The branchless banking sector has gradually cemented its position as the leading contender to help mainstream financial services in a largely unbanked Pakistani market. The persistent growth trend in the sectors fundamentals offer great hope that the socioeconomic issue of financial exclusion would be dealt as the scale and scope of branchless banking services expand in due course of time.
The latest State Bank of Pakistan newsletter on the BB sectors performance shows healthy growth in both the sector infrastructure and activity volumes between July and September, 2012. Underscoring the acceptance of BBs business in the market, the newsletter highlights a seven percent quarterly growth in agent network that had reached 31,637 agent locations as of September end.
The BB agent network is dominated by grocery stores and retailers (73 percent), remotely followed by mobile shops (13 percent) and franchises (one percent). The larger agent footprint among small grocery stores and retailers across communities and localities has helped fuel the BB momentum. During the quarter, average transaction per agent reached 994 transactions - three percent more than previous quarter.
The number of BB accounts - or mobile wallets - had reached 1.81 million by September-end, a hefty growth of 25.44 percent over the June-end tally. This growth is fuelled primarily by the 84.2 percent growth in the Level 0 BB accounts (the most basic, simple account with low KYC requirements and small transaction limits), thanks to the service providers focus on this group lately.
Growth in the Level 0 account category helped to improve the percentage of active accounts to 66 percent as of September end, from 64 percent at June end.
Increasing user trust in the system is obvious in that the deposits grew by 11 percent over previous quarter to reach Rs839 million as of September-end. However, this figure is very low as it averages to less than Rs500 per account. Moreover, bulk of this is said to be agents own funds for their liquidity management. Deposits are expected to increase manifold once service providers start offering attractive savings rate on deposits and also make available more spending options for m-wallets.
The double-digit growth in both the transaction volume and value continued in 3QCY12, albeit at a relatively decelerated pace compared to earlier quarters. SBP figures show that more than 31 million transactions originated from the BB system in the period under review, which channeled funds worth Rs139 billion (see illustration for the transaction mix).
The average transaction size had increased to Rs 4,420 during the quarter, which indicates increasing float in the system. Simple services like bill payments and mobile top-up continue to prevail in the transaction volumes, while funds transfers have characteristically driven the value chart.
Competition is good for the sector, and the two early entrants, Easypaisa and Omni, are expected to benefit from the new arrivals. For one, the proverbial pie is too big for just one or two service providers to fully cater. Moreover, awareness, a major challenge, is only going to increase as new entrants aggressively market their brands. A diverse, more comprehensive suite of financial services is expected to be rolled out in the future as competitors attempt to differentiate themselves.
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Branchless banking transaction (Jul-Sep, 2012)
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Volume Value
(Nos.) Rs (mn) $* (mn)
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Funds Transfer 13,954,510 95,863 1,011
Deposits & Withdrawals 2,370,718 7,833 82
Bill Payments & Top-ups 14,776,051 34,586 365
Loan repayments 318,265 646 7
Donations 6,864 1.0 0
Salaries 17 72 0.760
Others 20,939 9 0.09
Total 31,447,364 139,010 1,466
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Source: SBP Branchless Banking Newsletter, Issue 5, December 2012