Pricing Mobile Banking Services

Would people in villages be willing to pay for agent-based financial services?
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This Note discusses findings from a MicroSave study on the costs people incur to transact at bank branches in India and their willingness to pay for an agent-based system in their villages. Respondents were mostly poor, illiterate, and about half were day labourers. They were chosen on the basis that they had a bank account and visit bank branches regularly.

The study found many and varied reasons why poor people do not like to visit bank branches. They include:

  • Amount of time that has to be spent in a bank branch to make a basic transaction
  • Crowding of branches due to the government’s National Rural Employment Guarantee Scheme;
  • Distance that many have to travel to get to bank branches, which results in money spent on transport and time lost;
  • Illiteracy that creates significant barriers while filling transaction forms;
  • Cost of making the transaction.

The study found that poor people are willing to pay for agent-based banking services in their villages due to the financial and opportunity costs associated with branch-based banking. They are also quite rational about the amounts that might need to be paid.