M-banking set to gather pace

The central banks latest report on retail payment points to a promising future of one of the most resounding words in Pakistans banking industry these days: m-banking.
Although, it hasn penetrated the market as yet and has extremely low share in the overall pie, SBP data shows that m-banking saw significant growth both in terms of volume and value of transactions in the first quarter of current year.
The number of transactions made through cell phones more than doubled to 54,009 in the first quarter from 21,733 in the last quarter of FY09. Total worth of m-banking transactions in value terms also jumped manifolds over the period, from just Rs4.9 million in 4QFY09 to Rs152 million in the first quarter of fiscal year 2010.
The success story comes on account of back to back launches of cellular banking facilities by bankers and telecom operators alike. And with the advent these services and products, it seem that it will surpass all other banking channels in rural and far-flung areas, as it provides an effective way of doing banking business to the large un-banked region in Pakistan.
Given high mobile density in Pakistan, 54,000 per hundred thousand people, m-banking will gain quick market acceptance, since penetration of other banking channels such as bank branch, ATM, Point-of-Sale Terminals and internet is still quite low at 7.50, 3.39, 47.06 and 11,380 per hundred thousand people respectively, according to a CGAP - a Washington based consultative group on global micro finance environment.
Besides, m-banking can target those un-banked areas much easily in areas where it is not feasible to expand services through ATM, POS due to high cost of infrastructure. Moreover, the speed and ease of access to banking facility through mobile is also high, in contrast to all other banking channels.
And top it off, the cost per transaction through mobile is also very cheap - just $0.08 per transaction, which is nearly 10 and 50 times lower than that incurred for ATM and bank branch respectively, according to CGAP.
This cost effectiveness can help banks to gradually shift towards m-banking for its retail banking service offerings. But while m-banking can be a big threat to ATM and POS, as all they facilitate small transactions, due to restriction on both volume and value of transaction, it can not entirely replace internet banking and the IVR - avenues that can also handle bigger transactions.
As for bank branches, it might reduce the frequency of visiting customers, especially those small account holders, which in fact is in great interest of the banks, as services to small account holders through bank branch is quite expensive.

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Per-transaction costs

by banking channel $

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Branch           1.19 to 4

POS                   0.40

ATM           0.62 to 0.85

IVR           0.28 to 1.25

Internet              0.10

Mobile                0.08

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