PAGE Blog Business Weekly Magazine
Country wins global recognition in online banking policy initiatives and businesses
Branchless banking regulation was first introduced in Pakistan in April 2008. From the start, State Bank of Pakistan (SBP) has taken a positive regulatory approach by providing clear cut guidance and adjusting regulation where necessary. Pakistan has now firmly established the regulatory environment and supporting institutional framework to extend the field of branchless banking. A variety of business models are coming forth day-by-day that involves a broad range of players, including mobile network operators, technology companies, and courier business.
Pakistan occupies a leadership position in South Asia in branchless banking. About 6 percent of adults in the country have mobile accounts as compared to South Asia’s average of less than 2.6 percent. Pakistan is also among the 25 countries, the World Bank Group and partners are setting up as part of efforts to reach Universal Financial Access by 2020.
Last year, Pakistan launched its National Financial Inclusion Strategy (NFIS) with the object to achieve universal financial access, with a target of expanding formal financial access to at least 50 percent of adults, including women and youth, and to increase percentage of SME loans in bank lending to 15 percent by 2020.
Inter-operability facility
The State Bank of Pakistan and the Pakistan Telecommunication Authority (PTA) are jointly working to enable inter-operability among existing branchless banking operators. State Bank being a regulator would soon launch a software for monitoring of agents’ activities and transactions activities. Both are creating inter-operability facilities to make possible financial transactions from a branchless bank account on a mobile phone network to another one.
It would also developed an online application named Agentche, which would help monitoring branchless banks accounts’ agents activities and transactions activities so that no misuse of the funds transferring can be made.
Size of branchless banking
The aggregate network of branchless banking agents has reached almost 300,000 across Pakistan up to December 2015. Currently, nine branchless banking deployments are live in the market, while four banks are on pilot roll out phase.
Over 15 million customers hold branchless banking accounts. For the last three quarters, about 100 million transactions amounting up to Rs 500 billion are being carried out on average in each quarter in the branchless banking system. The average size of mobile banking transactions is around Rs 5,200.
Branchless banking sector has achieved dramatic growth and advancement in the closing year of 2014 with increasing number of users, launch of various innovative products and services and expansion of the network.
The sector has shown phenomenal growth in the transactions values and volumes. Five operators along with their owned and partner banks have entered into this profitable and emerging market and there is momentum amount of competition among all operators. The overall transaction value has increased to Rs 100 billion on monthly basis against an average transaction of 25 million per month.
Higher rate of taxation was one of the major hurdles in the way of branchless banking. Branchless bankers must develop value-added services for the existing account-holders to speed up growth in the sector. Besides, they may continue making efforts to bring-in unbanked people into the system.
There was a realization that branchless banking was developed to facilitate only poor section of the society, which was not true. Meezan Bank, announced to roll-out mobile wallet products very soon. Easypaisa, the largest and most innovative product portfolio, has changed the financial services environment in Pakistan.
Telecom contribution
Warid Telecom first soft launched its branchless banking service in January, which was followed by an official launch in July with 2,000 agents in 500 cities. It has collaborated with Bank Alfalah Limited and Monet as a technological solution provider.
The entry of Warid Telecom in branchless banking sector pushed all operators into another price war in the financial sector. Now, all five telecom operators are operating with their own branchless banking service in the country, leveraging their userbases to convert a largely unbanked society into a banked one.
Telenor Pakistan and Tameer Microfinance Bank, the pioneer and market leaders, have launched an innovative product of Inter-bank Fund Transfer Facility for its customers under Easypaisa, which enabled their customers to transfer funds between a number of banks.
The IBTF service is one of the most highly utilized services since its launch in the banking industry, which was later introduced by Ufone through Upayment .The service was later launched by Easypaisa in branchless banking, Ufone for Upaisa and Mobilink for Mobicash for over the counter customers. The trend is being followed by other operators as well.
Zong’s Timepey service accomplished its G2P projects of Rs 4 billion to 400,000 Internal Displaced Persons (IDPs) in October and November. Timepey offered the minimum rates for disbursement service. It charges 1.29 percent fee of the total amount of transfer to IDPs which is less than half of the different players. The project is very unique because the companies’ efficiency is exhibited with a handsome amount and huge number of beneficiaries seeking financial aids in shortest possible time for their genuine needs.
Umicrofinance Bank has introduced a Debit Card Facility for customers of Upaisa. This Debit Card facility is available on ATM card as well. The card is workable at shopping places having service partnership with Union Pay.
Upaisa has also signed an agreement with Meezan Bank in which its customers having ATM cards could use its more than 300 ATMs without any charges. Waseela Bank also introduced a Debit/ ATM card facility for their customers.
Overall, the branchless banking sector witnessed expansion of the agents which increased to 168,615 as of June-end 2014. The overall m-wallet accounts increased to 4.2 million as of June 2014 as compared with 3.5 million by the end of December 2013.
Branchless banking in Pakistan would have a positive impact on GDP growth and on people’s life. The branchless banking will change lives of simple people, they will have their bank accounts in their pockets, along with the benefits of fast transfers and low cost as well.
There are 29.8 million broadband users now. Pakistan has entered in the era of innovation, broadband tele density has increased to 15 percent with a potential for proliferation. Pakistan’s fast paced adaption towards mobile money that is facilitating both urban and rural population. It is a valuable addition and consumer convenience where users can avail facilities as well via mobile communications.
Both PTA and SBP were working on the regulations to be set for mobile banking with the target to continue the mutual coordination to set up fair and non-discriminatory regulatory framework for mobile banking service providers. PTA will be encouraging and supportive to such initiatives for future developments of ICTs.
The number of branchless banking accounts rose by 44.4 percent to 10.8 million during the second quarter of 2015, compared with 7.5 million in the previous quarter of January-March.
The sharp growth in the number of accounts was mainly on the back of introducing biometric technology and SIM verification in account opening. During April-June 2015 quarter, around 47,902 biometric devices were installed for real-time account opening at agent locations. A total of 1.3 million accounts were opened during the quarter through the biometric verification system.
This increase also resulted from massive opening of level zero accounts, which now constitute 87 percent of the total BB accounts. The people have started considering branchless banking as a key tool for satisfying their basic financial needs.
The active-to-total account ratio climbed to 34 percent from 20 percent in the previous quarter, which may be attributed to the release of two Benazir Income Support Programme tranches and rise in fund transfers between m-wallets and mobile top-ups.
The branchless banking has also proved to be an effective instrument in channelizing the government-to-person payments in salary disbursements, pension, and tax collection services.
The volume of transactions in April-June 2015 showed an increase of 37 percent over the preceding quarter to 99.5 million. While, the transactions in value stood at Rs505.9 billion, a growth of 43 percent during the second quarter.
The customer-oriented transactions in overall BB transactions remained 94 percent in volume and 61 percent in value; the rest being agent transactions for liquidity purposes.
M-wallet transactions showed encouraging signals by gaining a share of 29.9 percent (in volume) and 29.4 percent (in value) in the customer oriented transactions, as compared to 11.6 percent and 17.1 percent in the previous quarter respectively.
The average number of transactions per day scaled to 1.1 million, whereas the average size of transaction was Rs5, 083. The total BB deposits increased to Rs8.553 billion from Rs6.890 billion in the previous quarter; however, the average deposit in BB accounts fell from Rs914 in the previous quarter to Rs786 in the quarter under review.
The BB channel facilitated government-to-person payments of Rs36 billion made to 4.2 million beneficiaries as compared to Rs4.5 billion payments to 3.2 million beneficiaries in the previous quarter.
This rise in G2P was mainly due to the release of previous quarter’s BISP tranche during the quarter under review. The number of agents rose to 251,865 from 229,645, showing 9.7 percent growth over the previous quarter.
The value of m-wallet transactions experienced a hefty growth of 165 percent, climbing to Rs90.7 billion from previous quarter’s Rs34.2 billion. The number of m-wallet transactions also increased manifolds, ending up at 28.1 million from the previous quarter’s 7.9 million.
Cash deposit and withdrawals topped the chart in number of transactions, doubling to 10 million from the previous quarter’s 5 million, followed by government-to-government and funds transfers through m-wallets.
The share of debit cards into all the plastic cards already stands at 93 percent in Pakistan though people are also increasingly using branchless banking services for various kinds of transactions including P2P, Over the Counter (OTC), m-wallets etc.
The network of 200,000 agents help promote the trust and awareness among the public at large and are directly responsible for the 39.2 percent increase in number of branchless banking accounts since last quarter of 2014.
Branchless banking showing phenomenal progress. According to the World Economic Forum global report on Mobile Financial Services Pakistan has been declared as a breeding ground of innovation for branchless banking and has been fortunate in developing a variety of business models.
The First Microfinance Bank and Dubai Islamic Bank Pakistan was the first banks in Pakistan to experiment with branchless banking in cooperation with the Pakistan Post office. The Dubai Islamic Bank was awarded license in April 2010. It has over 50,000 existing customers in schools, business districts, residential areas and shopping malls.
National Bank of Pakistan (NBP) also entered branchless banking. It will continue to invest on product innovation and technological up gradation with a perspective to improve its financial services to the customers and also to standardize banking operations across the country.
India, Mexico, Brazil and Kenya have gained a lot from branchless banking. South Africa has often been used as a case study by those with an interest in financial inclusion.
The CGAP study, which looked at eight branchless banking providers in Brazil, Cambodia, India, Kenya, the Philippines, South Africa and Tanzania found that in more than half the countries studied, branchless banking grew five times faster than the largest microcredit lender.
According to a new paper from CGAP, an independent policy and research Centre Pakistan has become one of the fastest developing markets for branchless banking in the world. A number of developments indicate a positive outlook for branchless banking.
Branchless banking has a huge potential to reach the unbanked and underserved segment of the population. Branchless banking helps people to take better advantage of the banking facilities at affordable cost.
There are hundred million mobile phone users in Pakistan which almost half the population is literate, is evidence enough that even such disadvantaged sections are adept at using this technology. Cost of setting up of a conventional banking branch was 76 times higher than using third party agents to bring the unbanked into the financial system while using mobile phones halves costs further.
The commercial banks must focus and devise new branchless banking products as it would not only help them improve their market share but also serve a larger portion of the population living in rural and far-flung areas.
Pakistan’s branchless banking policy initiatives and businesses have won global recognition. It is one of the largest potential branchless banking growth markets in the world and ranked among the top three along Brazil and Kenya.
