Warid may not have changed ownership yet, but it doesn seem to be sulking in the waiting game either. Just a few days back, the fifth-ranked cellular operator in the country announced its entry into the market for mobile financial services (or branchless banking), along with its partner, Bank Alfalah Limited (BAL).
The branchless alliance between BAL and Warid--which are subsidiaries of the same sponsor, the Abu Dhabi Group--has long been anticipated. But somehow, Warid has been the last among the five cellular operators to arrive at this turf. Meanwhile, BAL is not too late, as it joins a small company of banks, United Bank, Habib Bank and Askari Bank.
Before analyzing this new entry, one needs to appreciate how far the branchless banking sector has come in four years. From a non-existent base, the sectors transactions have grown every quarter. In the year ended June 2013, it boasted 153 million transactions adding up to Rs636 billion. Deposits were nearly Rs2.5 billion by June end. Sectoral footprint has likely exceeded one lac agent locations by now.
The sectors lucrative prospects can be gauged from the fact that there were only two established BB service providers just over a year ago. Now there are seven! A few more pilots are also underway.
Coming back to the rookie in the field, its financial custodianship and transaction settlement functions will be performed by the BAL (as per the license requirements)--whereas Warid will act as its "super agent", deploying its network of franchises and third-party retail outlets. Warids press release mentioned that this service will be rolled out soon, with money transfer and utility bill payments services on the menu.
The large number of unbanked mobile users is a big opportunity, but how this venture approaches this pie is an interesting question. The sector remains heavily tilted towards Over-The-Counter (OTC) transactions, which were 83 percent of transactions volume in Apr-Jun quarter. The new licensees focus on OTC over mobile wallets is understandable, given the need for creating a steady revenue stream early on.
Perhaps the bigger question here is: what will become of this branchless coalition between BAL and Warid when the latter is eventually bought out of the Abu Dhabi Group. In that case, the most likely scenario will be that BAL --which is the actual licensee for BB services--will continue to offer mobile financial services. With no telco available for exclusive partnership, it will likely fly solo, like UBL did.
But, in case the Warid deal falls through, the two Emirati firms are ideally placed to harvest the promising market for mobile financial services.
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