Banks in South East Asia are increasingly using mobile and digital banking to reach out to the rural unbanked population.

Over the last several months, banks—from Indonesia to the Philippines—have made a push to expand banking to rural residents. In the Philippines, BanKO has introduced mobile-based banking. In Indonesia, Bank Rakyat has recently introduced banking by boat, taking ATMs and agents to customers to the Spice Islands. Bank of Ayudhya, in Thailand last year expanded product offerings to provide unbanked SME owners access to loans. The Philippines-based mBank, launched in late 2012, provides mobile services to large markets of unbanked and underbanked mobile phone users.

In some of these countries, the sheer number of unbanked—often rural population—is driving the mobile and innovation behind rural banking. In Indonesia, for example, serving the unbanked has become a core segment for many banks as the majority of its residents do not have access to traditional banking, making the country a front-runner for a move towards financial inclusion, according to Jeffrey Bahar, Deputy Chief Executive Officer of Spire Research and Consulting. Bahar noted only about a quarter of the Indonesian population currently has access to banking.

“It is interesting to note that Indonesia’s mobile phone subscribers has reached over 100 per cent penetration rate presenting vast potential and abundant opportunities for banks to introduce mobile financial solutions to the unbanked population.” Bahar said.

Innovation key

Some banks have partnered with microfinance institutions to reach this market, with technology paving the way for paperless contact with an agent able to sign people up for a bank account. These agents conduct banking transactions on mobile tablet devices for the customer.

Last year, Indonesia’s central bank, Bank Indonesia, created a pilot program, the ‘Mobile Payment Services’ (MPS), which saw five of the nation’s banks partner with telecommunications operators to target the unbanked population, making use of bank agents to introduce branchless banking.

Although seen as a low-cost e-channel development for banks, the program, in some cases, hit a road-block because customers were more inclined to use their mobile devices, according to Managing Director of Bank Sinar Harapan Bali, Alit Asmara Jaya.

“Banks are facing a low acceptance from customers’ to transact with a banking service. This resistance is caused by the use of the phone rather than the agent, and could be because of the security and benefits that can’t replace the use of cash,” said Jaya.

According to Voranuch Dejakaisaya, Head of Information Technology at Thailand’s Bank Ayudhya, unbanked customers across Asia need to be handled differently because they do not consider banking in a traditional sense. In order to engage them, banks need to innovate with things like mirco-finance transactions.

“The unbanked customer segment needs to define product and channel strategy differently. They need easy access to the branch, simple product and fast service, high transactions but small amounts… We have explored technology to service either mobile branch, deposit or collection on-site at their place using tablet, mobile devices, and SMS receipt confirmed at the spot of transaction.”