Mobile phones have been an every growing business in Pakistan, which affects demand and use for online banking. The cellular industry of Pakistan is regarded to be the best in Asia in terms of sales and has attracted many foreign cellular operators for investments.
China looks at the Pakistani market with hawk’s eye. China has an ever-growing market for phones and the best market for Chinese brands is Pakistan. It is estimated that of all the phones sold in the market, 60 percent of them are made in China. This also includes copy of original brands sold at a fraction of the original cost. Part of the reason for this growth has been population of 180 million people, which creates an automatic demand. In a country where people face daily challenges with inflation and high costs to meet ends meet, having an opportunity to purchase phones like iPhone or Samsung with the same features at fraction of the cost does not hurt anyone.
Teledensity is on a rise with lowering of prices of phones, currently at 75 percent based on latest updates by PTA as on March 2015. The country currently has 134 million mobile subscribers. The sector alone received USD 1,816M in investments in 2014. The mobile industry also faces challenges for illegal import of cheap phones readily available in the market. Secondly, sale of stolen phones within the market also takes share away from sale of new brands. High demand is witnessed for purchase of mobile phones with an estimated increase in imports by more than 50% through FY14. Reasons for an increase in demand for mobile imports consist of options available to buyers to pick and choose between brands. Prices of mobile phones with basic functionality continue to fall. With stiff competition between brands and Chinese imports, new phones are available ranging between Rs1,200 upward to Rs120,000. Mobile phones with ever-decreasing prices are providing features where customers can browse the Internet and use online banking services through GPRS.
Benefits of technology
With mobile banking, customers should not feel the need to visit a bank branch for all basic banking services which could be provided online. The market potential is wide as it is estimated only 25% of Pakistanis hold a bank accounts whereas 14% of the rural population and 67% of the urban population are banked. Rural penetration of banks continue to remain low with the complexity of running a physical branch and availability of skilled human resource, therefore, rural markets can provide wide potential. The only challenge with rural areas is that people are illiterate and would not use online banking through mobile phones. People residing in rural areas are un-banked, carry basic phones, which do not have functionality to browse the Internet. High teledensity and low penetration of banks to provide financial services can be filled through the use of mobile technology and alternate channels with an aim to shift from conventional banking to branchless and mobile technology to provide financial services. Telecom companies with penetration have the geographic reach which banks are capitalizing on.
Telenor through Easypaisa provides basic fund transfer services through Tameer Microfinance Bank whereas UBL with launch of UBL Omni in collaboration with various mobile operators provides basic banking services with an aim to bring the unbanked to a formal banking network. More recently Mobilink launched Mobicash and jumped in the band wagon of transferring cash through hand held devices.
In order to increase consumer awareness, marketing efforts continue on both outdoor, print and media to induce people to choose an alternate way of banking. However, since Pakistan literacy level is low, mobile services are usually availed through strong word of mouth, television advertisements and opinion driven from social settings for which consumer spend and marketing plays a pivotal role to keep the branch at top of the mind awareness. Those who earn a minimum wage and do not execute volumetric transactions drive comfort primarily through approaching a physical branch. Shifting small deposit holders to alternate channels through cellular technology is an ongoing challenge. Another challenge is the ongoing threat of mobile snatching which has restricted the use of expensive phones which have the functionality to carry out mobile banking transactions. Just for same purpose, people who frequently travel and are on the move choose to keep a basic phone which they do not use for online banking. People also avoid keeping expensive phones for the very risk of being snatched. Despite such threats and ongoing challenges, the market continues to grow with each bank putting effort to switch from conventional banking to alternate channels, which includes mobile banking. Mobile technology is most being utilized for utility bill payment, fund transfer and checking of account balances which includes basic mobile services. The services however offered are far behind those offered in western markets.
Capitalizing on the need for data communication when using mobile phones, mobile operators have increased data communication charges. High charges have hindered customers execute transactions or transfers which takes more online logging time in order to save on costs. Pakistan is predominantly cash led economy that needs to be first shifted to either the formal banking sector or to branchless banking where bank accounts are virtual and maintained online. Not only can banks approach wider audience, they will also save on costs without having to open new branches.
Freeing of international banking practises
Considering the rural penetration of the financial sector, mobile banking will allow those residing in rural areas to execute transactions through formal banking network where money in the legal system will flow through the financial sector thereby increasing the deposit base. When the banked are unbanked, this will increase transparency in the system. The only hindrance in the growth of mobile banking will be ongoing law and order issues where mobiles with compatible features to run branch banking are snatched along with cost of data communication to use such facility. At the parallel front, the industry has to develop and offer more services online than just basic banking, which may include applying for pay orders, cheque books, Credit Cards, ATM cards, supplementary cards, to name a few. Another problem is such where SBP does not allow transfer of funds online from a domestic account held at a bank in Pakistan to an international account held at the same bank if the same person holds both accounts. This shows the conservative nature of SBP, which has kept our banking sector safe but has also hindered financial innovation and full implementation of international banking practices in Pakistan. Despite all the given challenges, the industry will grow in double digits. The 3G/4G initiative has improved quality services, data and communication speed.