4.6.3 Beware of the challenges in using technology for YFS

The examples described in the previous text boxes provide promising evidence for increasing youth access to financial services. With any new technology, however, there are many challenges to address. Both FINCA and SBI had challenges with their banking agents. Initially, the goal was to recruit as many agents as possible to rapidly grow the network. These agents, however, require specific training not only on how to market and operate the POS service but in customer service as well. FINCA decided to develop a program to recruit, train, start-up, and monitor new agents. They will also monitor closely, using mystery shoppers, to ensure top quality customer service, particularly for youth clients. This supervision however, requires additional staffing, a cost that must be factored into sustainability calculations. Similarly, SBI and UBL are working on developing agent selection and monitoring benchmarks that will enable the agent network to run at an optimal level. The agent (mostly neighborhood groceries, telecommunication providers, general stores etc.) plays a key role in the success of the bank’s branchless banking initiatives. It serves as the face of the bank and is responsible for selling accounts, processing transactions and customer queries. UBL is currently focused on learning how to selecting the right agent and providing attractive incentives, including better commissions than competitors, to ensure that there is healthy transactional activity on the platform across the nationwide agent network. The UBL agent network has grown exponentially to approximately 9,500 agents making it one of the largest such networks in Pakistan.

Technology is the easy part. The assumption that people with mobile phones will automatically use financial services, however, is incorrect. SBI’s on-the-ground activities revealed an ongoing distrust of banks, technology and overall lack of customer awareness. Moving forward, the bank has worked to improve its on-the-ground campaign, focusing on raising awareness and establishing trust with customers. Similarly, Equity Bank is investing in the financial education of its youth customers to increase uptake of financial services. UBL is also prioritizing products that address customers’ greatest needs including domestic remittances, which can be used by youth migrant workers, and by rolling out financial literacy campaigns, and promoting the benefits of using Omni for day-to-day financial needs.

The high cost of technology is a concern for Freedom from Hunger and its partners in Ecuador. For example, $150 per smart phone, $500 per portable printer, Internet access, and the accompanying IT development costs must be factored into the cost of the product. This is particularly challenging since youth savings accounts generally do not generate much revenue for the coops. The rapid pace at which technology changes or becomes obsolete is also a concern. Equity Bank states that it must stay on top of the latest IT developments as it works to maintain its image as a technology-focused bank.

Partnering with mobile network operators (MNOs) can also present challenges. UBL developed a “telco agnostic” model, or a model that doesn’t require you to have a specific telco SIM to be part of this service. While convenient in many ways, this has also presented challenges. MNOs see a business opportunity in mobile financial services, specifically in providing their customers value-added-services to increase average revenue per user (ARPU) and to reduce churn, and therefore are buying up banks rather than sharing their customers. This then distorts the market and inhibits the goal of reaching the masses with financial services.

Finally, regulatory concerns confront most of the aforementioned financial institutions. The entry of MNOs into the banking world has raised red flags among regulators concerned with non-bank entities providing banking services to the public. Delays in passing legislation to guide the use of technology in banking can prevent FSPs from adopting the technological solutions they need to increase access to financial services.