Cleanup in m-wallets

The central bank has released the branchless banking (BB) statistics after quite a hiatus. The long-running quarterly newsletter has been discontinued by the SBP and only quarterly statistics are to be made available from this year. Looking at the recent numbers, the thing that catches the most attention is what has happened to the number of m-wallets (or BB accounts) over the last few quarters.

Recall that the BB segment had closed last calendar year with roughly 50 million accounts in the bag. Out of that, only 47 percent of the accounts were marked as “active”. As per the longstanding SBP definition, active accounts are those accounts that are either opened in the last 180 days or performed at least one transaction in the last 180 days.

This column has been pointing out how a lax definition of active account paints a misleading picture of the segment’s uptake among the people. (For necessary context, read: “A flight of fancy”, published October 16, 2019). But the m-wallet juggernaut continued into 2019, as freshly-released statistics show that the number of BB accounts had swelled to 52 million as of March 2019, of which only 41 percent were active.

But those concerns might have been noticed. In the subsequent quarter, there was a widespread closure of inactive accounts. Consequently, total accounts had declined by 31 percent in just one quarter to close at 36 million accounts as of June 2019. That weeds out at least 16 million accounts from the system in a short period! No wonder the share of active accounts surged to 62 percent in the mix, totaling 22 million.

The latest SBP figures, as of September 2019, show that the number of total accounts had started to rise again, reaching 39.6 million. Active accounts were reported at 21.7 million, a share of 55 percent. That gives rise to another anomaly: total accounts increased by almost 4 million in one quarter but active accounts declined by almost 0.3 million. How is that possible?

An increase in total accounts can only happen through opening of new accounts. By default, since every new account opened is an “active account” (for at least the quarter under review), it should lead to a direct increase in “active accounts”. It will be better if the SBP clarified as to the criteria behind “closure of inactive accounts” as well as the mysterious trend in the Jul-Sep quarter as pointed above. Also worth informing the public is whether a text-based USSD-channel user is also considered an m-wallet user.