Electronic Banking for the Poor
The advances in information technology have made the once incomprehensible notion of electronic banking feasible, even in developing countries. Electronic banking brings the potential to extend low cost virtual bank accounts to a large number of currently un-banked individuals all over the world. The technical options that comprise electronic banking solutions are: PDAs, ATMs and points of sale, magnetic stripe cards, smart cards and cell-phone banking.
This briefing note compiles the conclusions of MicroSave’s Virtual Conference on Electronic Banking for the Poor and other MicroSave action research on the topic. The main points that should be stressed when considering electronic banking are:
- The customer prospective – the value proposition, i.e., the solution must provide sufficient value to persuade clients to move transactions away from cash, a very versatile medium of exchange;
- The institutional perspective – the business case, i.e., electronic banking should increase profitability; and
- The local environment for electronic banking, this is influenced by the evolution of the financial and retail sectors, the level of financial literacy and the regulatory and policy environment.
The briefing note also includes recommendations for testing an electronic banking solution, options for the development of an electronic banking solution by microfinance programmes and six principles for donor involvement including: careful application of donor subsidies and donors’ role in promoting e-literacy and appropriate policy environments.