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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
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
Averagepriceis$5.2,median$5.1
Incomparisonwithfirstfewusecases,Brazilian‘bundled’accountsaremuchmorecompe==veduetolargernumberoftransac=ons
‐2.22.23.03.13.7
4.35.05.36.2
7.07.07.17.68.1
12.1
‐
2.0
4.0
6.0
8.0
10.0
12.0
14.0Price(US$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
Averagepriceis$3.4,median$3.8
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
Averagepriceis$7.4,median$7.6
1.43.2 3.8
4.3 4.8 5.16.1
7.68.7 8.7 9.1 9.3
10.812.0
15.6
‐
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Note:EKOexcludedsincedonotofferbillpay.
Price(US$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.$4.3)
Tieredpricingandespecially%pricingismoredifficulttocalculate
M‐PaisainAfghanistanrecentlychangedfrom=eredtoflatpricingbecauseagentsandcustomersfound=eredpricingconfusing
VodafoneM‐PESAinTanzaniarecentlychangedfrom%toacombina=onof=ered/flatforsamereason
Agenda
1. Methodology2. Branchlessbankingusecases3. Pricingstrategies4. Branchlessbankingvs.formalbanks
5. Branchlessbankingvs.informalalterna=ves
6. Conclusion
Onaverage,branchlessbankingservicesare19%cheaperthanbanks
Note:Pricesarebasedononemonthusageofservices.Datawasreceivedonactualaveragetransac=onsbyM‐PESAandKenyaBankcustomerstodeveloptheseusecases.
6.5
2.9
7.4
3.4
1.6
5.2
2.1
2.4
3.9
7.5
3.3
8.4
6.9
3.3
3.7
2.8
2.8
4.8
0 2 4 6 8 10
KenyaBankCustomer
M‐PESACustomer
HighUsage
BillPayments
Medium‐termsavings
Short‐termsafekeeping
Receiving
Sending
AVERAGE
Banks
BranchlessBanking
12%
24%
‐43%
50%
%BBcheaperthanbanks
14%
12%
12%
50%
19%
Price(US$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
1. Methodology2. Branchlessbankingusecases3. Pricingstrategies4. Branchlessbankingvs.formalbanks
5. Branchlessbankingvs.informalalterna=ves
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
RangeofInformalPrices
EKO
4–7%
3%
Priceas%oftransfer
InformalOpaons:Courier(basedonpricesfrom3differentci=estoone
ruraldistrict)
TANZANIA
0
2
4
6
8
10
RangeofInformalPrices
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
1. Methodology2. Branchlessbankingusecases3. Pricingstrategies4. Branchlessbankingvs.formalbanks
5. Branchlessbankingvs.informalalterna=ves
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