Branchless synergies

Branchless banking (BB) service providers have taken solo flights thus far. Pakistan’s four-year old BB sector is currently dominated by banks and telcos that have relied on their own infrastructure and agent networks to penetrate this largely unbanked market. While banks have allowed their agent networks to serve customers of any telco, each telco has restricted its BB agents to serve only its subscribers.
This trend of ‘service exclusivity’ seems to be working fine. The State Bank of Pakistan’s data shows that the BB sector had over 41,000 agents and nearly two million mobile accounts as of December end last year. Moreover, the agents of all BB service providers collectively settled transactions (e.g. funds transfer, bill payments, etc.) worth almost Rs500 billion in CY12. That’s double-digit progress.
However, in order for the BB sector to be all-inclusive and offer complete suite of financial services, the service providers must collaborate with each other. To significantly expand the BB footprint and offer customers the choice, they will have to migrate towards what the policymakers call a ‘many-to-many’ model.
CGAP – a financial-inclusion-oriented policy research centre at the World Bank – defines a ‘many-to-many’ BB model as one in which a central transaction processing system (TPS) provides total interoperability by allowing several banks to offer services to customers of several agent networks or telcos. The TPS is controlled by a bank, an agent, or subsidiary of a bank, etc.
‘Interoperability’ in the BB sector is a policymaker’s dream. Four years after its commercial launch, it appears that the sector is starting to move towards that pinnacle, with the launch of ‘Monet’ in Pakistan. A subsidiary of the Abu Dhabi Group, ‘Monet’ is a neutral mobile commerce platform whose business model is to bring together banks, telcos and merchants, helping build interoperability in the sector.
Warid and Bank Alfalah – two of the Abu Dhabi Group’s other subsidiaries in Pakistan – were the first to deploy ‘Monet’ for their branchless banking service’s pilot earlier this year. Meezan Bank, a major Islamic Bank in the country, is the next to show interest in the Monet’s TPS. Reportedly, Meezan Bank signed an MoU last week with Warid and Monet for the rollout of its branchless banking services.
These are positive signs for the sector’s outreach in the future. Interoperability is needed in order to bring down barriers, such as investment required in technological platforms for a new entrant. More importantly, third-party technological platforms such as Monet may ensure that service providers focus and compete on scope and quality of financial services, rather than just coverage and footprint.