Digital payments are on the rise in Pakistan during the pandemic. One key channel where this growth is prominent is the mobile wallets offered by branchless banking providers. As per latest central bank data, the number of m-wallets reached roughly 75 million as of June 2021, compared to 53 million accounts as of June 2020. The more useful indicator, number of ‘active’ m-wallets (opened, or used for transaction at least once, in past 180 days), reached 46 million by June 2021, compared to 27 million a year ago.
Active m-wallets undergoing a 72 percent growth in a single year (a year marked by both pandemic-related economic difficulties as well as some digital opportunities) is quite something. As a result, customers were performing 6.4 million transactions every day, directly through their wallets, in the quarter ended June 2021. This figure is 57 percent higher than 4 million daily m-wallet transactions during Apr-Jun 2020. Average transaction size over m-wallets has also marginally grown in this period to Rs2,666.
The number of m-wallet transactions in Apr-Jun quarter of 2021 stood at 577 million, up 58 percent year-on-year. Transaction volume leaders were mobile top-ups, inter-wallet fund transfers, and cash deposits. Whereas the value of m-wallet activities had reached Rs1.5 trillion in that quarter, showing a growth of 61 percent year-on-year. Top value drivers are inter-wallet fund transfers, cash deposits, and bank transfers.
The dominance of over-the-counter (OTC) channel vis-à-vis m-wallets has long receded, having only 7-8 percent share in overall customer transactions lately. However, contrary to popular perception, OTC has been growing in numbers of late. During Apr-Jun 2021, the volume of OTC transactions had risen by 54 percent year-on-year to reach 42 million, with value jumping 50 percent year-on-year to Rs126 billion.
Considering that the OTC channel is the stepping stone for un-banked and under-banked individuals to use some form of mainstream financial services, the growth in OTC numbers is welcome. If the commercial interest of agents and shopkeepers is kept alive, it will help on-board millions more first-time users, most of whom may eventually move to m-wallets. The active m-wallets are currently less than half of the overall addressable market of at least 100 million adults holding a mobile phone subscription.
Overall, the branchless banking numbers (m-wallets, OTC and agent’s own liquidity transactions) have posted an exceptional yearly performance if one adds up SBP’s quarterly figures. During FY21, total volume of BB transactions had grown by two-thirds to reach 2.1 billion, with transaction value getting more than doubled to Rs6.7 trillion. The pie is getting bigger, daily number of transactions are on the rise and transaction average has also moved up a notch. Let’s see what coming quarters bring to the fore.