Technology is revolutionizing the way financial services are delivered to low income clients. Though of course many questions remain about exactly how this will happen, how fast, and which technologies are the best. Setting aside these uncertainties for a minute, I would like to look at some of the (perhaps unexpected) implications that many financial service providers may be considering as they lean-in digitally.
What do we do with the branches? Brick and mortar bank branches have been a symbol for financial services for a long time. They herald trust and confidence among users of financial services. But with the growing prominence of new technologies, including mobile, point of sale merchant terminals, and internet-enabled banking, customers access service remotely. What will happen to the branches? It’s almost certain that branches will retain at least some of their traditional service functionality, but if the move to digital is as robust as expected, changes to branches will likely be robust as well. With iTunes, streaming services, and digital music, how many brick and mortar stores are still around that sell CDs? Here are some ideas for the future of bank branches:
- Call centers – Branches could become customer service call centers. Although some institutions already have this function, with increased client outreach, it might make sense to have enhanced customer service capability.
- “Beyond” services – Branches, especially given the rural locations of some, could be used to provide “beyond” microfinance services such as health care or business training.
- Banking cafes – Maybe inclusive financial institutions will take a page out of Capital One’s book and turn their branches into “banking cafes”, which feel like half bank branch and half internet cafe.
- Closed – More and more branches will just be closed because keeping them open will become too expensive, preventing financial institutions from realizing the cost savings of going digital.
What do we do with the groups? Lending and savings groups have long been a bedrock of financial inclusion for the very poor. For consumers lacking traditional forms of collateral or credit scores, groups provide social collateral as members vouch for each other and co-guarantee each other’s loans. Groups determine who to trust, who needs the payout, and they provide a social safety net if one member falls on hard times. Regular group meetings can support social cohesion and provide a unique opportunity for loan officers to interact with a large number of clients. Now that many clients can make financial transactions from their phones, what will become of group meetings?
- Beyond services – Maybe group meetings could be more enticing if there was some other reason for going, such as financial literacy, business training, or health care services like doctor exams or vaccinations. For example, ProMujer provides health services in concert with its microfinance groups.
- Gimmicks – Financial service providers could get creative to encourage group meeting participation with gimmicks such as prizes, games, awards, and give-aways.
- Decision making – Giving clients more buy-in in terms of how the institution is run, which products are offered, and so forth might be another way of getting clients to attend meetings. In short, groups could turn into credit and savings cooperatives.
- Go digital – Accion Venture Lab investee eMoneyPool is an online platform for group savings and loans that enables users to create virtual groups with their friends and family and conduct group financing online.
- End – In-person group meetings may simply be obsolete and replaced by individual financial products.
Whatever paths are taken, it will be interesting to monitor the impacts on client satisfaction and repayment rates.
Many institutions are currently dealing with these issues or likely will be in the future. I would be interested to hear from readers if they have any other suggestions on how branches could be utilized – ideally in a cost reducing or neutral manner. I am also interested to hear from readers on other suggestions of how groups could be utilized or transformed as technology uptake increases.
Nathan Were, Program Manager, FINCA, contributed to this post.
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