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Branchless banking in Pakistan

Published on 14th Jan, Edition 03, 2013


Pakistan is one of the fastest developing markets for branchless banking in the world where 90% of total bank branches are currently processing real time online banking services across the country. During the last five years average shows that 36 per cent of the transactions were routed through electronic channels depicting a 23 per cent average yearly growth as compared to 2 per cent average growth in paper based transactions. Branchless banking regulation was first introduced in Pakistan in April 2008, since then SBP has taken a constructive regulatory approach by providing clear guidance and also adjusted its regulations where ever required. The brick and mortar retail network of the entire financial industry of Pakistan stands at around 11,000 outlets while the branchless banking retail agents’ network has grown beyond 32,000 agents in a short span of 3 years. A variety of business models is emerging that involves a wide range of players whereas SBP has issued branchless banking licenses to a number of mobile network operators (MNOs), technology companies, and even a courier business.

There was a time when both public and private sector banks were announcing their massive branch expansion programs and taking pride in opening large number of branches in different cities simultaneously. Banks have travelled a long way since then. The merger and acquisition process saw some of them acquiring rural presence. With the advancement in technology and usage of computers they have changed the concept of branches as a business channels. Brick branches are substituted by computerized click branches. E-banking is being popularized and is increasingly being used for reaching out to the growing number of customers.

Installation of ATMs was the beginning of branchless banking. Initially, these gadgets housed in small boxes, were used as cash dispensing machines, accessible 24 hours throughout the year. Cost of the installation and its maintenance was very high; banks in Pakistan were slow in investing in them. But when the foreign banks started installing them in many of their metropolitan centers, domestic banks could not remain comfortable without the new facility. Foreign banks, having the experience of managing ATMs for quite some time, were installing them in cities, where they did not have branches. For them ATMs were substitutes for regular branches, as the licenses for the latter were not readily available. The new generation banks copied them and started installing more ATMs than opening branches. A majority of ATMs are now on off-site locations. Old private sector banks and the public sector banks followed this pattern later.

With the ATMs equipped to many other operations besides cash dispensation, they are emerging as a substitute for the traditional type of bank branches. Crediting deposits by cash or by cheque, depositing cheques or drafts for collection, making payment of utility bills, or repaying the credit card bills are some of functions ATMs can handle at present.

As a result of SBP regulations on branchless banking, country has seen emergence of four mobile service providers providing mobile banking which not only advances new frontiers for financial inclusion but also pushes the expansion in the payment ecosystem of the country. A more recent e-banking development in Pakistan is wireless internet applications of banking i.e. mobile banking. With the combination of two most recent technological advancements – internet and mobile phone – has emerged. In order for users to access their accounts, they need a mobile device and network connectivity.

Therefore, sitting in front of a computer is not a requirement anymore; accessing accounts can occur anywhere any time. Just to log on to a bank’s website using a cell phone, such as viewing account balances, making transfers between accounts, or paying bills. This can be conducted through the internet browser on the phone, through a program downloaded from the bank, or by text-message (SMS). Mobile banking removes space and time limitations from banking activities such as checking account balances, or transferring money from one account to another.


Mobile banking is a new technology in Pakistan. It is said that while mobile banking and more specifically SMS-based mobile banking applications is becoming popular in Pakistan yet it is not widely used. Most people heard about it but don’t have a clear idea. Many people heard about mobile banking but they yet have not felt that they should use it as they are happy to use traditional banking system. Mobile banking is a real time on-line banking. With the introduction of mobile banking in Pakistan, the service providers are investing heavily in hiring, training and branding their agents. It will make access to banking and advanced payment, transactions at affordable cost. People will not have to wait by standing in a long line which is happen in traditional banking system.

Governor SBP gave interesting statistics in a recent speech, Telenor’s Easy Paisa service has crossed over 600,000 utility bill payments and moved nearly to PKR 1 billion on Money Transfer whereas MCB was recently nominated among the top four best mobile money services category for Global GSMA Mobile Awards.

According to the Governor of SBP, mobile phone subscribers are almost 120m, while banking accounts stand at 32m whereas the number of borrowers is only 5.7m, which indicates that there exists a large financially-excluded market. One can trust mobile banking as traditional banking system. It has a secured pin code which is known by the user only, and also has a check digit without it no one can deposit money. But in Pakistan traditional branch-based banking remains the most widely adopted method of conducting banking transaction. Poor people are often not considered viable customers by the formal financial sector as their transaction sizes are small, and many live in remote areas beyond the reach of banks branch networks. Informal banking services such as microfinance and village savings and loan associations remain limited in their reach. So, mobile banking system can bring poor people into banking system. According to the World Bank study, only 12% of the adult population of Pakistan has access to formal banking services.

Developing and under-developed economies all over the globe are looking for new modes and means to contain poverty and include their citizens in the financial system. SBP is trying its best to develop the branchless banking market by making regulations, facilitating market players and providing guidance. The concept of branchless banking will be instrumental in bringing maximum number of people of Pakistan into the banking network and later in the tax net.

Branchless banking has great potential to reach vast numbers of low-income, unbanked people at affordable prices with a wide range of products to meet their complex financial needs. It is required that branchless banking executes transactions in a transparent manner, maintain best possible audit controls, smooth and uninterrupted availability of mobile network and most importantly such systems should be in place where no one can take advantage of innocence of customers. It is also required that service providers give confidence to their existing and prospective customers on their system which they have implemented, while keeping in mind, one single fraudulent transaction will shake the confidence of the poor people.


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