BR Research: Please tell us about the motivation behind your recent interactions with telcos and banks in Pakistan. Lito Villanueva: Our fundamental motivation is that our partnership with our clients should not be limited to the sale of a particular software or licence. So we also provide the technical support that is necessary to help shepherd them towards the most efficient and effective use of these acquisitions.
We provide them with the education, training and knowledge so that they can achieve success through the use of our products and services. The value proposition is that we have learnt so much from deployments in various markets. Given the fact that we have been in this business for about 10 years, we have witnessed the success and failures of a number of mobile banking or branchless banking deployments all over the world.
Of course, one size does not fit all in this context; a successful model from the Philippines or Bangladesh cannot necessarily be replicated in Pakistan or in Mongolia. There are several variables including the culture and norms, behavioural patterns of the population, infrastructure and the regulatory framework.
In Pakistan's case, the regulatory framework is very proactive, dynamic and very supportive towards any new ideas coming from the telcos as well as the financial institutions to come up with services for branchless banking. They are committed to financial inclusion, so their goals are in line with the aspirations of these sectors.
One of the key barriers to growth in most markets tends to be the lack of any regulatory framework that delineates how to carry out an initiative such as ours. But here in Pakistan, the challenge has been brought to the private sector by the government. The likes of MCB and Telenor Easy Paisa are success stories and others have been encouraged by their experiences.
BRR: You named some regional peers such as the Philippines and Bangladesh that boast success stories of branchless banking. Have these initiatives in these countries been banking-led models such as in Pakistan or are they different?
LV: In most cases, yes. At the end of the day, the institution that is held responsible for ensuring that regulations are adhered to is the bank. However the countries that I have named are applying a mixed model. Even here in Pakistan, although compliance to regulations is the responsibility of the banks, the telecommunication companies are also vital as they provide some of the key infrastructure and services that make branchless banking or mobile banking possible.
BRR: What are the differences and similarities in branchless banking in Pakistan as compared to other countries in the region?
LV: Firstly, there is the regulatory aspect. Pakistan has a very favourable regulatory environment. Some other countries may also have a favourable regulator but they still face more restrictions.
Secondly, there is the number of agents. While the other countries may have a large number of agents; they often face liquidity management issues.
One thing that we do not want to see or experience in Pakistan is a situation where the customer is denied service because the agent has run out of cash. At the end of the day, such services are popularised by word of mouth. Any negative or positive feedback can go viral in no time so our efforts are concentrated on making sure that even isolated cases of such kind do not emerge.
For that we have to inculcate the understanding that it is not simply about generating a large number of agents; companies have to ensure that these agents are well trained and informed about the needs of the clientele. The agents are practically the front desk, the client-facing proposition.
So you have to make sure that you select the right agents. Then you have to ensure that they are thoroughly trained and educated about the needs of the clients. And then there has to be constant and vigilant monitoring of the agent network to guarantee smooth operations of the network facilities.
Thirdly, in terms of customer acquisition; banks here can go for mass registration. Identifying your specific target market is necessary for the development of a coherent business plan. You have to know whether you are catering to the under banked or the unbanked, as both these markets are quite distinct. While the under banked clientele are already using some basic banking services, the unbanked prospects mainly belong to the bottom of the income pyramid and they have to be made aware of the utility of such services before they start using these services.
They also need different guidance and support from the service provider. In the case of the under banked, there will be many existing customers of the bank that just have to be initiated to mobile banking and other value-added services. The marketing communications used by companies must not be garbled. They must be very clear in terms of who they are targeting and what message they are sending to them. It should not be too complex for the target market to understand. But this can only happen when the service provider is quite sure about the specific target market.
BRR: What role can Visa play in increasing financial literacy and boosting financial inclusion in Pakistan? LV: Visa is definitely in the scheme of things when it comes to improving financial inclusion. Even before an individual is financially included, he has to know what is in it for him. We have to make sure that mobile banking is not simply for them to deposit and withdraw money. People have to be made aware of the key role of savings in their own financial progress and on the macro level, its effect on economic growth. We are committed with our partners in any efforts that help create that awareness among the people.
BRR: Visa has had great success in facilitating G2P payments. Are there similar projects coming up in the foreseeable future? LV: A classic example of these G2P payments is the disbursements made to flood victims. Similarly the recipients of the Benazir Income Support Programme, the World Food Programme, and the Challenge Fund are all shining examples. There are several bargains in the equation that Visa and Fundamo can leverage on.
So going forward there will definitely be more such programmes. Fundamo ties in very well in the bigger picture for Visa. Fundamo, being a privately held corporation had operated on a small scale with different partners across the world. Its acquisition by Visa has really brought it to the global fore. It has opened many doors of opportunity for Fundamo in the 230 countries where Visa is present.
The interoperability between debit, credit and ATM cards as well as mobile accounts will really facilitate the international and national transfer of payments for people. It has the potential to really impact remittances because the process becomes that much faster and easier through the use of mobile accounts.
BRR: The government is on the verge of granting licences for 3G technology and there may also be new international players entering the telecom sector here. How do you expect these changes to play out?
LV: Healthy competition will always be good. With or without mobile banking, in the telco landscape margins are thinning because of tough competition, pricing battles and the proliferation of unlimited service packages. The game is shifting to value-added services (VAS) and telcos are also pushing VAS. The telcos are aware that they must have the right strategy to ensure that customers stick with them and all these services that we have talked about are an integral part of these solutions.