Columbia International Affairs Online: Working Papers

CIAO DATE: 10/2012

Beyond branches: Innovations in emerging-market banking

September 2012

Economist Intelligence Unit


Banks in emerging markets are increasingly weighty in global finance and still enjoy plenty of room to grow in their home markets. But they will do so in innovative ways that set them apart from the lenders of the developed world. The continuing rise of emerging markets will boost the importance of banks in developing countries in the coming decades. These financial firms will not follow the same business models as their developed-country counterparts, however. Instead, they will rely much less on the branded branch, the traditional outlet for banking services. New technologies, innovative low-cost business models and supportive policy changes will permit lenders to engage ever greater numbers of consumers in sustainable and profitable ways. Many of these individuals will become users of formal financial services for the first time in their lives. Unlike the storefront travel agent or video rental shop, the bank branch on the street corner is unlikely to disappear entirely. But such outlets will become increasingly irrelevant as routine financial transactions take place more frequently on mobile phones, over the Internet, in partner retail locations and even through home visits. A gradual decline in the use of cash will also make branches and automated teller machines of steadily declining importance.