Kiosks for the unbanked.

By: Susan Cournoyer, Gartner Managing Vice President, Industry Market Strategies, Financial Services

Automated banking reduces costs, increases profits, and taps new customers.

Bankers have historically sidestepped the lower income banking market, citing the high costs of providing teller, account and lending services for small accounts. The low-tomoderate income segment even earned a name for itself as the unbanked, technically referring to anyone without a bank account, but largely comprised of lower net worth individuals. The unbanked population is estimated to be over 40 million in the U.S., with billions of individuals worldwide.

Automated banking 'specialized kiosks and other IT investments' is now turning the unbanked into a bankable proposition. Some of these kiosks represent a next generation of automatic teller machines (ATMs), like Wal-Mart's kiosks that service their pre-paid debit card initiative for the U.S. unbanked. On a global basis, bankers have taken kiosks a step further than that. ICICI Bank plans to dramatically expand its existing network of over 1,500 kiosks throughout India to support micro finance throughout the country. ATMs are co-located with the kiosks to support Internet banking, and the bank is also exploring Smart Cards to assist with loan processing and payment.

Today's business objectives pushing banking and credit companies into self-service include:

1. Targeting a new customer segment. As automation makes serving the unbanked cost-effective, new domestic and global banking markets become addressable and potentially profitable targets.

2. Increasing wallet share and profit per customer. Kiosks can provide support for more complex banking relationships, such as microlending, in addition to basic banking services like demand deposit accounts and ATM access. Clients with more products tend to show more loyalty and generate higher profits, reinforcing the virtuous cycle of increased wallet share and customer profitability.

3. Reducing operating costs through automation. Limited automation made the unbanked segment too costly to service, particularly due to their dependence on low margin basic banking services. Payments and lending, by contrast, represent more attractive revenue streams due to their higher margin interchange fees and interest payments. Kiosks and associated technologies support the automation of these processes.

Key Kiosk Applications

Banking and credit companies focus primarily on customer facing functions:

Debit accounts and payments

Internet banking in rural regions of developing countries

Loan processing/management for micro-finance loans

Obstacles to Deployment

Challenges of providing profitable basic banking services (primarily account opening and demand deposit account processes) Lack of standard platform/process for automated microloan processing

Integration of item, cash and check processing capabilities on a real-time basis.