Mexico experiments with the ‘branchless’ bank
Tess Vigeland: The FDIC estimates that somewhere around 18 percent of the U.S. population is what’s called underbanked — people who turn to payday lenders and check cashing services and the mattress because they don’t have good access to the banking system.
In Mexico, estimates are 75 percent of the population is underbanked. But as Alex Goldmark reports, a number of startups are using technology to bridge the gap between rich banks and poor customers.
Alex Goldmark: The city of Chimalhuacan in Central Mexico has a population the size of Washington, D.C. but just two banks. And that’s a huge inconvenience for people like Eduardo Ramos, who pays a dollar each way to take a half hour bus ride to one of those branches.
Eduardo Ramos: It takes me some two hours because when you arrive there, it’s the only bank and it’s filled with people.
The lack of bank branches is a common problem across Mexico, partly because they’re expensive to set up — one report pegs it at $1 million apiece.
Loreto Garcia: It’s not easy to bring there the services, the products. It’s very expensive.
Loreto Garcia is with Banamex, Mexico’s second largest bank. Her bank and others are teaming up with tech companies to offer what you might call a branchless bank. The goal is to lower the costs enough to make it possible to offer services that meet the needs of most Mexicans.
Alvaro Rodriguez: A place where you can go and put the $5 into your account or take the $5 out of your account, or $3 or $1.
Alvaro Rodriguez is one of the investors behind a new start-up called BaraRed. It’s devised a way to attach iPads to payphones and turn them into something akin to an ATM. A customer goes to a payphone, say at a corner pharmacy, taps a few buttons, and enters a banking request, like ‘withdraw 500 pesos.’ A companion iPad behind the counter beeps and tells the pharmacist to give the customer 500 pesos. The bank then reimburses the pharmacy. Rodriguez says it works for other transactions, too.
Rodriguez: And it says, ‘What do you want to do?’ ‘I want to make a payment. Electricity bill.’ ‘How much do you want to pay?’ ‘150 pesos.’ You click it, you turn around, go to the store owner. In his or her iPad it says collect 150 pesos.
Most transactions will cost about 30 U.S. cents, split between BaraRed and the storekeeper.
In Chimalhuacan, pharmacy owner Angel Martinez let me in behind his bulletproof windows to see the where the money will be kept for the new phone booth branchless bank he’s installing this month. He says he’s not worried about becoming a robbery target.
Angel Martinez: It’s not a problem for us. We manage our cash well. It’s always flowing in and out, so we end up with the right amount.
He can decline any transaction that’s too big so he doesn’t plan to stockpile extra cash. He does expect to earn extra though because the customers I stopped here, like truck driver Jose Lopez, were pretty excited to be able to walk to a bank.
Jose Lopez: It’s good! I waste more money paying for the bus trip now than I would in fees taking out 1,000 pesos. This would be really magnificent.
Banks hope that enthusiasm for convenience will lead Lopez and his neighbors transact often enough to build up credit histories, take out loans, join the financial system.
In Chimalhuacan, Mexico, I’m Alex Goldmark for Marketplace.
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