Branchless banking: on average 22 million transactions being carried out monthly: SBP governor

Governor State Bank of Pakistan (SBP) Ashraf Mehmood Wathra has said that Pakistan is now the one of the largest branchless banking market in the world, where the average monthly transactions have reached 22 million valuing Rs 125 billion.
Speaking at the International Branchless Banking Conference 2014 here on Monday, he said that number of Branchless Banking accounts have significantly grown and cumulatively reached to 4.7 Million. However, he said that usage of M-Wallets had not grown in tandem with the growth in accounts, as Over-the-Counter (OTC) transactions constitutes 82% of the total.
Wathra said that the combined agent network of all providers has increased to 186,000. However, their number of unique agents is estimated to be 80,000. Average size of branchless banking transactions is Rs 5,600 (US $56), which indicated that using technology they were now reaching out to the poor and low income groups. Because of this performance, he said "Our branchless banking policy initiatives and business models have won global recognition."
The conference was organised by SBP to highlight key branchless banking developments so far and perspective of international organisations and experts on up-coming challenges and proposed solutions as well as experiences and lessons learned by the industry practitioners.
He said that today's event was yet another milestone in the long-standing partnership between State Bank and DFID in advancing financial inclusion, adding that with a shared global agenda and strong national targets aiming at bringing a positive impact to the lives of the poor, they were creating a momentum for change.
Wathra said that Richard Montgomery, Head of DFID Pakistan deserved all appreciations for all the support they have extended in addressing the barriers and industry bottlenecks that hinder the broader access and usage of financial system in Pakistan, particularly the poor and marginalized segments of the society.
"I believe that having access to simple financial products can have a real, positive impact on peoples' lives. G 20 leaders, the IMF, the World Bank, other multilateral and development institutions, have called for an improvement in the quality of economic growth such that it should be "inclusive," he added. "They are convinced that inclusive growth begins with financial inclusion and broader access to finance. Following this insight, we have seen broadening of policy objectives from pure monetary and financial stability to a greater role in propelling and sustaining inclusive growth through more and better financial inclusion," he maintained.
"In Pakistan, high level of financial exclusion has led our society to rely on excessive use of cash especially for payments and savings which is risky, costly, and inconvenient to the businesses and public at large," Wathra added. Besides, he said "It restrains our national efforts towards documentation of the economy. Given our vast and diverse geographic landscape with scattered population and security challenges in some parts of the country, Pakistan has one of the lowest bank branches per 100,000 people ratio in the world."
He said that despite the fact that SBP was encouraging expansion of brick and mortar branches network especially in rural and under-served areas, they understand that it cannot be an adequate strategy for the accelerated financial inclusion. The SBP therefore envisioned a path towards digital financial inclusion back in 2007 to create convenient digital channels for servicing common people, reducing their high dependence on cash. Under a specialised legal and regulatory framework, the SBP allowed the market to promote the use of electronic payments and mobile phone banking, he added.
Wathra said that the journey towards universal digital financial inclusion began with two landmark policy initiatives; i) enactment of Payment System and Electronic Fund Transfer Act in 2007, and ii) issuance of the SBP's Branchless Banking Regulations in 2008. To complement these policy measures, the SBP in partnership with UKAid facilitated the early adoption of Branchless Banking in Pakistan by supporting a number of technology-driven innovative projects as well as knowledge sharing events to showcase the opportunities to the market, he maintained.
Further, he said that institutionalising the industry dialogue, the SBP set up a Branchless Banking Consultative Group to tackle the developmental challenges of branchless banking market. Moreover, under the FIP, State Bank launched the first round of Financial Innovation Challenge Fund (FICF) to support digitisation of Government-to-Persons (G2P) payments through branchless banking channels.
"Pakistan witnessed successful emergence of various branchless banking models. In the year 2009, the SBP licensed first model namely 'EasyPaisa' by Tameer MFB and now there are eight branchless banking providers operating in the country. It is also encouraging that excitement in the market is still growing and new banks are also keen to become part of this innovative banking either through partnerships or through establishing their own BB model," Wathra added.
He said that despite the positive early performance indicators, our BB market will not achieve potential scale, sustainability, and impact in the long-run unless it overcomes few critical early development challenges around product, channel, and infrastructure.
"The greater promise of branchless banking lies in the ability of our banks to build new or leverage existing agents' network, and convert massive SIM subscribers' base into banking account holders. This transformation is already underway with the support of an evolving branchless banking ecosystem," he added.
In particular, the government's vision to digitize the space of its Government-to-Person (G2P) payments through branchless banking has proved as a strong catalyst to the industry. The industry needs to expand in this area by offering proposition for digitisation of larger G2P, P2G, Business-to-persons, and persons-to-business payments, he maintained. In addition, he said that the role of PTA and NADRA in this ecosystem has remained critical to support ongoing branchless banking initiatives.
However, he said, "In a significant development to promote registration of mobile-wallets, SBP and NADRA are signing an MoU today to rationalise fee on biometric verification of customers' identity and role of NADRA and PTA will continue to remain important in the next level of development of branchless banking."
In line with the vision of working together with key stakeholders, he said that digital financial inclusion was going to be the cornerstone of SBP-led National Financial Inclusion Strategy (NFIS) that was currently in the stage of formulation.
He said that to facilitate the transition, the SBP was emphasising on building the financial capability of all the citizens, as evidenced by the National Financial Literacy Program launched by State Bank. The program was meant to support SBP's objective to migrate most of retail transactions to electronic channels in the medium to long term.
Besides, he said that the SBP was also working on developing a strategy to strengthen its payment system infrastructure for retail payments especially low-value, high-transaction payments in the system. Globally, Payment and Settlement System was a fast growing area, witnessing rapid innovations, driven by market forces as well as new technologies, he added.
"SBP in collaboration with PTA is also working on the framework of interoperability of the retail transactions which are taking place through branchless banking channels. Through these and few other initiatives, SBP is striving for building a safe, efficient, and inclusive payment system which is not only important for financial inclusion, but is also critical for the effective functioning of the financial system and smooth transmission of monetary policy," the governor maintained. Congratulating the industry for its valuable efforts towards the expansion and deepening of the financial system, he said that their ingenuity and hard-work will further expand the frontiers of financial services industry in near future.-PR