The branchless banking (BB) segment, which is increasingly been seen by policymakers as a medium for financial inclusion, is gradually gaining traction. Calculations based on latest data show that the BB segment is originating 2.5 million daily transactions, with over Rs10 billion in values transacted every day. The segment is, however, heavily skewed towards two players in a ten-player market.

Though BB is a bank-led field, the top two cellular mobile firms have made hay in the BB arena. These are Easypaisa (Telenor) and JazzCash (Mobilink), each of them having their own microfinance bank to operate in this segment. The duo has leveraged their respective multi-million subscriber base and in the process created a viable revenue stream to offset saturation in their core business of connectivity.

So how concentrated is the segment? As per the SBP’s latest BB quarterly newsletter, the duo dominates nearly all aspects of the BB ecosystem as of September 2018. Easypaisa and JazzCash have a combined 88 percent share in the number of m-wallets (total accounts: 43.1 mn). They also have a similar, 87 percent, share in active accounts (total active accounts: 22.6 mn).

In terms of transaction mix, the two players collectively had 85 percent share in the number of transactions in the Jul-Sep quarter (total transaction volume: 226 mn). They had a 76 percent share in the value of transactions during the quarter (total transaction value: Rs973 billion). The duo has a combined 87 percent share in BB deposits, which came in at Rs17 billion as of September 2018.

Hats off to the two top telco’s for scoring big in the BB market as well, thanks to their large user base, investment muscle and marketing push. The fact that the playground is open for competition to everyone, so long as one can bring a bank to start playing, also shows that the two players have earned it. In that sense, the credit for this market’s gradual development should go to Easypaisa and JazzCash as well.

But still, the above-cited official numbers make it difficult to dispel the impression that the BB market’s characteristics resemble that of a duopoly. While credit is due to them, but then the duo’s dominance also lands some of this market’s shortcomings at their feet. There are several issues that ail this market.

For instance, nearly half of m-wallets ever opened end up becoming inactive. That leads to question marks over how useful the reported statistics are in assessing the market’s relative state of development. Then, despite the government’s repeated appeals under two rounds of NFIS, the two dominant players have more than half of their agent-base without account-opening capabilities. More critical, the BB deposit base is very low, despite the top players running microfinance banks.

This segment’s development depends on the duo upping its game and focusing on “usage” instead of merely growing “users”. With the Enhanced NFIS 2018-23 already in motion, the SBP also has several targets relating to digital transaction accounts. The regulator will do well to assess why the duo in particular and the market in general, is unable to increase deposits and cut down on account inactivity.