MICROFINANCE PAPER SUMMARY: “Multi-Layered Banking: Five Cases to Illustrate the Changing Structure of the Financial Services Market;” by Aiaze Mitha, Faith Biegon, Peter Zetterli; Edited by CGAP


This paper cites several financial service providers (FSPs) in emerging markets exploring how recent advances in digital technology have enabled new business models, transforming the financial services market. The authors argue that these FSPs have deconstructed the financial services market into distinct modules, allowing these modules to be reassembled in innovative ways. These modules include: products, customer relationship management, distribution and the “balance sheet layer” – including risk management and compliance with financial regulations.

Upon its release, Daviplata, a service of Colombia’s Banco Davivienda, offered payment services targeting underserved customers. Over time, the service has grown to enroll two out of five adults in the country, encouraging the bank to expand Daviplata’s financial services offering. Benefiting from a solid balance sheet layer, Daviplata owes a significant part of its growth to its partnerships with organizations that could complement its distribution and customer relations modules.

Grab is a Southeast Asian ride-sharing company that launched its own payment system, GrabPay, in 2017. GrabPay has since expanded to offer insurance, loans and investments, with plans to establish digital banks in several countries. Much of this expansion has been made possible by Grab’s extensive collaboration with banks and financial technology (fintech) firms to strengthen its balance sheet layer.

Indian fintech Kaleidofin was launched with a focus on savings services for informal workers. Its success has been limited due to factors such as low levels of financial literacy among its clients. The company shifted to providing credit scoring software to other organizations, such as microfinance institutions and non-bank financial companies, which were stronger at working with customers. This allowed Kaleidofin to focus on its product layer while offloading tasks related to the other three modules.

M-Pesa is a Kenya-based mobile money company that has started using user payment histories to make credit decisions. It eventually made its credit scoring algorithms available to other FSPs. While M-Pesa has great customer relationship and distribution modules, it deploys the products of its PSF partners based on their balance sheet layers.

Paytm, an India-based fintech, offers buy-it-now, pay-later and other credit services to individuals and merchants. The company has been successful in building customer relationships, expanding its customer base, estimating customer risk, and acquiring and leveraging user and third-party information. Paytm has partnered with many non-bank financial companies, with these partners handling the tasks of Paytm’s balance sheet module while focusing on front-end processes.

Based on demand-side research conducted in partnership with Grab and Kaleidofin, the authors find limited evidence that modular banking positively affects both outreach workforces and depth of impact for organizations seeking to increase the financial inclusion.

This is a summary of an article by Aiaze Mitha, Faith Biegon and Peter Zetterli; published by CGAP (Consultative Group to Assist the Poor); July 2022; 38 pages; available at https://www.findevgateway.org/paper/2022/07/banking-layers-five-cases-illustrate-how-market-structure-financial-services-evolving.

By Saulius Simonas Ramanauskas, Research Associate

Additional Resources

CGAP homepage

Daviplata homepage

Enter homepage

Kaleidofin homepage

M-Pesa homepage

PayTM home page

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