The country’s branchless banking (BB) had an impressive year in 2021, as per calculations based on the recent data released by the State Bank of Pakistan (SBP). By the end of December 2021, the number of active BB accounts (also known as m-wallets) had reached almost 45 million, showing annual growth of 21 percent. That translates into net addition of 8 million active accounts during last year.
There was much bigger growth in transactions taking place over the digital channel. During CY21, the number of BB transactions jumped by 51 percent year-on-year to reach 2.5 billion, whereas the value of those transactions surged 106 percent year-on-year to reach nearly Rs9 trillion! Pakistan, like other countries, has seen accelerated adoption and usage of digital payment channels during the pandemic.
As the illustration shows, the growth in transaction value has been much sharper than volumes during the pandemic. As a result, average transaction size has also significantly improved. SBP data show that in the Oct-Dec quarter of 2021, customer-oriented BB transactions averaged Rs2,992 per transaction, which was 11 percent higher compared to Rs2,961 per transaction seen in the final quarter of 2020.
In terms of demographics, SBP data show that 63 percent of total BB accounts were in Punjab, 21 percent in Sindh and 12 percent in Khyber Pakhtunkhwa. Those are almost the same provincial shares as reported at CY20 end. About 26 percent of BB accounts were owned by female users at the end of 2021, slightly higher than 25 percent at the end of 2020. Geographic and gender inclusion needs to improve.
M-wallets dominate BB landscape. During the final quarter of 2021, customer-oriented BB transactions totaled 661 million in volume (YoY growth: 21%) and Rs1.97 trillion in value (YoY growth: 34%). Within that, the share of m-wallet transactions was 93 percent in terms of both volume and value, whereas the remaining share of 7 percent belonged to once-dominant over-the-counter (OTC) transactions.
The shares of OTC vs. m-wallets haven’t changed much relative to previous year. OTC transactions are mostly for utility bills payments and inter-personal cash transfers and payments. Whereas, m-wallet transactions have dominant use-cases around digital transfers to bank accounts and other m-wallets, mobile top-ups, cash deposits into and cash withdrawals from m-wallets, and utility bills payments.
Account activity levels, however, dropped a bit last year. The share of active accounts (“active account” is one that is either opened or used at least once over the past 180 days) in total BB accounts at the end of 2021 was 57 percent, down from 59 percent at the end of 2020. If just over half of accounts ever opened tend to stick around in the BB system, then this aspect needs to be significantly improved by both service providers and monitored by the regulator. Let’s see what 2022 has in store for the BB ecosystem.