Mexico Experiments With the 'Branchless' Bank Alex Goldmark - Marketplace
go to original July 26, 2012

An example of a BaraRed at a local pharamcy in Mexico. (Marketplace)

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 a number of start-ups are using technology to bridge the gap between rich banks and poor customers.

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.

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 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 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.

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.

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.

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.

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