The launch of Telenors "Easy Paisa" - a product that allows the payment of utility bills through its retail outlets -- is the second major breakthrough in sowing the seeds of m-banking industry in Pakistan. The first, being the successful launch of "Mobile Money Order" and "Mobilink Genie" by Mobilink.
Both telecom firms look set to gain popularity, as branchless banking through agents and mobile phones is far more efficient and convenient than going to a branch. M-banking services can fulfil the needs of both urban and rural communities; on one hand, it can save time of the urban community and on the other, provide banking services to rural community.
This is truer for a developing country like Pakistan marked by limited access to banks mainly because lenders haven penetrated in rural areas where majority of the countrys population lives. The low penetration of branches can be gauged from the fact that there are just seven branches per hundred thousand people and 0.22 braches per thousand kilometers. Similarly, there is a lack of availability of ATM facility; on an average there are only 0.10 ATMs per thousand kilometers.
Such dearth in banking when seen in the backdrop of significantly high penetration of cellular technology shows that growth opportunities in the m-banking sector are fairly high. According to a UN report, mobile subscription in Pakistan expanded at a cumulative growth rate of 102 percent in past four years, while on the contrary, bank account holding stood as low as 226 bank accounts per thousand adults.
But although m-banking has great potential in Pakistan - being at a nascent stage -- there is a huge gap for technological development and improvement in this regard. And one way to do so is to adapt the model applied by their peers elsewhere. For instance, the model successfully launched by Globe Telecom in Philippine is rather interesting.
Globes model provides facility through which cellular users can deposit cash into an e-virtual account, tied to their mobile connection through retail outlets. In addition, they can send funds from one personal account to that of another person, pay bills, make loan repayments and also shop by using the money deposited in their e-virtual accounts.
And it seems the industry is moving in the right direction. Reportedly, Telenor - in union with Tameer Bank -- is planning to launch a service that will facilitate the transfer of domestic remittances through its retails agents - a model that can be subsequently expanded by using cellular technology.
Increasing the scope of m-banking is also good for the broader economy. According to a recent study, mobile service facility reduces poverty using microfinance and cash management facilities. Another report points out that adding ten extra cell phones per 100 people in a typical developing economy, GDP growth per person boosts by 0.8 percentage points.
In short, telecom companies can play a major role in development and growth of economy in the future by providing low cost services with greater accessibility, especially in the unbanked far flung areas.
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