Pakistans four-year old experience with the branchless banking has been exhilarating. Early entrants have gained significant scale in a promising market, while the regulator, SBP, has been in the lead, evolving the rules of the game as the market develops. Lauded for its nurturing role both at home and abroad, SBPs efforts for more participation from the private sector are proving fruitful now.
The BB services have been gaining traction in a largely unbanked Pakistani market. SBP data shows that in FY12, a huge liquidity of Rs339 billion was generated in over 90 million transactions within the BB system. Nearly 1.5 million mobile accounts had been opened, and the agent footprint had expanded to 30,000 locations, as of June 30, 2012. The exponential growth is expected to continue further.
Recent weeks have seen full-scale rollouts from two mobile network operators, an exciting development. First was the launch of mobicash, the BB service of Waseela Microfinance Bank that uses Mobilink as super agent (the former is sponsored and the latter owned by Orascom Telecom). Earlier this month, Zong (China Mobile, Pakistan) launched its BB service, Timepey, in partnership with Askari Bank.
They say that if theres anything that can be done, will be done - by you, or to you. Easypaisas converging platform and Omnis go-solo approach have translated their different business propositions into scale of commercial gains, which the large banks weren convinced of few years ago. Banks are now said to be seriously mulling over their options. HBL is already preparing to go beyond its BB services soft launch.
What about competition in the market? In a recent interview to the World Banks CGAP (a policy research institute), Nadeem Hussain, the Founder, President and CEO of Tameer Microfinance (Easypaisas banker) said the pie is so large that all service providers can play, take the market to 20 to 30 million transactions a month, and facilitate Pakistan in becoming a global leader in BB services provision.
Highlighting some of the challenges, he said, "Awareness will remain an issue until large telcos come and spend the big marketing dollars to make people aware of what a mobile account is and how mobile financial services work. Creating the service culture at the agent network is another challenge, besides cash management. If agents are not customer-friendly or go out of cash, then the whole edifice falls."
As competition grows with more players joining in, the BB product offerings are expected to diversify and presently high service charges may go down. What the new entrants must work on is to target niches, by bringing in a different perspective. There is something for everyone here, as Nadeem points out. Building a payment ecosystem is something which all service providers must collaborate for.
The established service providers focus has remained more towards urban, middle class pockets and migrant white collar workers. Moreover, it is the OTC transactions that have been majorly driving the volumes. Such a strategy makes business sense, but it can also lead to missing the woods for the tress if persistent efforts are not made to expand the pie.
Here is a sector wherein operators and bankers can actually build commercial propositions around the agenda of financial inclusion. The unbanked population is so huge that its financial mainstreaming by even a few percentage points can yield substantial commercial gains. The key here is to keep the eye on the ball!