Pia Roman, Head of Inclusive Finance Advocacy at the Central Bank of the Philippines, was one of the speakers in the Branchless Banking focus at this year’s Banking & Payment Technologies Conference in Lagos over 4-6 May. In the following interview with Financial Nigeria magazine she highlights some of the key lessons Africa’s banking and mobile industries can learn from the Philippines experience.
In your opinion, what does the entire gamut of branchless banking cover?
Branchless banking is the delivery of financial services outside the brick and mortar bank offices using technology (this can include mobile phones, cash cards, POS, etc.). This system may be enhanced by having retail agents as delivery channels.
A 2004 survey by the Rural Bankers Association of the Philippines (RBAP) found that 93% of rural bank customers had access to a mobile phone, while the rural banks between them had only 73 ATMs. For countries with similar statistics, that are looking to provide financial services for the poor/rural areas, what kind of opportunity does this scenario present?
This is exactly the significant opportunity presented by branchless banking. It goes beyond the limitations of the physical offices and outlets of banks which are not situated in areas that also need financial services. Mobile phone saturation in the Philippines shows that it caters to all income groups. This is imporant because in th ePhilippines there is still a concentration of banking offices in areas that are higher income or are in urban areas. Using mobile phones as a means to access the financial services of banks or even as a channel for transfers provides a possibly transformative effect.
The Philippines has been proclaimed one of the leaders in mobile banking. How do the country's "Smart Money" and "G Cash" models work?
Smart Money: a re-loadable payment card issued by Banco de Oro that may either be accessed through a Smart mobile phone or a MasterCard powered card, similar to a debit/cash card
G-Cash (offered by Gxchange, a wholly-owned subsidiary): a cash-less and card-less method of transforming a mobile phone into a virtual wallet
Both allow person to person transfers, purchase of goods from merchants, bills payment.
How successful a strategy (in terms of statistics/coverage) have the GCash & SmartMoney models been in providing financial services to the under-served/ unserved areas of the Philippines?
The reach of g-cash and smart money are increasing but still small relative to their existing customer base for airtime/ calls. This is the reason why enabling retail agents and other outlets as possible cash in/out points is crucial to the expansion of this model.
Banks are also anxious to preserve their bottom line. What is to be gained by financial institutions who want to pursue a branchless banking strategy?
Banks are able to increase their market reach in a cost effective and efficient way.
What role has the Philippines' Central Bank played in enabling the innovation of mobile banking while ensuring safe, sound and prudent standards?
We are continuously looking for ways to make sure innovation will continue to happen while maintaining our focus on the safety and soundness of the system. We make sure initiatives are consistent with laws especially anti money laundering rules. (I will talk more on this in the conference)
Under BSP Circular 268, banks may not outsource any inherent banking functions, which effectively include all transactions related to deposit-based accounts. Is the relationship between banks, Globe (mobile operator) and Smart (remittance agent) regarded as an outsourcing arrangement or as an extension of the banks' structure? Which is more ideal for a bank to explore/deploy?
This is not being seen as an outsourcing of the inherent banking functions. Instead, the e-money is seen merely as a means to transfer real money to electronic money. The loan granting and the deposit taking is still done by the client transacting directly with their bank, even if it is now possibly through mobile phones. There should be clear delineation between deposit-taking transactions and receipt of funds for fund transfer purposes and consequently regulated proportionately
The Micro, Small and Medium Enterprise (MSME) Project in Nigeria aims to increase the performance levels of MSMEs in selected non-oil industry sub-sectors. How can branchless banking increase a typical MSME's access to finance, and what kind of structure would this be?
Access to finance is seen as one of the most important aspects to grow small businesses (or any business for that matter). The limitation of this access is largely due to the inaccessibility of banks to the microentrepreneurs. Branchless banking now brings banking services to those that are traditionally unreachable by formal financial institutions.