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The usage of electronic banking (e-banking) continues to improve in Pakistan, thanks to regulatory response during the pandemic. Latest data from the State Bank of Pakistan (SBP) for the quarter ended March 31, 2021 show that the four leading alternate delivery channels (ADCs) for banking sector payments – the ATMs, Point-of-sale (POS) machines, Internet banking and Mobile banking – have all undergone healthy growth a year since the pandemic struck.

Compared to others, much more robust expansion is happening under the two virtual ADCs (Mobile and Internet banking), which suggests that fee waiver last year on digital fund transfers helped. Mobile banking (MB) channeled 52 million transactions valuing Rs1.3 trillion in Jan-Mar 2021 period, exhibiting a growth of 144 percent in volume and 178 percent in value. The transaction value has nearly trebled in a year, and the average transaction size has grown by 14 percent year-on-year to reach Rs25,104.

The momentum is still on the ascent, as the latest quarterly growth rate for MB transactions stood at 18 percent in volume and 16 percent in value. The number of MB users is on the rise. As of March-end 2021, mobile banking users had reached 9.8 million, a growth of 20 percent over March-end 2020. However, the number of banks providing MB services was 27 (out of 50 financial institutions) as of March 31, 2021, showing no change since last year.

The Internet banking (IB) channel is not far behind its cellular counterpart in terms of growth. IB transactions reached an all-time-high of Rs1.6 trillion in the Jan-Mar 2021 period via 25 million transactions, reflecting a yearly increase of 109 percent in value and 74 percent in volume. The transaction value more than doubled in a year and the average transaction size grew by 20 percent to reach Rs63,743.

This channel still has the tailwind, as quarterly growth for Jan-Mar 2021 period was 21 percent in value and 11 percent in volume. Between March 2020 and March 2021, the number of Internet banking users had grown by 31 percent to reach 4.9 million. Just as with MB, the number of banks providing IB services was 27 as of March 31, 2021, the same number as last year.

Also encouraging to see is that the POS footprint is on an improving trend. During Jan-Mar 2021, customers swiped their cards to conduct 25 million transactions worth Rs124 billion, producing a solid yearly growth of 28 percent in volume and 21 percent in value. There has been a rapid increase in the number of active POS machines in the market. The number of POS machines as of March-end 2021 had reached 67,099, showing a growth of 38 percent compared to March-end 2020.

The POS trend has picked up in recent quarters, with latest quarterly growth standing at 8 percent in transaction volume and value both. Recent regulatory interventions, such as reduction in interchange fee on debit card payments, have helped provide favorable outcomes in the the POS ecosystem. Average POS transaction size was Rs4,972 in the quarter, a decline of 5 percent over the same period last year.

Lastly, the ATM channel also showed significant growth. The ATMs ejected some Rs2 trillion cash in 154 million transactions during Jan-Mar 2021, showing a corresponding growth of 24 percent in value and 17 percent in volume when compared with the pre-pandemic quarter of Jan-Mar 2020. (This channel also showed quarterly growth of 3 percent in value and 1 percent in volume). On average, folks withdrew Rs13,580 per ATM transaction, up 6 percent compared to Jan-Mar 2020. The number of ATMs as of March-end 2021 stood at 16,175 – a growth of 4 percent compared to March-end 2020.

So far, so good! However, there is a need to improve banking access so that more folks can benefit from these ADCs. The number of bank accounts stood at 62 million as of December 2020, SBP data show – but filtering for unique individuals having bank accounts (due to multiple-account phenomenon) would further discount that number. As for those who already banked and using e-banking channels, it remains to be seen how the rollback of free-of-cost inter-bank fund transfer will impact their e-banking transaction behavior.

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