Branch sharing – a productivity transformation in Pakistan’s banking sector

In Pakistan, branch costs are heavy and represent some 50-65 percent of total operating costs, excluding financing costs. While digitalization, ATMs, and online banking have reduced the footfall, our cash heavy economy still relies significantly on branch networks. Our 33 scheduled banks have some 19,000 branches, with HBL and NBP leading the way. Most commercial areas and high streets would have branches of numerous banks clustered together.

In the major economies also branch networks represent significant costs. While the UK has significantly reduced costs by digitization and branch closures, closely followed by the US - costs are still between 30 and 45 percent. Interestingly, Germany, Japan and Canada still have large branch networks with operating costs typically more than 50 percent. Pure digital banks like Revolut and Monzo have almost zero branch expenses but are still outliers.

While branches don’t represent the bank’s core business, they are costly and eat significantly into profitability. Telecom operators had similar cost versus utility issues with their tower networks, till they decided to share towers. Soon tower operating companies emerged mainly from Telco spin-offs. This led to big gains in productivity, efficiency and improved margins. This transformation has also taken place in Pakistan with Engro Connect - independently operating some 15,000 towers.

Banks should replicate this model. A Branch Operating Company (BOC) could be set up initially with banks as shareholders. In this model some 5000 shared branches may not only suffice, but significantly improve access; particularly in semi-urban and rural areas, where, currently, individual branches do not make economic sense. Presently, HBL has the largest network with some 1700 branches - the BOC with 5000 branches would triple that coverage. All banks could enjoy a similar level of access, which for the smaller banks could represent an eight to tenfold increase. The customer would walk into one of the BOC branches and be able to do all that he or she does in the current system. Just like an air traveller going to a travel agent chooses options from multiple airlines; the financial services customer could choose from the offerings of various banks – deposit rates, loan terms, servicing costs, etc. at one convenient location.

Typically, the banks will continue with their flagship branches for corporate and high-end customers. While all the retail high volume work will get done in the BOC at a fraction of current costs. Luckily, all the technology and security applications are already available to allow the BOC to interface smoothly with the operating systems of its client banks.

This will not only lead to huge productivity gains and improved margins for the banks but also increase their reach multi-fold. At only 25 percent of adults with accounts, Pakistan has one of the largest unbanked populations in the world (South Asian average 68-70 percent and Europe 95 percent). The increased reach could change this significantly.

Banks could plough back these gains into improved services, more competitive rates and greater reach into underserved markets such as SMEs and geographical areas. For the customer improved accessibility and wider choices in a one-stop financial super shop will be a great boon. This could provide a much-needed boost for a much larger, productive and accessible banking sector.

Copyright Business Recorder, 2026