Branchless banking

It is a matter of great satisfaction that financial system of Pakistan is second to none in adopting new technologies and introducing fresh products in the banking business for the convenience of their clients and improve their share in the market. Branchless banking (BB), a comparatively fresh innovation in the field, has, in particular, made a tremendous progress in the recent past in the country, as reflected in the growth of Government to Person (G2P) payments, which reached Rs 20.8 billion or were up by 163 percent during the first quarter of CY14. The rise was mainly due to a rise of G2P beneficiaries to 5.6 million during January-March, 2014. Out of the total G2P accounts, card-based beneficiaries increased to 3.5 million while non-card-based beneficiaries climbed to 2.1 million during this period. The detailed analysis of the data released by the SBP showed that the surge in G2P payments was mostly fuelled by Benazir Income Support Programme (BISP) payments, which had a share of about Rs 19.6 billion or 95 percent in overall payments. In addition to the regular G2P payments, government also released Rs 328.5 million relief payments for 51,000 BISP beneficiaries in famine-stricken Thar district besides disbursing Employees Old Age Benefits Institution (EOBI) pensions amounting to Rs 485 million through branchless banking.
One could easily visualise that the branchless banking and particularly G2P, a new mode of payment, is set to increase sharply in the medium term as the clients of the banks become more familiar with the new technology with the scope of government sponsored schemes expanding to help the deprived sections of society. Already, government has widened the coverage of BISP and allocated Rs 75 billion for the purpose in the budget for FY15 as compared to the disbursement of Rs 48.18 billion during the first nine months of FY14. UBL, Bank Alfalah and some other institutions are taking keen interest in branchless banking and account inactivity was also lower in all types of BP accounts. Looking ahead, branchless banking is likely to become very effective tool for the transparent and hassle-free disbursement of government financial support among the needy and a source of great comfort for the ordinary people who cannot visit bank branches for one reason or the other for their ordinary banking requirements.
The rapid increase in branchless banking (BB) in Pakistan is a welcome development for a number of reasons. Obviously, the growth in financial services through this mode would reduce the staff and other physical requirements like well-furnished premises of the concerned institutions and thus increase their profitability, which could partly be passed on to the clients. It would also help in extending the outreach of financial services in the unbanked areas and achieving the objective of financial inclusion besides ensuring transparency in the payment system. Seen from every perspective, financial depth has a positive effect on economic development and a well structured and efficient banking system plays an integral role for such a transformation. Fortunately, IT infrastructure and Nadra has also played a great supporting role in expediting the process of BB. Hopefully, synergy between all the concerned institutions would continue to grow to take advantage of new technologies and provide a measure of relief to the common people. With the growing awareness, the BB phenomenon would not remain only confined to BISP and other government schemes but would also expand to cover other banking transactions. Regrettably, however, there are only few sectors in the country, which appear to be able to supply state-of-the-art services and can stand shoulder to shoulder with their international competitors and financial sector is one of them.