Electronic Banking for the Poor

This paper discusses the potential of using electronic banking to provide low cost banking to un-banked individuals worldwide. It lists few of the popular technologies used in electronic banking and explores how these technologies can be used in microfinance programs:

• Personal digital assistants (PDAs);
• Automatic teller machines (ATMs) and point of sale devices;
• Magnetic stripe cards;
• Smart cards;
• Mobile banking.

The paper also assesses:

• Customer perspective and checks whether the e-banking solution provides sufficient value to persuade the customer to move transactions away from cash. It evaluates the features, accessibility, affordability and convenience;
• Institutional perspective and checks whether the e-banking solution increases profitability;
• The environment for e-banking which is influenced by:
• • Evolution of the financial and retail sectors;
  • Level of financial literacy;
  • Regulatory and policy environment;
• Management of risks during development and design of an e-banking solution.

Finally, the paper discusses the principles that should guide donor involvement in e-banking initiatives for the poor:

• Donor subsidies should focus on building shared infrastructure and consider scalability;
• The recipient institution should cover the recurrent costs of the e-banking initiative;
• A careful cost-benefit analysis should be conducted before launch;
• Donors should document successful and unsuccessful experiences;
• Help governments understand and develop appropriate policy environments;
• Donors can invest in promoting e-literacy.