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Editor’s Note: The Consultative Group to Assist the Poor (CGAP) just announced the launch of a brand new resource for those interested in the growth of mobile money around the world. The Branchless Banking Database, accessible in a convenient Excel spreadsheet format, provides rich data about the state of the industry and a recount of the challenges and opportunities to be found in this fast-growing sector.

In this interview, CGAP’s Mark Pickens shares with us the rationale behind and some of the main findings of this research effort.

NextBillion.net: First of all, why did CGAP decide to embark on this study of branchless banking institutions at this time?

Mark Pickens, CGAP: This pulls together a set of data points CGAP has collected while advising mobile network operators, microfinance institutions, banks, and policymakers about using new technologies to bank the poor. When put alongside one another, it tells an interesting story about progress within branchless banking – issues such as building an agent network, setting prices, is branchless banking even reaching the unbanked?

NextBillion.net: Could you explain the sources and the scope of the study?

Mark Pickens, CGAP: It includes a range of different sources, mainly primary sources from CGAP’s own analysis and field work. We bring together some of our own research data with relevant data from other sources such as data on banking access in 168 countries from CGAP and the World Bank’s “Financial Access 2010” report, or the World Bank’s data on population and income. We want this to be one-stop shopping for people who like to crunch the numbers and are following branchless banking. We present the data in an Excel format so others can manipulate the data for their needs.

NextBillion.net: The study results mention that in 2010, more than 2/3 of the world’s 4.77 billion mobile phone owners live in a poor country and people living in these poor countries are twice as likely to both live in a city and own a mobile phone than have a bank account. How have these factors helped to shape the growth of branchless banking?

Mark Pickens, CGAP: In the past decade half the world has leapt from infrequent contact with communication devices straight to complete immersion in the mobile tools of the 21^st century. Mobile has really changed people’s lives. One of things it does is dissolve distance. When that functionality gets paired with merchants who agree to act as human ATMs, handling deposits and withdrawals, the cost structure of banking declines radically. All of a sudden, places and people who were unbankable become economical, even attractive, for businesses to serve en masse. The obvious example is Kenya, where half the adult population has signed up for M-PESA, a mobile wallet and money transfer service, since 2007.

NextBillion.net: Despite the growth, branchless banking institutions (BBIs) like M-PESA haven’t necessarily been profitable, why?

Mark Pickens, CGAP: Well, we’re pretty sure M-PESA is profitable. The volume of transactions it handles is huge: equivalent to about 20% of Kenya’s GDP. But it’s true many other BBIs are struggling to achieve volume. By our estimate, 1 in 5 of the 100+ BBIs in the work have joined the “million client club” (1 million registered clients). That’s not a bad success rate when you consider this is a new service, often offered by mobile operators and tech companies who are new players to the financial service space, targeting customers most of whom are new to the formal financial system. But the real challenge in 2011 will be getting even more BBIs onto steeper growth curves to make the business case work.

NextBillion.net: What are some of the pitfalls BBIs should be avoiding to in order to be successful in reaching more customers?

Mark Pickens, CGAP: It’s less about avoiding pitfalls than successful execution, particularly crafting a viable agent network. Branchless banking is a business of having cash where and when clients need it: if you don’t, they will quickly lose trust in the service. And the key to a viable agent network is understanding how the business case looks from the agent’s perspective. What will be needed in the combination of commissions, increased foot traffic into their store, and status of being connected to a major brand to make potential agents want to participate?

On the customer side, providers need to put attention on savings, not just money transfers. Savings offer a useful service for customers, and it leads to a more robust relationship of trust. There’s room for a lot more innovation in branchless banking products.