M-wallets: lots of deadwood

The latest branchless banking (BB) statistics are an interesting read. The number of BB accounts, also referred to as m-wallets, had reached 46.1 million at the end of December 2019, a 16 percent increase over September end. The accounts at year-end are a million shy of the 47.1 million accounts in December 2018, but the 50 million mark may be crossed this year.

Within those accounts, about 53 percent were classified as “active”. (The SBP has previously defined “active accounts” as those fully-compliant accounts that are either opened in past 180 days or have done at least one transaction in past 180 days). This ratio is low, but somewhat better than 42 percent active accounts that were seen at the end of 2018.

The reason for better activity level at 2019 end is that there was a massive cleanup in m-wallets in the first half of 2019. As a result, active accounts were 62 percent of total accounts by June 2019. But the ratio started declining thereafter. By September 2019, active accounts had come down to 55 percent of total accounts. And by December 2019, the activity is witnessed in 53 percent of the accounts.

So, it appears that the deadwood is again building post-cleanup. Consider: between July and December 2019, the total number of mobile wallets increased by over 10 million. Since the active-account definition spans six months, this addition in overall accounts – essentially “new accounts” – should show up in active accounts. However, active accounts have increased by just 2.5 million in that six-month period!

This suggests that the activity levels are very low in the previously opened accounts (that is, accounts opened before June 2019). And to show growth in active accounts, the BB service providers must keep showing massive growth in overall accounts. But that doesn’t make much sense because new accounts should be part of the active accounts for at least two quarters (180 days).

This issue – as to why the increase in total accounts is not showing up in active accounts – has been pointed out before. While the BB service providers have strict internal reporting standards, it appears that regulatory reporting is misleading on a seemingly innocuous data point. There could be window dressing at work. The service providers, and the regulator which collects such data, need to come clean.