Much of the current government’s financial inclusion agenda depends on making digital transaction accounts (DTAs) grow in number and pervasive in use. If the State Bank of Pakistan’s latest Branchless Banking (BB) newsletter (issue 30) for the Oct-Dec quarter is any guide, growth in DTAs – or m-wallets – has been smooth, helping cap off the BB segment in 2018 on a positive note.
As of December 2018, the number of m-wallets had risen to 47.2 million. That’s an impressive addition of 10 million accounts over the year. That feat is, however, marred by the high degree of inactivity among those accounts in the system. The number of active accounts stood at just 19.8 million in December 2018, slightly above the 19.3 million figures seen in December 2017.
Since 2015, the concentration of active accounts had been gradually increasing, taking the five-year average ending 2017 to 46 percent, trying to hold firm beyond the 50 percent threshold. Yet active accounts dropped back to 42 percent of all accounts in 2018. That active accounts increased by just half a million are worrisome in the face of ten million accounts added during the year. BB service providers, who seem to be indulging in a numbers game, are unable to retain m-wallet users on their platforms.
The quarter under review continued the trend towards m-wallet usage and away from over-the-counter (OTC) mode. Within the customer-oriented transactions in Oct-Dec, m-wallets had an 82 percent share in volume (total volume: 315 million transactions) and a 67 percent share in value (total value: Rs639 billion). A year ago, m-wallet share was 71 percent in transaction volume and 65 percent in value.
Meanwhile, the BB transactions are growing in scale. Daily number of transactions averaged 3.6 million in Oct-Dec 2018, up from 1.9 million in the same period the previous year. During the quarter, almost a trillion-rupee worth of transaction flowed through the BB system – growing 30 percent year-on-year. As of December 2018, deposits had increased to Rs24 billion, compared to Rs21 billion in December 2017.
Declining share of OTC transactions is a good omen for the government’s digitization agenda. However, much more could be done if the activity level improves among m-wallets. At the pace m-wallets have grown in CY18, their total number may have crossed 50 million by now. Quite a milestone! But is it, really, an achievement when three out of five accounts opened go on to become inactive not long after? The regulator needs to critically assess why a majority of accounts continue to be inactive in this domain.