Banking from Your Palm

Usage of mobile applications has dramatically grown in the last five years, leading to technology enabled transformation of financial services (or Fintech). Mobile applications that allow users to check balances, deposit cheques, and perform other transactions are the cornerstone of Branchless Banking Services (BBS). The rate of BBS adoption is sometimes higher in emerging economies than in the developed world. In Pakistan, however, growth of mobile accounts (MA) has been slow despite the popularity of the over the counter (OTC) channel.

Latest research by Muhammad Adeel Zaffar, Ram L. Kumar, and Kexin Zhao focuses on adoption and diffusion of BBS through the intense use of mobile devices (e.g., a smart phone) to perform financial transactions. It also aims to identify important factors that drive MA diffusion and illustrate main and interaction effects between these factors. Furthermore, the research examines how the relative effects of the different sides of the market have evolved over the course of the MA diffusion across both rural and urban consumer segments, and helps to understand the dynamics of diffusion of an important financial technology innovation.

Using interview data, literature review, and agent-based simulation modelling, the authors investigated social and economic factors simultaneously to understand key factors behind individual consumers' adoption behaviour. These factors were examined in light of a) different sides of the BBS market and how they might interact with each other to affect the process of diffusion, and b) individual-level attributes and behaviours of key stakeholders.

The findings suggest that BBS platform providers should differentiate incentive strategies to rural and urban customers. The research emphasises the need to treat rural and urban populations differently since a strategy that works with rural customers may not be as effective with urban customers. For example, access to online merchants has a stronger appeal for rural customers than it has for the urban population who in any case have greater access to brick-and-mortar merchants. Overall, it is important to coordinate stakeholders from multiple sides of the market and differentiate incentive strategies to different customer segments.

This research can help BBS providers to understand and influence agent behaviour; brainstorm how different types of advertisements could influence components of the decision functions; emphasise ease of learning (set-up costs), reduced wait time, access to a greater range of merchants, estimated transaction volume, and other factors. Similar analyses may also benefit Near Field Communication (NFC) based devices, 4G/5G mobile phones and services, mobile app platforms, etc.

Reference:
Zaffar, M. A., Kumar, R. L., & Zhao, K. (2019). Using agent-based modelling to investigate diffusion of mobile-based branchless banking services in a developing country. Decision Support Systems, 117, 62-74. 
doi:10.1016/j.dss.2018.10.015

About the Author

Muhammad Adeel Zaffar is Assistant Professor and Associate Dean (External Relations) at the SDSB, LUMS. He teaches courses in the areas of information systems and operations management at the undergraduate and graduate levels. He is the Programme Director and Co-Programme director for the executive programmes on Leading and Managing Change and Management Development, respectively at the Rausing Executive Development Centre (REDC), LUMS. His research interests include development of decision support systems, technology and innovation diffusion, social networks and their impact on Information Systems (IS) strategy and IS diffusion, agent-based computational economics, IS pedagogical issues, and network location models in the context of disaster response and recovery systems. His work has been published in Decision Support Systems and Electronic Commerce.
Email: adeel.zaffar@lums.edu.pk