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After recording an impressive performance back in 2021, Pakistan’s branchless banking (BB) sector seems to be giving mixed signals in early parts of 2022, as per the latest data released by the State Bank of Pakistan (SBP). Is it because the BB segment has also been impacted by the broader economic slowdown? Or are there any sector-specific issues that are at work? Let’s find out.

At the end of June 2022, the number of active BB accounts (also referred to as ‘m-wallets’) stood at 43 million, a decline of 6 percent compared to June 2021. (An “active account” is defined as an account that was either opened in last 180 days or used at least once over past 180 days). This is despite the fact that the number of total accounts had increased in the same period by nearly 20 percent to 88.5 million.

Clearly, BB service providers are having more luck in getting new accounts opened than making those new users stick around on their platforms. And that’s a concerning thing, because it probably reflects the race to meet targets of new user registrations. As a result, the share of active accounts in total accounts at June-end 2022 had declined to 49 percent, a sharp fall from 61 percent active accounts seen in the overall accounts at the end of June 2021. This large slip doesn’t augur well for the sector’s sustainability.

The situation looked more hopeful on the transactions front. During the quarter ended June 30, 2022, the volume of transactions had reached 729 million and the value of transactions at Rs2.94 trillion, signifying year-on-year growth of 17 percent and 32 percent, respectively. As a result, strictly looking at customer-oriented transactions in the mix, the average transaction size jumped by 21 percent year-on-year to reach Rs3,257 in the quarter under review.

Have rising consumer prices swelled BB transaction flows as well? Moving to yearly data, calculations based on SBP data show that during entire FY22, the BB transactions totaled 2.7 billion in number and Rs10.6 trillion in value, thereby growing by 27 percent year-on-year and 59 percent year-on-year. Again, just as in latest quarterly data, it appears that value-growth is about twice as fast as volume growth. Whether such growth carried over to Jul-Sep 2022 quarter, affected by floods, remains to be seen.

In short, it appears that while new users may be difficult to come on board and stay for long, the older users may have increased their payments/transfers via the BB channel. Considering that macroeconomic headwinds have not yet slowed and floods have disrupted rural markets and supply chains, BB service providers have a big challenge to improve their outreach and cushion their transaction flows from adverse effects. Let’s see what the coming weeks and months have in store for this digital payment avenue.


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