The State Bank of Pakistan has recently launched the Payment Systems Review report for FY22. One of the highlights of the report was the exponential growth on the mobile banking front. As per the report, “Around 387 million transactions amounting to Rs11.9 trillion were conducted using mobile banking showing growth of 100% by volume and 141% by value.”
Reliance on the internet and mobile banking channel has increased significantly in the past few years. “During FY22, Banks and MFBs processed 1,611.8 million e-banking transactions amounting to Rs. 137.9 trillion in value. An increase of 36.2% by volume and 59.4% by value on a YoY basis. Real-Time Online Branches (RTOB) transactions contribution was the largest in total e-banking transactions value with a share of 76.4% followed by Mobile Banking 8.6% and Internet Banking 7.4%,” SBP report further added.
The significant growth in the adoption can be attributed to rising mobile broadband and smartphone penetration among the masses. As per PTA’s telecom indicators, the share of smartphones among total mobile devices on Pakistani networks has risen to 55 percent. Further, the mobile broadband (3G/4G) penetration has reached 54 percent.
As per experts, those among the public that have adapted to digital payments, have realized the advantages of digital transactions outweigh those of cash in terms of convenience, security, and ease. Hence, there has been an uptick in overall volumes and the size of average transactions.
Further, the mobile banking industry has developed multiple use cases, catering to various needs of the customers including fund transfers, bill payments, education fee payments, merchant payments, airtime recharge etc. This can explain the reason for the surge in throughput.
The fact that now, many players are going for open API systems with mini-apps integrated into their platforms, gives them access to cater to a wider segment of the audience, resulting in a steady increase of average transactions to other digital players as well.
However, to achieve further growth in mobile banking, it is necessary to make digital payments cheaper than or more convenient than cash. From an ecosystem perspective, the big challenge that is faced today is that the country thrives on a robust cash economy. Therefore, most of Pakistan’s retailers still insist on transacting in cash only.
As per experts, there should be laws in place that mandate every retail outfit to accept digital payments in addition to cash. Moreover, tax incentives should also be offered on a broader level to those who transact digitally rather than in cash like the tax incentive being offered by the Punjab government at restaurants on credit or debit cards. The idea should be to bring more digital payment use cases into the digital realm.
Yet, what the SBP report fails to highlight is the staggering gender gap that still exists when it comes to financial inclusion. As per the World Bank’s Findex report 2021, “Women are often excluded from formal banking services because they lack official forms of identification, do not own a mobile phone or other forms of technology, and have the lower financial capability.”
“In South Asia, for example, women are 22 percentage points less likely than men to have a mobile phone. India and Bangladesh are near the South Asian average, with gaps in mobile ownership of 19 and 20 percentage points, respectively. In Pakistan, women are half as likely as men to have a mobile phone.” The report further added.
Therefore, to achieve sustained growth on the mobile money front, it is pivotal for policymakers to encourage financial inclusion and develop use cases for the masses.
Reliance on the internet and mobile banking channel has increased significantly in the past few years. “During FY22, Banks and MFBs processed 1,611.8 million e-banking transactions amounting to Rs. 137.9 trillion in value. An increase of 36.2% by volume and 59.4% by value on a YoY basis. Real-Time Online Branches (RTOB) transactions contribution was the largest in total e-banking transactions value with a share of 76.4% followed by Mobile Banking 8.6% and Internet Banking 7.4%,” SBP report further added.
The significant growth in the adoption can be attributed to rising mobile broadband and smartphone penetration among the masses. As per PTA’s telecom indicators, the share of smartphones among total mobile devices on Pakistani networks has risen to 55 percent. Further, the mobile broadband (3G/4G) penetration has reached 54 percent.
As per experts, those among the public that have adapted to digital payments, have realized the advantages of digital transactions outweigh those of cash in terms of convenience, security, and ease. Hence, there has been an uptick in overall volumes and the size of average transactions.
What the SBP report fails to highlight is the staggering gender gap that still exists when it comes to financial inclusion. As per the World Bank’s Findex report 2021, “Women are often excluded from formal banking services because they lack official forms of identification, do not own a mobile phone or other forms of technology, and have the lower financial capability.”
Further, the mobile banking industry has developed multiple use cases, catering to various needs of the customers including fund transfers, bill payments, education fee payments, merchant payments, airtime recharge etc. This can explain the reason for the surge in throughput.
The fact that now, many players are going for open API systems with mini-apps integrated into their platforms, gives them access to cater to a wider segment of the audience, resulting in a steady increase of average transactions to other digital players as well.
However, to achieve further growth in mobile banking, it is necessary to make digital payments cheaper than or more convenient than cash. From an ecosystem perspective, the big challenge that is faced today is that the country thrives on a robust cash economy. Therefore, most of Pakistan’s retailers still insist on transacting in cash only.
As per experts, there should be laws in place that mandate every retail outfit to accept digital payments in addition to cash. Moreover, tax incentives should also be offered on a broader level to those who transact digitally rather than in cash like the tax incentive being offered by the Punjab government at restaurants on credit or debit cards. The idea should be to bring more digital payment use cases into the digital realm.
Yet, what the SBP report fails to highlight is the staggering gender gap that still exists when it comes to financial inclusion. As per the World Bank’s Findex report 2021, “Women are often excluded from formal banking services because they lack official forms of identification, do not own a mobile phone or other forms of technology, and have the lower financial capability.”
“In South Asia, for example, women are 22 percentage points less likely than men to have a mobile phone. India and Bangladesh are near the South Asian average, with gaps in mobile ownership of 19 and 20 percentage points, respectively. In Pakistan, women are half as likely as men to have a mobile phone.” The report further added.
Therefore, to achieve sustained growth on the mobile money front, it is pivotal for policymakers to encourage financial inclusion and develop use cases for the masses.