Branchless banking transactions decline 1.47 percent in July-Sept

KARACHI: Branchless banking transactions declined 1.47 percent in volume and 2.67 percent in value during the July-September quarter of 2017 over the previous quarter as the agents are still adapting to the central bank’s requirement of biometric verification system for payment settlement.

The State Bank of Pakistan (SBP), in a branchless banking (BB) newsletter, said a total number of 164.7 million transactions worth Rs726.4 billion were conducted during the Jul-Sep 2017 quarter.

“The BB transactions declined by 1.47 percent and 2.69 percent in number and value respectively from the previous quarter, due to decline in OTC (over-the-counter) transactions,” the SBP said. “SBP made it mandatory for the banks to conduct person-to-person transactions (also called CNIC to CNIC) only through the biometric verification System (BVS) devices starting July 2017. Since the installation of BVS devices is still underway at a number of agent locations, this led to a decline in OTC transactions, thus exhibiting a downfall in overall BB transactions.”

Branchless banking agent network grew 17,397 during the quarter under review, bringing the aggregate number of shared agents to 420,107. The agent network is operated by Omni, JazzCash, Easypaisa, HBL Express, Upaisa, PayMax, Mobilepaisa, Meezan Upaisa and JS Bank.

The value of mobile wallet (m-wallet) transactions rose 55.4 percent to Rs246.4 billion in July-September 2017 with volume of transaction standing at 104.8 million during the quarter.

The share of m-wallet transactions in overall customer-oriented transactions jumped to 66 percent – the highest percentage ever, confirming the fact that m-wallet channel is slowly and steadily gaining momentum vis-à-vis over OTC channel, the central bank said. Customer oriented transactions mainly comprise of fund transfers, bill payments social welfare payments and cash deposit and withdrawals.

During the period under review, 5.7 million new BB accounts were opened, which was the highest in all the preceding quarters.

“The rise in BB accounts is exhibiting a steeper trend since June 2016 onwards, due to the enabling environment created by the SBP and vibrant role of BB players to facilitate account opening through biometric devices at agent locations as well as the remote mode,” the SBP said. “The cost reduction in customer verification from NADRA (National Database and Registration Authority) has also provided enough synergy to encourage the banks to attract the customers towards the branchless banking channel.”

The central bank said the active accounts, however, remained 47 percent of the total BB accounts.

“The significant rise in BB accounts on one hand, and limited share of active accounts on the other, shows the fact that the BB platform is attracting more and more masses, however (it) still needs to provide value-added service for generation of activity in accounts.”

The central bank emphasised a need of innovative and tailored-made products for different segments of the society to generate activity in accounts as well as transform existing cash-based payments streams to digital channel in order to pave a way for the establishment of a ‘cash-lite society’.

The central bank has taken an initiative recently to leverage the BB channel to provide home remittance facility to the mobile wallet holders.

The branchless banking channel has been facilitating foreign remittances since long.

The remittances worth Rs1.7 billion and Rs2.4 billion were performed during the years 2015 and 2016 respectively, whereas the first three quarters of CY2017 witnessed Rs1.6 billion worth of remittances.

“Despite the numbers are negligible as compared to the total inward remittances received through the core banking channel, it is expected that the branchless banking accounts have huge potential in increasing the worker’s remittances,” SBP said.

As on quarter end, the BB accounts comprised of 25.6 millon male and 7.3 million female accounts. Sindh represented the highest share of female BB accounts of 25 percent, followed by Punjab, Khyber Pakhtunkhwa and Gilgit Baltistan. BB accounts witnessed 29 percent increase in female accounts as compared to 19 percent in male accounts, which is a positive sign in gender inclusion.

However, this phenomenon was attributed to Punjab, whereas other provinces experienced higher growth in male accounts than female accounts.