The FY17 was a great year for mobile wallets in Pakistan. As per the latest statistics on the branchless banking (BB) sector issued by the central bank, m-wallets had reached a tally of 27.3 million at the end of June 2017. That’s a growth of roughly 87 percent on a year-on-year basis. Policymakers view m-wallets as a nice, scalable way to financially on-board tens of millions of unbanked Pakistanis.
It’s not just the FY17 growth in m-wallets that is impressive. Latest data show that the concentration of m-wallets in the overall BB transaction mix was also on the rise during the year ended June 30, 2017. For some context, besides the m-wallets, the other main channel which customers use to perform their BB transactions is over-the-counter (OTC) mode via the agent kiosks. OTC has typically been dominant in the BB transaction mix, as customers preferred to transact via corner shops. During the Apr-Jun 2017 quarter – the period for which the latest data are available – the overall volume of transactions carried out by BB customers reached nearly 162 million – a growth of 43 percent year-on-year. The value transacted by customers in the same quarter was about Rs474 billion, rising 44 percent year-on-year.
The m-wallets had an impressive 58 percent share in the BB transaction volume pie during Apr-Jun 2017, compared to a volume share of 39 percent in the Apr-Jun 2016 quarter. In the value pie, m-wallets had a 48 percent share in the period under review, up from 35 percent in the same quarter previous year. M-wallet share in the transaction mix has consistently improved in recent quarters. While that sounds good, some of the latest statistics from the sector are not too reassuring.
One, inactive m-wallets still outweigh the active ones. Active accounts almost doubled over previous year to reach 13.16 million in FY17. However, this number comes to 48 percent of the 27 million+ overall m wallets. The active accounts’ proportion in FY17 is up over two percentage points compared to FY16. But, it still doesn’t dispel the impression that the growth in overall m-wallets is a mirage.
Two; even though the total number of agents crossed four lac as of June 2017, the concentration of active agents drastically declined to 46 percent. Back in June 2016, active agents were 68 percent of overall agents. The decline in active agents comes to 51,577 – or 22 percent year-on-year. This is concerning because agents, who facilitate the OTC transactions, are BB’s entry point for the uninitiated folks, especially in remote areas.
And three, there has been visible decline in already-low average-deposit figure. By June end 2017, the sector’s deposits improved 12 percent year-on-year to reach Rs15.4 billion. But the average deposit per m-wallet was down 40 percent year-on-year to Rs565. If one takes into account only the active accounts, the average deposit fell 43 percent year-on-year to Rs1172 as of June 2017. Service providers need to offer attractive saving schemes to encourage folks to use BB as a trusted venue to park their money.
There are some other issues as well, highlighted by BR Research in earlier columns. The SBP didn’t release a detailed newsletter for the quarter under review. From previous issues, one knows there are gender and geographic disparities in the sector’s footprint. Sure, the growth story for the BB sector was strong in FY17. But going forward, it needs to be more inclusive.