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Mobile Money Revolution: The Next Big Thing in Pakistan

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Mobile Money Revolution: The Next Big Thing in Pakistan

If you lose your wallet then it means you have lost all your financial belongings for good but if that information is saved in your mobile instead of your wallet, your account is safe from misuse. The modern financial transactions have turned its way towards mobile transactions i.e. Mobile Money or M-banking which refers to payment services operated under financial regulation and performed rom or via a mobile device. So instead of paying your bills with cash, cheque, credit or debit cards, now you can use a mobile phone to pay your bills. Though mobile money has a long history but only recently it has gained momentum due to the innovative technology support for it. This trend of “non-coined currency” is adopted across the world in different ways and its demand has been successfully recognized by the companies and organizations.

The modern financial transactions have turned its way towards mobile transactions i.e. Mobile Money or M-banking which refers to payment services operated under financial regulation and performed from or via a mobile device

Obviously, internet is the most fundamental enabler of economic and social development of the 21st century. According to GSMA “Connected Society Programme”, 3.2 billion people are online through internet whereas out of this, around 2.4 billion are using mobile phones and directly contributing to the digital economic system. Unfortunately, 4 billion people are still unable to use internet which means that they are still offline and unable to incorporate in the digital economic system.

3.2 billion people are online through internet whereas out of this, around 2.4 billion are using mobile phones and directly contributing to the digital economic system

Whereas, in developing countries m-payments have been recognized as a source of encompassing financial services to the community that is still“underbanked” or “unbanked”.

There are some fundamental models of mobile banking which are used and also recommended by GSMA under its “Mobile Money Programme”; these include:

  • Premium SMS based transactional payments
  • Direct Mobile Billing
  • Mobile web payments (WAP)
  • Contactless NFC (Near Field
  • Communication)

The “Overview of the mobile money industry in 2015” of GSMA proved these models very effective as they have increased the importance of online payments than any other industry.

Scope of Branchless Banking in Pakistan

Definitely the scope of this modern financial solution is very wide and similarly in case of Pakistan it will also help to facilitate millions that are residing in far flung areas who have less banking facilities and it takes days to transfer money. Along with scope, the procedure of fund transfer is also very simple which suits even the illiterates living in remote areas. Also the youth who don’t have bank accounts can easily get the money sent by their parents just with-in a few minutes.

With over 30 million broadband and 27 million mobile data users, Pakistan is witnessing an internet boom

Mobile money can also help in increasing e-commerce trend in Pakistan. With over 30 million broadband and 27 million mobile data users, Pakistan is witnessing an internet boom. Also with many affordable internet bundle packages that are offered by the telecom operators coupled with the increase in 3G/4G coverage and the rise in affordable smartphone users, Pakistanis have become tech-savvy and internet-friendly. Banking transactions through cell phones have become a popular mode of payment in Pakistan as the introduction of 3G/4G has pushed mobile banking transactions up by 5 % to Rs 26 billion in second quarter of fiscal year 2015-16 (FY16).

Banking transactions through cell phones have become a popular mode of payment in Pakistan as the introduction of 3G/4G has pushed mobile banking transactions up by 5 % to Rs 26 billion in second quarter of fiscal year 2015-16

Realizing the potential of m-money, recently Pakistan Telecommunication Authority (PTA) and State Bank of Pakistan (SBP) have jointly signed a Memorandum of Understanding (MoU) on Regulatory Framework for Mobile Banking Interoperability in order to frame regulations for m-banking. To make mobile transactions secure, now the authorized financial institutions (AFIs) will be held responsible for the financial losses and other fraudulent activities in m-banking according to these newly devised regulations.

With convenient, secure and instant payments in place, Pakistan is truly about to witness the dawn of the second generation of e-commerce in the country; E-Commerce 2.0. This situation indicates that Pakistan has the potential and is also ready to adopt modern m-payment services which is already in process along with the mobile operators and some of the banks as well. Let’s evaluate each of their status in this regard.

Easypaisa by Telenor Pakistan

Easypaisa is Pakistan’s first and largest branchless banking service which was launched in 2009 jointly by Tameer Micro Finance Bank and Telenor Pakistan. Easypaisa has the largest financial footprint in Pakistan with over 75,000 Easypaisa shops in more than 800 cities across the country. Nearly 650,000 transactions are conducted on Easypaisa every day by 20 million active customers.

In 2015, Easypaisa moved nearly 3% of Pakistan’s GDP. Easypaisa has the largest product portfolio of services for its customers including remittances, payments, savings and insurance and offers ATM cards and IBFT services that work with all banks connected through 1-Link in Pakistan.

UPaisa by Ufone

Ufone has also introduced its services for m-money by launching “UPaisa Solution”. UPaisa was launched in 2013 in collaboration with U Microfinance Bank Ltd. in orderto provide financial solutions to the masses of Pakistan. It claims to have the largest agent networks in Pakistan as it provides convenient access to financial services to even the remotest locations of Pakistan.

Mobicash by Mobilink

Mobilink along with Waseela Microfinance Bank has also introduced “Mobicash” as branchless banking system. Mobicash is no doubt playing its due role in giving people of Pakistan the absolute financial liberation in far flung areas of the country.

Timepey by Zong

In this race of financial inclusion, Zong also tried to set its feet by introducing “Timepey” which facilitates with Utility Bills’ Payment, Mobile Account and Funds Transfer. But due to some conflict between Zong and the partner bank, Timepey services are currently discontinued.

Pakistan Telecommunication Authority (PTA) and State Bank of Pakistan (SBP) have jointly signed a Memorandum of Understanding (MoU) on Regulatory Framework for Mobile Banking Interoperability in order to frame regulations for m-banking

Other than this, there are many banks who have realized the worth and demand of branchless banking and also initiated their mobile money services in order to provide financial solutions to those who don’t have accounts in their banks. HBL Express, UBL Omni etc. are such other non-teleco companies in this field.

Still milestone in any field cannot be achieved in a blink of an eye, every initiative needs time to grow especially in a country like Pakistan where technology advancement is interlinked with government willingness to be part of this race. Hence, there is dire need to resolve few of the key challenges faced by Pakistan in its way to financial inclusion:

  • Managing cash & liquidity by incentivizing agents
  • Creating the right cost and revenue model in which clients, Agents, Telcos and the bank benefit
  • Training & educating both the agents and public to build a homogenous network
  • Use effective marketing tools, tailored products, and partnerships to rapidly set up and grow the network

Overcoming these mentioned hurdles will get Pakistan to increased branchless bank accounts and will also prove that “Telco Agent Networks” are the best suited model for “Branchless Banking

Agents” in Pakistan. Pakistan has performed well in branchless banking filed as during the quarter Jul-Sep 2015, the branchless banking industry surpassed its own m-wallet projections by reaching 13.2 million accounts, due to an impressive 21.2% growth in a single quarter, reports State Bank of Pakistan. A total of 2.3 million accounts were opened during Jul-Sep 2015, out of which 2.2 million were level-0 accounts.

With the entry of new players, branchless banking services in Pakistan are heading towards growth and healthy competition. However, the success rate will still depend on the procedure that how the industry is overcoming issues like accounts activity level, agent quality and network, mass adoption of customers and their confidence on deposit-led solutions, and reliability of system & technology.

Technology boom is the next big thing going to happen soon in Pakistan as with growth in mobile broadband penetration rate (which is 19% as per GSMA Intelligence) and internet penetration,

Pakistan is already leading in the region. Hence, this will surely help in many interrelated things in overall growth of mobile money trend in Pakistan.