By reducing the cost and risk of cash collection, electronic payments can open doors for the development of new fee-for-service business models. For example, electronic payments may allow prepaid utility services for electricity or water to be offered on a broader basis, or poor communities to access mobile health services which were previously unavailable due to high transaction costs.2
Electronic payment infrastructure is already leading to innovations in how financial services companies can deliver service to remote regions.
- In the last five years, Brazil has seen 95,000 branchless banking agents open up and now all municipalities are covered by the formal banking system. These remote banks at local retail outlets, which often carry out transactions with a simple POS machine, have added foot traffic to stores and helped generate additional sales. Brazilian retail stores reported up to 30 percent increase in sales because of newly offered banking agent services.3
- Kenya now has more than 30,000 mobile money agents, a number of which have started up for the express purpose of offering the electronic payment services.
In many developing countries, businesses are now able to offer electronic health and crop microinsurance through electronic payment systems.4
- For the first time, more than 300,000 Ghanaians have been able to purchase life insurance from Tigo, a mobile network operator. Tigo provides free funeral insurance coverage as a reward for buying airtime and uses SMS to promote the service and let people know about their balance.5
- The risk for drought or flooding in Kenya is high and can easily destroy farmers’ crops and livelihood. In Kenya, the Syngenta Foundation’s Agriculture Index Insurance Initiative uses mobile phones to offer farmers crop insurance. Farmers can insure farm inputs at their local retailer and pay half the premium. Using mobile phone technology, farmers register using a camera-phone to scan a bar code on each input sold and a text message confirms the policy.6
- The Westpac Banking Corporation, which electronically delivers social welfare in Fiji, increased its client base by 15 percent. The program also strengthened the business case for the installation of an additional 28 rural transaction points which has since benefitted the larger rural community.7
1 The Journey to Cash Lite, Better Than Cash White Paper, Bankable Frontier Associates
2 Abrams 2011 on Bridge schools in Kenya, unpublished
3 Mas, Ignacio and Hannah Siedek, CGAP Focus Note 47, “Banking through networks of retail agents”, CGAP: Washington, DC. May 2008
5 Christine Hougaard and Doubell Chamberlain, “Funeral Insurance”microinsurance innovation facility, June 2011