1.9.41163/• FSDKenya/MITsurveyofM‐PESAcustomers2008.

Price(US$PPP)

Average$1.6

Spend5.4%ofvalueofassettosaveforitover6months

• Onaverage,spend$9.6over6monthstosaveforPPPadjustedassetof$178($75nominal)

• Averageis5.4%ofPPPprice,median(beOermeasureduetofewextremeoutliers)is2.4%

• Overall,lowcomparedwithcostofcredit,SUSUandotheralterna=ves

• Rangeisfrom0%(EKO)to24%(WIZZIT)

‐ 1 2 2 3 3 47

13

20

‐

5

10

15

20

25

BBPrice(tosave)as%ofvalue%

Average5.4%

UseCase5:BillPayments

BillPaymentsScenarioincludes:•  1Deposit•  3BillPayments•  1Air=metop‐up•  1BalanceInquiry


Thesepricesareformediumtransac=onvalues(depositis$68.6andeachbillpaymentis$20.7)

Note:EKOexcludedsincedonotofferbillpay.Zap(KN)valueisnega=vesincevalueofdiscountfromair=mepurchasedismorethanpriceofothertransac=ons.

(0.5)

0.91.6

2.32.4

3.33.73.8

4.04.34.5

5.25.25.35.5

(1.0)

‐

1.0

2.0

3.0

4.0

5.0

6.0Price(US$PPP)

Average$3.4

UseCase6:HighUsageTransac=onAccount

Highusagetransac=onalaccountincludes:•  2Deposits•  2Transfers•  2Withdrawals•  2Air=metop‐up•  2BalanceInquiries•  2BillPayments

Thishighusageaccountisaproxyforfinancialinclusionanddemonstratespriceifapersondidmosttransac=onsviaBBservice


1.43.2 3.8

4.3 4.8 5.16.1

7.68.7 8.7 9.1 9.3

10.812.0

15.6

‐

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Note:EKOexcludedsincedonotofferbillpay.

Price(US$PPP)

Average$7.4

UseCase7:TypicalM‐PESACustomer

Actualbundleoftransac=onsthatM‐PESAusersarecurrentlydoing:• 1.2deposits• 0.6transfers• 0.8withdrawals• 0.6air=metop‐up• 1balanceinquiry

• M‐PESAitselfchargesjust$1.9forthis,significantlybelowtheaverage

• Averageis$2.9,median$2.6

1.01.51.51.9

1.91.92.12.13.13.2

3.53.73.74.34.4

6.3

‐

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Note:From2008surveyof3,000householdsbyFSDKenyaandMIT.

Price(US$PPP)

Average$2.9

UseCase8:TypicalKenyanBankCustomer

HowmuchwoulditcosttodoeverythingviaaBBservicethatbankcustomersarenowdoingviathebank?

AnaverageKenyanbankcustomerdoes:• 1.2deposits• 1transfer• 3.1withdrawals• 0.4billpayments(checks)• 1balanceinquiry

Todoallthiswithabranchlessbankingservicewouldcost$6.5amonthaverage,$6.8median

Note:Datafrom“TechnicalReport:BankPricingStudy,”preparedforCentralBankofKenya,September2007.EKOexcludedsincedoesnotofferbillpay.

3.03.73.73.84.34.44.5

6.86.87.78.08.68.9

9.8

12.9

‐

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Price(US$PPP)

Average$6.5

Agenda

1.  Methodology2.  Branchlessbankingusecases3.  Pricingstrategies4.  Branchlessbankingvs.formalbanks

5.  Branchlessbankingvs.informalalterna=ves

6.  Conclusion

PricingStrategies

Thissec=onexploresfivepricingstrategiesthatinfluencecustomeruptakeandusage:

1.  Pricetoencourage‘primaryproduct’2.  Offerair=mebonus/discountifpurchasedviaBB

service3.  Offerfreeregistra=onand/ordeposits4.  Giveagentsasayintheprice5.  Methodofcharging(flat,=ered,%)

1.Pricetoencourage‘primaryproduct’

3.7 3.94.5

3.9

00.51

1.52

2.53

3.54

4.55

Sending+ReceivingUseCases

Averageall8usecases

Avgof5moneytransferproviders

Allproviders

%Averageof5providersischeaperthantotalaverage

20% 0%

Ofthe16providers,notallarepushingallproductsequally

Forexample,theVodafoneimplementa=ons(M‐PESAinKNandTZ,M‐Paisa)andMTNimplementa=ons(CIandZA)targetmoneytransfers

Asagroup,theyare20%cheaperthanallprovidersformoneytransfersbutequaltothegroupacrossallusecases

Price(US$PPP)

PriceofMoneyTransferProvidersvs.allproviders

2.Air=mediscountsdrivedownpricesandencouragecustomeruptake

Fourprovidersofferdiscountsof5‐10%onair=mepurchasedviaphones–GCash,SmartMoney,VodafoneM‐PESAinTanzaniaandZapinKenya*

Customersaremo=vatedtolearnhowtodepositmoneyatagentsandtransactonthephone–skillsthatcanbeappliedtoothertransac=ons

Discountsdrivedownpricingacrossthescenarios–otenmorethanoff‐sexngthepricesoftransfersandbillpayments

2.4

3.2

0

0.5

1

1.5

2

2.5

3

3.5

Pricingwithair=mediscounts

Pricingwithoutair=mediscounts

Averagepriceforfourairamediscounterswithandwithoutthediscount

25%decreaseinoverallpricewithair=mediscount

*OrangeCIalsohadanair=mepromo=onbutthisisscheduledtoendApril30,2010.Note:Basedonthe4providerswhoofferair=mediscountsand6ofthe8scenarios(medium‐termsavingsandKenyabankcustomerscenariosdidnotincludeair=mepurchases)

Price(US$PPP)

3.Offerfreeregistra=onand/ordeposits

Vastmajorityofprovidersofferfreeregistra=on

Abouthalftheprovidersofferfreedeposits

However,twoproviders(WINGandWIZZIT)chargeanaverageof$5foracustomertoregisterandoneprovider(Smart)chargesabout$1forthedebitcard

Theseprovidersdon’tlosemoneyonlargenumbersofofficiallyregisteredcustomers,manyofwhommayneverbeac=ve

However,astheproductofferingissonewup‐frontcostswilldeterpoten=alpoorcustomersfromtryingouttheservice

Freedepositsencourageexperimenta=onandusage

Theyareveryimportantforproviderswhowanttoencourageair=mesalesviatheBBservice

Unintendedconsequence:ifacustomertransfers/withdrawsinfrequently,shecandepositdailyinaservicelikeM‐PESAandmaintainavirtuallyfreesavingsaccount*

*Infact,21%ofM‐PESAuserssaythatcomparedtootherop=ons(bothbanksandinformalop=ons),M‐PESAistheirmostimportantsavingsinstrument.FSDKenya/MITsurveyofM‐PESAcustomers2008.

4.Giveagentsasayintheprice

ADVANTAGES(mainlyforagentsandproviders)

DISADVANTAGES(mainlyforcustomers)

• Marketforcesofsupplyanddemandmightdeterminebestprices,especiallyinruralareaswherethedistancetobankbranchesandcostoftransportishigher

• Agentsbenefitastheyarepaidinreal‐=meandunderstandexactpriceofeachtransac=on

• BBprovidersbenefitastheydonotneedtoseOlecommissionsseparately

• Feelsmoreexpensiveastheyneedtohandcashtoagent

• Difficulttoknowhowmuchmoneywillbeneededforacertaintransac=on

• Annoyingifneedtonego=ateseparatelyeach=meuseservice

• Difficultforindustrytoknowtruepricestocustomers

TheZAPimplementa=ons(asidefromKenya)andtheFilipinoprovidershaverecommendedpricesbutallowagentstosetthefinalprice

5.Methodofchargingdependsontypeoftransac=on,notprovider

FREE % TIERED FLAT

CASH‐IN 8 4 2 0

CASH‐OUT 1 1 8 4

P2PTRANSFER

0 1 4 9

BILLPAYMENT

1 0 0 12

BALANCEINQUIRY

8 0 0 6

NumberofProvidersthatchargespecifiedmethodofpricing

Transac=onsareeitherfree,chargedaflatfeeorchargedasa%or=erofthetransac=onvalue

Eachtypeoftransac=onhasamethodofpricing

thatclearlydominateswithover2/3ofproviderschargingthesame

way

Note:ThetwoBrazilianbankswereexcludedastheychargeasetmonthlyfeewithalltransac=onsincluded.EKOexcludedfromBillPaymentsastheydonotofferthisservice.

Mostpricingvariesbasedontransac=onamount

• 13ofthe16branchlessbankingprovidersvarypricingdependingonvalueoftransac=on• Onaverage,thereisa$4differencebetweenpriceofhighandlowusecases• Ingeneral,serviceswhoarecheapestforlowamountsarealsocheapestathighamounts

Note:Thehighvalueof$206ishigherthantheupperlimitofseveralproviders.Inthesecases,theirhighestpricepointswereused.

$‐

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

Low($23)

Medium($69)

High($206)

Price(US$PPP)

Priceacross8usecasesatlow,medium,hightransacaonvalues

Whichpricingisbestforlow‐incomecustomers?

%/Tieredpricingcheaperatsmallamounts

However,flatpricesareverysimpletounderstand

Forexample,%/=eredpricingis31%cheaperfora$5transferthanflatpricing(averageprice$0.55vs.$0.80)

However,flatpricingis81%cheaperfora$100transfer(averageprice$0.80vs.$4.3)

Tieredpricingandespecially%pricingismoredifficulttocalculate

M‐PaisainAfghanistanrecentlychangedfrom=eredtoflatpricingbecauseagentsandcustomersfound=eredpricingconfusing

VodafoneM‐PESAinTanzaniarecentlychangedfrom%toacombina=onof=ered/flatforsamereason

Agenda



6.  Conclusion

Onaverage,branchlessbankingservicesare19%cheaperthanbanks

Note:Pricesarebasedononemonthusageofservices.Datawasreceivedonactualaveragetransac=onsbyM‐PESAandKenyaBankcustomerstodeveloptheseusecases.

6.5

2.9

7.4

3.4

1.6

5.2

2.1

2.4

3.9

7.5

3.3

8.4

6.9

3.3

3.7

2.8

2.8

4.8

0 2 4 6 8 10

KenyaBankCustomer

M‐PESACustomer

HighUsage

BillPayments

Medium‐termsavings

Short‐termsafekeeping

Receiving

Sending

AVERAGE

Banks

BranchlessBanking

12%

24%

‐43%

50%

%BBcheaperthanbanks

14%

12%

12%

50%

19%

Price(US$PPP)

Thelowerthetransac=onvalue,thecheaperbranchlessbankingisincomparisontobanks

3.03.9

7.0

4.8 4.8 4.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Low Medium High

BranchlessBanking

Banks

%BranchlessBankingcheaperthanbanksacross8scenarios

38% 19% ‐45%

DepositAmount $23 $69 $207

Price($USPPP)

Transac=onValue

Averagepriceacross8usecasesbasedonlow,medium,highvalues

Weexpectmostlow‐income,unbanked

customerstotransactatlowamountswhereBBischeapestcomparedwithbanks

Gapbetweenbranchlessbankingandbankpricesfortransfersgreatestatlowamounts

PPPoftransfervalue$US(nominalamounts$5‐150)

At$13(nominal

$5)BBpriceis20%ofvalue

($2.7)andbankpriceis43%ofvalue($5.6)

At$390(nominal$150),BBpriceis2.1%ofvalue($8.2)andbankpriceis1.4%ofvalue($5.6)

At$230($90nominal)bothBBandbankscost

thesame‐$5.6or2.4%ofvalue

$160istheaveragetransferamount($62nominal)–BBcharges$5.0(3.0%)andbanks

$5.6(4.8%)

TotalPriceSendingandReceivingas%ofTransfer

Value

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

0 50 100 150 200 250 300 350 400 450

BBPriceas%ofPPPofvaluetransferred

BankPriceas%ofPPPofvaluetransferred

Whyisn’tthegapbetweenbranchlessbankingandbankswider?

•  Weselectedbanksthattargetthemassmarket(minorityofbanks)andwepickedcheapestcomparableaccounts(e.g.,SouthAfricanMsanziaccountsthatarerecognizedtobelossmaking)

•  Ini=alinvestmentforsuccessfulbranchlessbankingimplementa=onishigherthanoriginallythought(severalmilliondollars)andsomeprovidersaresexngpriceshighertoquicklyrecoverthisinvestment

•  Someprovidersindicatedtheyarepurposefullysexnghighpricessotheycanlowerthemascompe=torsentermarket

Othercost‐relatedadvantagesofbranchlessbanking

Branchlessbankingincurslowercostintermsoftransportand=me

Eventhemass‐marketorientedbanksinoursamplefrequentlyhadrela=velyhighminimumbalances:• EcobankandUnitedBankofAfricaCoted’Ivoireminimumbalanceisequalto$87PPP• StateBankofIndiasavingsaccountminimumbalanceisequalto$68PPP

Interestratesofferedarelow(average3%,$0.22amonthbasedonmediumtermsavingsavg.balanceof$89)andoten=edtohigherbalances

Banksusuallyrequireaminimumbalancethatdeterslow‐income

customersCustomerscandomanybranchlessbankingtransac=onswhenever,wherevertheywant

Allbanktransac=onsneedtobedoneatphysicalbranchorATM

Ifwefactoredincostoftransportandopportunitycostofspendinghourstotravelandwaitinlines,totalcostofbankcouldbemuchmore

Branchlessbankingofferspay‐as‐you‐gopricingwhilebankschargefixedmonthlyfees

Pay‐as‐you‐gomodelofbranchlessbankingispreferredbylow‐incomecustomers(e.g.,vastmajoritybuyair=mepre‐paid)

Also,it’smuchcheaperforfewertransac=ons

89%ofbankfeesinhighusagescenarioarefixedmonthlyfeesandonly11%arevariablefees

Incontrast,only11%ofbranchlessbankingpricesarefixedmonthlyfees

89

11

2

18

2

20

4

30

3

21

0% 20% 40% 60% 80% 100%

Banks

BranchlessBanking

MonthlyFee

Deposit

Transfer

Withdrawal

BillPay

Contribuaontototalpriceofhighusagecasebytransacaontype

BBandBankpricedispari=esvarywidelycountrytocountry

BanksinIndiaandSouthAfricafacepoli=calpressuretooffersimplifiedaccounts(‘no‐frills’inIndiaand‘Msanzi’inSouthAfrica)thatarenotprofit‐oriented.Inthesecountries,BBismoreexpensivethanbanks.

Kenyanbanks,incontrastaremoreexpensive.CouldthisbeonereasonforthesuccessofM‐PESA?

Note:Analysisbasedonaverageofall8usecases.Brazilbanksnotincludedsincesameproductswereusedforbranchlessbankingandbankprices.

1.5 1.7

4.45.3

0.4

6.0

9.4

4.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

India Kenya Côted'Ivoire

SouthAfrica

BB

Banks

Price(US$PPP)

Agenda



6.  Conclusion

InformalproviderschargedoublethepriceforamoneytransferthanaBBprovider

0

2

4

6

8

10

12

AverageBBprovider AverageInformalProvider

4.9

10.7

PriceforMoneyTransfer(SendingandReceiving)

BBis54%cheaperthaninformalop=ons

Note:Totalpricetosendandreceive$62($160PPPvalue).$4.9istheaveragepriceforsendingandreceiving(notincludingothertransac=onslikeair=metop‐up)acrossall16providersin10countries.$10.7istheaveragetransferpriceforfourinformalmethods(taxi/courier,moneychanger,busservice,postoffice)inthreecountries.Average=metosend/receiveis2–4daysforinformal.

Priceas%oftransfer 3.1% 6.7%

Price(US$PPP)

In3countries,BBprovidercheaperthancheapestinformalop=onformoneytransfer

CAMBODIA

0

0.5

1

1.5

2

2.5

3

3.5

RangeofInformalPrices

WING

1.7–3.5%

1.3%

Priceas%oftransfer

InformalOpaons:Taxi/courierandmoneychanger

INDIA

0

1

2

3

4

5

6

7


EKO

4–7%

3%

Priceas%oftransfer

InformalOpaons:Courier(basedonpricesfrom3differentci=estoone

ruraldistrict)

TANZANIA

0

2

4

6

8

10


Avg.M‐Pesaand

ZAP

9‐10%

1.8%

Priceas%oftransfer

InformalOpaons:PostOfficeMoneyFaxService,BusService

Note:Therangesforinformalprovidersrepresentthewaythatpricesarequotedasthesepricesareotennotfixedandvarybasedonamount,urgency/=merequired,personalrela=onshipsandotherfactors.Sources:Cambodia:WINGMoneyinternalresearch2009,India:Microsavereport‘ResearchonUsabilityandRemiOancesinBihar,;Tanzania:M‐PesainternalresearchandPostOfficeMoneyFaxwebsite(hOp://www.tanpost.com/mfxrates.html)

Agenda



6.  Conclusion

Low‐incomehouseholdsspend0.6%oftheirshareofGDPonbranchlessbanking

0.1 0.2 0.1 0.1 0.1 0.3 0.1 0.2 0.3

3.5

0.2

1.2

1.9

0.7

1.4

0.4 0.5

1.71.5

‐

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0AnnualBBpriceas%ofGDPperhousehold

RANGEOFPRICINGAS%OFGDPPERLOW‐INCOMEHOUSEHOLDLow‐endismedium‐termsavings(cheapestusecase);high‐endishighusage(mostexpensiveusecase)

Note:0.6%isaverageacrossall8usecases.GDPPPPadjustedpercapitadataisfromtheWorldBankJuly2009(2008values).Welookedattheshareofincomeforthe2nd20%percen=leineachcountry(i.e.,notthepoorest20%inthecountrybutthoseinthe20thto40thpercen=leforincomewhowouldtendtobeeconomicallyac=vepoorinadevelopingcountry).Wethenmul=pliedthisnumberbythenumberofpeopleineachhousehold(average5.3).

0.2

PreliminaryConclusionsofBBPricing(I)

•  Branchlessbankingoffersacheaperalterna=vethanexis=ngformalandinformalop=ons,butthegapisnotaslargeasexpected(atleastatthemediumdepositsizeof$69,theaverageof5servicesthatprovidedCGAPwithdata)

•  However,webelievemanylow‐incomepeoplearetransac=ngatloweramounts,andatthatpoint(about$20)branchlessbankingis38%cheaperthanbanks

•  Thewaybranchlessbankingservicesarepriced(e.g.,freedepositsandair=mediscounts)encouragecustomeruptakeandusageasmuchastheabsoluteamounts

PreliminaryConclusionsofBBPricing(II)

•  BranchlessbankingpriceshavenotseOled–mostproviderschangedpricesinlast6months

•  Actualcustomeruptakeandusagerateswillbethemostimportantfactortodeterminewhetherbranchlessbankingservicesoffercustomersavalueproposi=onworththeprice

APPENDIX

SummaryofUseCases

USECASE TRANSACTIONS AVERAGEPRICE(US$PPP)

MEDIANPRICE(US$PPP)

1.SENDINGMONEYTRANSFER

1Deposit,1Transfer,1Air=me,1BalanceInquiry

$2.4 $1.9

2.RECEIVINGMONEYTRANSFER

1Withdrawal,1Air=me,1BalanceInquiry

$2.1 $2.1

3.SHORT‐TERMSAFEKEEPING

2Deposits,2Withdrawal,1Air=me,1BalanceInquiry

$5.2 $5.1

4.MEDIUM‐TERMSAVINGS

4Deposits,0.2Withdrawal,1BalanceInquiry

$1.6 $0.7

5.BILLPAYMENTS 1Deposit,3BillPayments,1Air=me,1BalanceInquiry

$3.4 $3.8

6.HIGHUSAGETRANSACTIONALACCOUNT

2Deposits,2Transfers,2Withdrawals,2BillPayments,2Air=me,1BalanceInquiry

$7.4 $7.6

7.TYPICALM‐PESAUSER 1.2Deposits,0.6transfers,0.8withdrawals,0.6Air=me,1BalanceInquiry

$2.9 $2.6

8.TYPICALKENYANBANKCUSTOMER

1.2Deposit,1Transfer,3.1Withdrawals,0.4Bills,1BalanceInquiry

$6.5 $6.8

Transac=onPrices

TRANSACTIONTYPE

AVERAGEPRICEFOR$50TRANSACTION

MEDIANPRICEFOR$50

TRANSACTION

LOWESTPRICE HIGHESTPRICE

DEPOSIT $0.61 $0.0 Free(8providers)

Smart($1.9)

WITHDRAWAL $1.93 $1.56 EKO(Free) M‐PesaTZ($3.79)

TRANSFER $1.34 $0.78 SmartandG‐CashPH($0.11)

EKO($4.69)

BILLPAYMENT $0.80 $0.65 Free(ZAPKenya) OrangeandMTNCI($1.74)

AIRTIMETOP‐UP ‐$2.48 $0.00 Smart(‐$11) Free

BALANCEINQUIRY

$0.06 $0.00 Free(7providers)

WIZZIT($0.46)

Note:TwoBrazilianbanksareexcludedfromanalysisastheyonlyofferonesetmonthlyfeebundledwithmanytransac=ons

Func=onalityofBranchlessBankingProviders

PROVIDER MONTHLY

FEE DEPOSITS TRANSFE

RS

Withdrawals - registered

user Airtime top-up Bill Payment

Transfer to unregistered

user

Bradesco (BN) X X X X X

Caixa (BN) X X X X X

EKO (IN) X X X

EasyPaisa (PK) X X X X

GCash (PH) X X X X X

M-Paisa (AF) X X X X X X

M-Pesa (KN) X X X X X X Vodafone M-PESA

(TZ) X X X X X X

MTN (CI) X X X X X X MTN (ZA) X X X X X

Orange Money (CI) X X X X X

Smart Money (PH) X X X X X

WING Money (CAM) X X X X X X

WIZZIT (ZA) X X X X X X

ZAP (KN) X X X X X ZAP (TZ) X X X X X X

Advancingfinancialaccessfortheworld’spoor

www.cgap.org www.microfinancegateway.org

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