Slow and steady, the mobile wallets are catching on. The numbers look good in a relative sense. But there is much more to be done to grow the retail digital payment ecosystem.
As per the central banks latest branchless banking (BB) newsletter, the number of BB accounts or m-wallets had jumped to 16.9 million in the quarter ending September 2016. Thats a 16 percent growth over previous quarter. The basic-KYC, level-0 accounts continue to dominate (92% share lately). It is not clear; however, how different income segments are represented in these accounts.
But the data does have a gender component. Some 2.4 million new accounts were opened during the Jul-Sep quarter. More than half of that growth came from new accounts opened by female users. Thanks to that, female representation in m-wallets had reached 20 percent as of September end. That is still way lower than their national population, but its a better ratio compared to conventional bank accounts.
As for geographic, about 95 percent of BB accounts are concentrated in Punjab, Sindh, and Khyber Pakhtunkhwa. This makes a case for more focus in the negated regions.
Encouragingly, m-wallets are taking a bigger slice in the transaction numbers. During Jul-Sep 2016, there were a total of 105 million customer transactions. There was a double-digit fall in over-the-counter (OTC) transactions but slight growth in m-wallet transactions. Thanks to that, m-wallet transactions had risen to 44 percent of overall transactions, a great improvement from 31 percent in same quarter the year before.
Growth in m-wallet numbers and activity not only offers customers more convenience, but also allows the operators to go direct with the customers and introduce savings and spending products in collaboration with other market players in the retail economy. Also, since there are many more folks with mobile phones than bank accounts, m-wallets can plug the gap and bring folks into formal financial space.
But some issues continue to fester in this segment. One, even though agent locations have kept on expanding, the percentage of active agents is decreasing. There were 351,912 agents as of September, end, the SBP newsletter shows, but 40 percent of those access points were inactive during the quarter under review.
Two, only about a third of agent locations have the authority or the capability to open customer accounts. There are a number of reasons behind that. There is a cost attached to equipping agent locations with biometric verification system (BVS) machines. Then, agents also sometimes push back, fearing that opening BB accounts would result in a fall in their OTC transaction volume. This is a complicated issue, but one BB service providers need to address.
Three, the real m-wallets are actually smaller in number. Active BB accounts were just 46 percent of the total 17 million accounts, as per the newsletter. The highest activity level ever reached was 52 percent in Jan-Mar 2016. This suggests that a significant chunk of folks dont find value in operating their m-wallet once after they have opened it.
And last, which also makes a case for value-added services, is that m-wallets are catering to low-ticket transactions. During the Jul-Sep quarter, m-wallet transactions were 44 percent of customer transaction volume, but only 34 percent of overall value. The OTC transaction value was almost double the m-wallet amount of Rs100 billion in the quarter. One way to change that would be to induce folks to use mobile accounts for fund transfers and utility bill payments.
Good thing is that service providers will have help, thanks to the dubious financial inclusion mantra. The federal governments National Financial Inclusion Strategy views m-wallets as a main tool to expand account ownership. The Benazir Income Support Programme is also introducing a BVS-centric cash-disbursement system, which will rely on mobile phones. That augurs well for activity within this segment.
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