Mobile Banking: The Fingertip Solution

Majyd Aziz

Mobile banking, also referred to as seamless banking or branchless banking, is fast becoming the source of financial empowerment for customers in Pakistan. The game changer has been the blend of universal and affordable availability of cell phones, user-friendly technology and preferential consumer behavior that has enabled people  to make fast track and easy access financial transactions at a lower cost. According to a McKinsey Report, the usage of internet banking has risen over 30% while mobile banking has shot up by 85% across the Asia Pacific region.

Some relevant information about seamless banking in Pakistan:

·    In first quarter of 2014, value of branchless banking transaction was Rs 225 billion while volume was 55 million compared to Rs 52 billion and 12 million in first quarter 2012 respectively

·    In first quarter of 2014, the number of retail agents involved in branchless banking transaction was over 115,000 compared to less than 20,000 in first quarter 2012

·    In first quarter of 2014, the number of accounts involved in branchless banking transaction was over 3 million compared to less than 0.75 million in first quarter 2012

·     Adults with an account at a formal financial institution (percentage-wise) in Pakistan,  India, South Asia and among lower middle income are 7%, 33%, 31% and 26% respectively in rural areas and 15%, 41%, 38% and 34% respectively in urban areas

·     Adults with an account at a formal financial institution (percentage-wise) in Pakistan,  India, South Asia and among lower middle income are 17%, 44%, 41% and 34% respectively among men and 03%, 25%, 25% and 23% respectively among women

Benazir Bhutto Shaheed Youth Development Program is a visionary initiative to impart vocational training and skills development to the underprivileged youth in the province of Sindh. As a Founding Member of BBSYDP, it was my endeavor to introduce transparency in disbursement of stipend payments to the trainees who were based all over the province. Initially, the primarily government-owned bank, National Bank of Pakistan, was requested by me to open individual accounts for trainees without any penalty or surcharge for zero balance. However, with only 180 branches in Sindh and due to lot of bureaucratic paperwork, the facility developed many hitches and created logistical difficulties for the trainees. Moreover, since the training period was only of six-month duration, NBP was reluctant to pragmatically support and continue this service.

Recently, it was decided to consider mobile banking as an alternative. Tameer Microfinance Bank in partnership with Telenor, a mobile service provider, introduced seamless banking in Pakistan in 2005. It brought an innovative service for the unbanked through a product known as “Easypaisa”. Easypaisa does more than 200,000 transactions daily through 32,000 outlets in 700 cities. It claims to move 1% of Pakistan’s GDP and was recognized as the 3^rd Largest Mobile Money Service in the World in 2013. In Pakistan only 15 million people have an account in a formalized financial institution whereas there are 130 million cell phone SIM users in the country.

Easypaisa came up with a solution for BBSYDP to provide stress-free, uncomplicated and fast track accessibility to stipend payments through its retailer network. The Over-the-Counter solution works through the CNIC (Computerized National Identity Card) number of the trainee. The amount would be disbursed at once to all trainees, and withdrawals could be made at any of the State Bank of Pakistan Licensed Easypaisa Agents in Pakistan. At the same time, the MIS Report would be immediately generated for BBSYDP for record and monitoring. The uncollected amount would be returned to BBSYDP within fifteen days. The Agreement also provides a dispute resolution mechanism, full transparency, strong outreach in far-flung and remote areas, and effortless accessibility through licensed Easypaisa agents.

There are 772 training institutes in Sindh that are registered under BBSYDP. The total Easypaisa agents in Sindh are in excess of 8300. As examples, there are 40 institutes in Ghotki while Easypaisa has 152 agents corresponding to 380% coverage. In Umarkot, there are 16 institutes while agents are 148, thus over 925% coverage. Similarly, in Hyderabad and Karachi there are 29 and 105 institutes while Easypaisa agents are 575 and 5036, representing nearly 2000% and 4800% access facility. The example of the Easypaisa-BBSYDP arrangement is given to highlight the growing confidence in mobile banking sector by people who would normally not have an account or are unable to travel to branches or outlets to collect or remit money. 

The favorable attitude towards mobile banking is a manifestation of consumer financial empowerment. The customers are getting hassle-free service and in close proximity to their home or place of work. The guiding line for service providers is, and should be, that customer behavior is re-defining the ways of conventional banking and that customers are less interested in visiting branches and wasting precious time. Ergo, it is imperative for banks to quickly and continuously recognize and respond to rapidly changing customer thinking. Banks also have to strongly focus on customer loyalty like never before since choices for banking transactions are rapidly increasing due to highly-charged, innovative, and enterprising solutions among the banks that are competing for their share of the customer pie. 

The future bodes well even for business-to-business transactions via mobile banking. The high point, of course, would be when mobile banking becomes, in the first phase, a SAARC connectivity rather than just a domestic affair. Global mobile banking transactions would then gradually become an everyday reality.