Apparently, there is no stopping the surge of mobile accounts in Pakistan. As per the latest statistics on the branchless banking (BB) sector issued by the State Bank of Pakistan (SBP), m-wallets reached a high of 33 million as of September 2017, up 21 percent quarter-on-quarter and roughly twice the level seen in the same period last year. Encouragingly, some 22 percent of those accounts – 7.4 million – are owned by females, with a growth of 29 percent seen in Jul-Sep 2017 over previous quarter.
The quarter under review had another breakthrough in that the transaction performed via m-wallets dominated for the first time, at the expense of the over-the-counter (OTC) transactions that are made via the agent kiosks. M-wallets generated 105 million transactions, which is roughly two-thirds of overall customer transactions in the quarter. Some Rs246 billion flowed in these transactions, which is 55 percent of the overall value. This transaction mix is a visible improvement over the previous quarter.
The OTC share has been coming down in recent quarters for which data are reported by the SBP. But in the quarter under review, the decline in OTC concentration owes particularly to the fact that since July 2017, SBP had made biometric verification system (BVS) mandatory to conduct CNIC-based person-to-person funds-transfers. This will likely dent future OTC share as it’s going to be financially and logistically challenging for the service providers to provide bulk of the active agent network with BVS machines.
While the m-wallet growth continues its momentum, there are reasons to suspect that the growth is not high quality. Active accounts – defined as those opened in the last 180 days or having made at least one transaction in the last 90 days – are the real deal. Just 47 percent of the total accounts – some 15.5 million – were reported by the SBP as active in the Jul-Sep quarter.
That statistic is a continuation of a trend whereby the majority of m-wallets are inactive. It looks great that active accounts in the Jul-Sep quarter were up 101 percent over same period previous year. But also consider, total accounts increased by 5.8 million, but active accounts increased by 2.4 million said in the quarter under review. What is going on?
It appears that service providers, in their bid to show growth, are only focused on registering new m-wallets, as many people don’t seem to use their accounts later on. And folks who do use it, roughly half of their m-wallet transactions are for mobile top-ups and bill payments. Either m-wallets don’t have a more diverse usage case for users or service providers are at a loss to develop and market new savings /investment/insurance/credit products.
It has been years that the SBP has been nudging the service providers to get better at their service offering. It’s time for a different approach. Perhaps, the central bank should start with a definition for m-wallets that doesn’t mislead. To get a better picture, the definition must cater to usage criteria alone.
As things stand, growth in m-wallets, amid consistently high dormancy, looks no different than an enticing mirage.