In much of the developing world, where less than half of the population is served by formal financial institutions and people must rely on their own funds or informal services that charge excessive rates, the lack of access to finance is leading to greater income inequality and slower economic growth. Financial institutions and mobile service providers around the world are addressing this problem by investing in financial products and services targeted specifically at underserved markets. India’s ICICI Bank, Brazil’s Bradesco, and South Africa’s Absa (which is majority owned by Barclays) have begun experimenting with innovative branchless banking models that address some of the barriers to financial access.
In 2008, Australia and New Zealand Banking Group Limited (ANZ)—one of the largest banks in the Asia-Pacific region—launched WING, a mobile banking and payments service that expanded financial inclusion in Cambodia and also benefited the company by providing access to new markets and supporting long-term business growth.
“Through innovating our products, and the way we deliver them, ANZ can create greater financial inclusion that builds individual prosperity, contributes to thriving local communities, and helps ANZ to grow responsibly,” ANZ CEO Mike Smith said at an event to celebrate the launch of WING.
ANZ started WING as a pilot program in Cambodia’s garment sector, an industry that represents 80 percent of total exports and 10 percent of the country’s GDP. At the time, ANZ found that garment factory workers in Phnom Penh were sending 5 million remittances annually to family members in neighboring provinces through informal means at an average cost of 2.6 percent of the transfer amount.
To help the garment workers, ANZ launched WING for middle- and low-income customers, the majority of whom were previously unbanked. In fact, only 5 percent of households in Cambodia had an account with a financial institution, so after just one year, ANZ made WING available to all Cambodians.
Overcoming the Challenges to Financial Access
WING uses an innovative delivery model that tackles three main hurdles to expanding financial access to low-income populations.
Physical access to formal financial institutions:Challenge: In Cambodia, as in most emerging markets, it is not cost-effective to place bank branches or ATMs in rural areas, and it is impractical for people to travel to major cities such as Phnom Penh or Siem Reap to conduct financial transactions.
Solution: WING relies on a network of 42 microfinance institution branches and 500 rural merchants, such as mobile phone shops and convenience stores. Customers can make cash withdrawals and deposits at any of these locations using mobile phones on a variety of networks, allowing WING to reach all 24 provinces of Cambodia in a cost-effective manner.
Strict eligibility requirements:
Challenge: Many low-income workers are part of the informal economy and lack the documentation required to create an account with a traditional financial institution.
Solution: The only requirement for WING customers is access to a mobile phone. More than 1,800 “pilots,” WING’s commission-based network of salespeople, travel to remote parts of Cambodia to sign up new customers and instantly activate new accounts.
Challenge: Most formal financial services require a minimum balance or collateral, both of which low-income customers often cannot afford.
Solution: WING has no minimum balance, no account-holding or maintenance fees, and no mobile phone charges, which is critical for a service targeted at low-income customers. The service earns revenue by charging a per-transaction fee that is approximately 50 percent lower than the fees charged by informal financial service providers. According to a study by Consultative Group to Assist the Poor, which looked at 10 mobile banking solutions in emerging markets, WING has among the lowest fees of any banking solution targeted at low-income and unbanked customers.
While WING’s use of mobile technology addresses barriers to financial access, ANZ is also trying to increase financial literacy, which helps drive demand for financial products and services. People who are left out of the formal financial sector need to understand how to manage money, what types of products and services are available, and what benefits come from being part of the formal financial sector. Peter Dalton, ANZ group general manager of innovation, acknowledged that ANZ’s main challenge has been “educating people who are used to a cash-based economy to become comfortable with a new way of doing things.” To address this, ANZ partnered with Equal Access, a nonprofit communications firm, to deliver radio programs on money management throughout Cambodia.
Measuring the Impacts
As of July 2010, WING had more than 150,000 registered customers in Cambodia that were generating more than 70,000 transactions per month. The social impact of WING has been impressive:
- Fifty-six percent of WING customers were previously unbanked, according to research commissioned by the International Finance Corporation.
- About two-thirds of previously unbanked customers were women. Research suggests that women tend to reinvest 90 percent of their savings in the health and education needs of their families, creating a virtuous cycle that leads to long-term prosperity.
- On average, customers reported using 20 percent fewer informal financial services.
- Sixty percent of WING’s customers earn less than US$3 per day, while 30 percent earn less than US$1.50 per day—indicating that WING is meeting the needs of middle- to low-income people, its target customer base.
From a business perspective, WING has had several benefits. The program is helping support ANZ’s corporate strategy to be a super-regional bank and to increase the share of gross net profits from Asia from 7 percent to 20 percent by the year 2012. It is also helping ANZ offer new services and gain access to other markets. The company has already expanded the offering to provide additional services such as bill payment and payroll solutions, and ANZ plans to roll out the service to other countries in the region as WING approaches profitability. WING’s focus on mobile payments has also provided ANZ with critical experience in one of the world’s fastest-growing channels in financial services.
Using CSR to Expand Market Opportunities
ANZ’s experience with WING in Cambodia demonstrates that growing responsibly doesn’t have to mean growing slowly. Companies across all industries have an opportunity to access new markets by leveraging their core competencies to address social and economic challenges. When doing so, company leaders should keep in mind the following:
- Align CSR strategy with overall business strategy. When the two overlap, a company can maximize its positive impact on society while also creating long-term shareholder value.
- Think beyond your traditional customer base and look for unmet needs. You may find millions of potential customers that can be reached through product or service innovation.
- Create demand through education and awareness. Education is critical to the successful launch of a new product or service, especially with customers who traditionally have been left out of the formal sector.
- Partner for success. Find strategic nonprofit and aid organizations that can bring local knowledge or share the cost of launching a new product or service targeted at underserved populations.