The history of branchless banking in Pakistan is no more than two years. But the way this product has been winning the hearts and minds of banking service providers and consumers, the market may soon witness a new wave of competition.
In the presence of two major branchless banking service providers - UBL Omni and Easypaisa - the popularity of branchless banking can be gauged from the fact that around 0.4 million branchless/mobile banking accounts have been opened through a network of over 14,000 branchless agents across Pakistan in the space of few months, according to SBP.
To expand the reach to the unbanked population, mostly living in rural areas where it is not economically viable to set up a bank branch, a large number of banks are eyeing investment in this area.
Branchless banking gurus, such as Nadeem Hussain, CEO of Tameer Microfinance Bank, estimate the market size potential between 60-70 million people.
As the product/service is in nascent stages, the industry needs more service providers to have a pronounced impact on the branchless banking network.
Since existing players have already invested in product and market development, the second movers will likely incur a lower cost to enter this market. But given that volume is very important to make profits, the entry of new players might start a price war.
However, to divide the market pie efficiently among partners, market pundits suggest all mobile operators and bankers to come up with a centralised branchless banking infrastructure to supplement each others resources and expertise.
The market relates the idea of a coordinated branchless banking platform to the formation of 1-link ATM, a shared ATM network which was key for the uptick in ATM networks across Pakistan.
This will also provide an opportunity to potential service providers, who are finding it difficult to enter a partnership.
It would help existing players to cumulatively and efficiently address some challenges currently being faced by this industry, such as agents training, customer awareness, customer protection and regulatory issues etc.
In other words, cooperative competition should mark the industry in the initial phase.