Banks in the region are turning to smart cards and biometrics to boost their microfinance operations, according to a new report from IDC's Financial Insights.
The study revealed that the successes of banks such as Grameen Bank in providing sustainable microfinancing schemes, have spurred others in the region to grow their microfinance operations. The report cited Indonesia's PT Bank Danamon and India's ICICI Bank, as two examples that rely on biometric and smart card technologies to alleviate the high costs of administering microfinance and to expand such operations.
"Banks in Indonesia and India have emerged as leaders in deploying innovative technologies to grow their microfinance businesses," said Abhishek Kumar, senior research analyst of Financial Insights' Asia-Pacific banking advisory service. "These banks have shown that technologies like biometrics and smart cards, can be successfully deployed to target previously under-served customer segments, providing business benefits alongside poverty reduction."
According to Kumar, PT Bank Danamon was able to achieve lower operating costs as the use of biometric authentication resulted in a paperless environment. The bank could also reach the masses--customers only need to scan their fingerprint for verification instead of manually filling up forms, making it easy for first-time users or those who are illiterate to perform banking transactions.
Kumar told ZDNet Asia in an e-mail interview that there are other banks in India and Indonesia "running their own pilot programs on biometric and smart card technologies". Other countries, in which microfinance industries are relatively young, are likely adopting a wait-and-see approach before deciding to implement such technologies, he said.
However, Kumar noted, while the use of technologies such as biometrics and smart cards would increase efficiency in established and mature microfinance industries, new or smaller operations were unlikely to yield similar benefits.
"For banks with small microfinance networks, there is likely very little cost benefit in making the technology investment for a limited network," he explained.