Branchless Banking Soaring High

Monday, October 15, 20120 Comments

The growth momentum of the branchless banking sector - still in its early stages - ceases to
amaze. The sector is leapfrogging ahead despite inherent sectoral difficulties and overall challenging
macro conditions. The recently released fourth quarterly issue of the SBPs BB newsletter series show
yet another period of impressive all-round gains in the sector. 

To start with, the BB services penetration increased by a handsome 37 percent between April and
June, for the registered number of mobile banking accounts is said to have reached 1.45 million as of
June end. The push came from a 3.7 times quarterly increase in Level 0 (basic) accounts that now
represent 25 percent of total accounts. 

The newsletter refers this growth momentum to UBL Omnis success in opening basic BB accounts,
regulatory flexibility in account opening, agents incentives, and growing customer awareness. It was
highlighted that "females, running small businesses such as beauty parlor, boutiques, and grocery
stores have also showed interest in opening Level 3 accounts to act as BB agents." 

The coverage of the BB network is also heading North with double-digit growth, as nearly 30,000
agents are now spread out across 90 percent of the countrys districts. A 27 percent quarterly growth
in the amount of deposits held with the agents (Rs753 million as of June 30, 2012) is a reflection of
growing confidence and trust in the system. 

While all this growth is happening, there are not many avenues where the BB customers can spend
through their mobile wallets. Hence, the transaction mix is dominated by cash transfers, bill
payments and mobile top-ups. SBP has estimated that 26.36 million transactions took place during
the quarter ending June 2012, with a massive liquidity of Rs115.3 billion or 1.21 billion dollars exchanging hands. 

On a positive side, the transactions are growing manifold - the volume grew by 12 percent and value
by 35 percent over previous quarter. As there is more growth in transaction value, the average
transaction size increased from Rs 3,853 in 1QCY12 to Rs 4,065 in 2QCY12. More daily transactions
took place during the period, at 315,178, which is a solid 12 percent increase over previous quarter. 

The newsletter highlights that "six more banks have obtained approval for branchless banking and are
entering or have entered their pilot phases before rolling out their full-scale BB operations". Those
conducting the pilot are Waseela Microfinance Bank (an Orascom subsidiary), HBL, MCB Bank,
Askari Bank (with Zong), and Dubai Islamic Bank. 

Of particular interest to the stakeholders should be the introduction of Smart National Identity Cards
by Nadra that is in the offing. This initiative could become a game changer in individuals access to
public welfare services, financial transactions, personal insurance and electronic voting. If this flies,
Nadras outreach can then be leveraged for the development of a payment ecosystem around the BB

While the emergence of new players in the sector is required for more penetration and adoption of BB
services, experts opine that it is equally important to have in place interoperable networks soon. That
will not only encourage more service providers to join in, but will also ensure that operators are
focused on and customers have access to comprehensive and competitive suites of mobile financial
services.  Via
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