The launch of Telenor Pakistans Easy Paisa and its growing number of product offerings amid other exciting developments in the m-banking industry are promising. It now seems that the distant dream of providing banking facilities to millions of people at their doorsteps may be realized sooner than previously thought.
The telecom giant, which also plans to rollout micro finance business and provide international remittance facilities soon, has just started offering an in-land remittance service called "Money Transfer. What makes this product so special in the first place?
Well, it is its unique branchless banking model that provides services through retail agents in a country, where cash machines and banks are few and far between. According to CGAP, a US-based policy and research center, there are only 3.39 ATMs and 7.5 commercial bank branches per hundred thousand adults - implying the need for banks and hence plenty of room to grow.
But happy ending of the story of ranchless banking does not end here, because the success of this business model does not only depend on building a strong agent network but more on making this model viable for the agents, profitable for the company and cost effective for the customers.
At present, retail agents at home are facing challenges akin to those faced by M-PESA and GCASH agents in Kenya and the Philippines, respectively.
This is not due to any fault in domestic branchless banking model. But, in essence, it is the very nature of heavy cash-based economy in developing countries that makes it difficult for retail agents, especially those present in far-flung areas, to handle cash transactions or keep sufficient float to maintain service continuity.
In some cases, m-banking agents have to pay transport fares in order to deposit and withdraw cash from banks that are often located at far distances.
In other cases, where bank branches are located at nearby places, retailers face strong price competition from conventional banks since the fee they charge to transfer domestic remittances is lower than what is being charged by m-banking agents.
"Most users are price sensitive, and in most cases they prefer to send money through Hundi or other informal channels", one retail agent told BR Research.
Going forward, in the light of growing money laundering issues at home, companies venturing into the business of m-banking in Pakistan might face strict regulatory issues as regards the certification of merchants to conduct banking operations.
To turn the corner, companies need to make some ingenious decisions to streamline the agents cash handling techniques, make commission structure attractive for them and reduce service charges to make their offering attractive for consumers.
Telecom players need to understand that heavy expenditures on fancy advertisements, despite high product demand, will not do the trick alone.