After a bit of delay, the Payment Systems Review for FY22 was finally released by the SBP last weekend. Within that publication, the data pertaining to electronic banking (e-banking) showed strong growth in prominent alternative delivery channels (ADC). Cumulatively, the four major banking-sector ADCs for retail customers – ATMs, Point-of-sale (POS) machines, Internet Banking and Mobile Banking – saw robust growth of 39 percent year-on-year in volume terms to reach 1.36 billion transactions in FY22, with even higher growth of 70 percent year-on-year to reach Rs32.43 trillion in total value.
This spectacular growth needs to be kept in perspective, as these data points are a bit dated now in a changed economic situation that has unfortunately deteriorated. During FY22, there was strong GDP growth of ~6 percent, with broad-based representation from nearly all sectors. The banking sector retail ADCs – which are geared towards consumption-driven spending, payments, and transfers –benefitted from increased economic activities last fiscal. It remains to be seen how ADCs will fare in FY23.
Back to the stellar FY22 numbers, the Mobile Banking channel is the clear front-runner among the pack. Compared to FY21, this channel’s volume doubled to reach 388 million and the transaction value was up 1.4 times to reach nearly Rs12 trillion! This growth mainly came from existing users as overall users grew 13 percent year-on-year to 12.33 million by June-end 2022. The average transaction size on the Mobile Banking platform in FY22 grew by a fifth to reach Rs30,582. Since FY17, this channel has grown 52 times in volume and 84 times in value, indicating higher user acceptance and improved apps by service providers.
The Internet Banking channel is not far behind, growing its volume by 52 percent year-on-year to 142 million and its value by 81 percent year-on-year to Rs10.25 trillion. The main driver was users growing 60 percent year-on-year to reach 8.36 million as of June-end 2022. The average transaction size over this platform grew by a fifth compared to FY21 to reach Rs72,335 in FY22. Between FY17 and FY22, Internet Banking transactions grew almost 6 times in volume and 11 times in value. A star performer among ADCs for quite some time, it was finally overtaken in value terms by Mobile Banking in FY22.
It is good to see that the POS channel is a laggard no more. During FY22, transactions over POS machines jumped well over 50 percent year-on-year in both volume and value to reach 138 million and Rs707 billion, respectively. This was mainly because of POS machines growing by 46 percent year-on-year to reach 104,865 units as of Jun-end 2022. The average transaction size was almost flat at Rs5,143 per transaction, which suggests that the demand-side dynamics are the same in terms of consumer spending via this retail channel. Between FY17 and FY22, POS transaction volume and value grew nearly 3 times.
Meanwhile, the ATMs continue to be the volume leader among ADCs, doing their thankless jobs dispensing cash 24/7. This channel recorded a 16 percent yearly growth in volume to 692 million transactions and a 19 percent growth in value to Rs9.62 trillion in FY22. As of Jun-end 2022, there were 17,133 ATMs in the country, as banks added two new ATMs per day, on average, during FY22. Just like POS, the average ATM transaction size has also remained flat over FY21, standing at Rs13,907 in FY22. In the five years to FY22, ATM transactions doubled in both values and in volume.
The data for the ongoing fiscal will provide early indications of how resilient this growth in banking-sector ADCs has been amidst output contraction in various economic sectors. There were also massive flood-related losses earlier this fiscal, particularly hurting primary farming sectors and secondary processors downstream in the value chain. Much-higher inflation, averaging 25 percent in 5MFY23, has also eroded purchasing power. The impact of such events on consumer spending and P2P transfers is bound to be significant. One hopes the SBP would soon release the Jul-Sep FY23 data, to help inform the better analysis.
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