Pakistan is the most vibrant market for sale and purchase of mobile connections and cellular phones. The industry is regarded to be the best in Asia in terms of sales. Major cellular companies have eyed Pakistan for increase in sales in double digits; part of the reason being population of 180 million people which creates an automatic demand. In recent times, high demand is witnessed for purchase of mobile phones. Core reason for this increase in demand for mobile imports consists 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 Rs1,000 upward to Rs120,000. Mobile companies looking at the price point and purchasing power of a general Pakistani consumer are particularly interested to develop a market for phones, which can retail between Rs1,000 to Rs5,000. Chinese phones in this regard have captured a wide market introducing cheaper models of expensive phones. Since new models are being announced monthly, consumers tend to switch between phones as the technology and features offered improved at a reducing price due to market competition. Considering the population of Pakistan, Teledensity is 63.6% with an estimated 116 million people carrying a mobile phone as on July 2015.
Banks are making an effort to tap into the market and exploit the use of cellular phones offering Branchless and Mobile Banking services. The idea is that consumers 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 continues to remain low with the complexity of running a physical branch and availability of skilled human resource. Banks on the other hand would only establish and keep a branch provide deposit targets are met and the branch assists the overall bank in generating required revenues. In addition to such challenges, which may extend to both urban and rural areas, overall cost of operating a branch is expensive and may not be effective in the long run leading to relocation of the branch or closure. High teledensity and low penetration of banks to provide financial services, this gap is being bridged though 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 can capitalize on. Following the Telco based model for providing banking services, 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.
As advertisements increase and marketing budgets become key for developing a consumer base, more and more consumers who are aware of banking products and services are buying phones which support mobile banking. 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 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 these small deposit holders to alternate channels of banking through cellular technology is a challenge. Another challenge which can hamper the growth of mobile banking is the ongoing threat of mobile snatching, which restraints the use of expensive phones enabling the use of mobile banking.
Despite the threats and ongoing challenges, the market continues to grow with each bank putting effort to switch from conventional banking to alternate channels. One such objection of the use of mobile banking apart from the comfort or law and order situation is the charge, through at par with competing banks, is high both through services offered by mobile operators providing internet, data communication and GPRS services coupled with those charges by financial institutions. Mobile technology is most being utilized for utility bill payment, fund transfer and checking of account balances, which account for only basic mobile services. It is often argued that the service currently offered is simply following the Western model of banking being implemented in Pakistan rather than focus on innovation which maybe replicated all over the world.
The main advantage of mobile banking is ease and convenience on part of the consumers whereas being cost effective on part of the banks. Consumers are actively being pushed with inbound phone calls to carry basis banking through the use of mobile banking with an aim to reduce the consumer traffic physically approaching the branch. Mobile banking is the next way forward to provide consumers with banking services without ever having to approach the branch. With such innovation and increased use of mobile phones, there is high competition between banks extending mobile banking services on the basis of services and price.
SBP before allowing the Telco let model issued guidelines of how transactions shall be carried out based on allocated slabs. These slabs only allow basic facility of funds transfer primarily targeted to low income groups and discourage any form of money laundering.
Pakistan is predominantly cash led economy, which needs to be shifted into the financial sector to increase transparency in transactions. As on objective of SBP is to assist both the consumers and financials institutions towards financial inclusion and provide ease through which banking services are offered to the consumers.
The idea for banks is to build a stronger consumer base without having to open a new branch is only possible through alternate banking channels. 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. Alternate channels with success witnessed with Omni and Easypaisa are examples of how country wide penetration is possible if exploited for social benefit and long term profitability. For the alternate channel to be successful going forward, financial institutions, mobile telecom operators, SBP and Pakistan Telecommunication Authority (PTA) collectively have to work together to provide a platform where mobile based transactions are secure leading to consumer comfort along with marketing and sales efforts to attract new customers yet shift the current customers to mobile and alternate mode of banking. Pakistan with high penetration and use of cellular technology and opportunity to bank the unbanked may assist banks in reducing the number of branches, thereby reducing costs and provide superior services through the use of technology.