Branch­less bank­ing growth

The Pak Banker - - EDITORIAL -

Un­der the di­rec­tion of the State Bank, the branch­less bank­ing sec­tor has made good progress over the last few years, ex­pand­ing the scope and reach of fi­nan­cial in­clu­sion in the coun­try. Last week SBP took some new de­ci­sions to stream­line Branch­less Bank­ing Reg­u­la­tions in line with the best in­ter­na­tional BB prac­tices. The new rules de­fine the scope of pow­ers vested in the boards of direc­tors of banks who have been tasked with pro­vid­ing strate­gic di­rec­tion and main­tain­ing over­sight while se­nior man­age­ment would be re­quired to set up nec­es­sary in­ter­nal con­trols and en­sure ad­her­ence to laws and reg­u­la­tions. The scope of al­ter­na­tive de­liv­ery chan­nels and tech­nolo­gies has been ex­panded to in­clude 3G and 4G spec­trum, POS ter­mi­nals, in­ter­net bank­ing and ATM/debit cards for pro­vid­ing better branch­less bank­ing ser­vices. SBP has also in­tro­duced in­ter­bank funds trans­fer ser­vice with or with­out bio­met­ric sys­tem.

The ob­jec­tive be­hind the re­vised rules is to reach a larger chunk of pop­u­la­tion that is not yet cov­ered by ex­ist­ing fi­nan­cial ser­vices. It may be re­called here that SBP has de­vel­oped a Na­tional Fi­nan­cial In­clu­sion Strat­egy which was for­mally launched in May, 2015 to push for­ward re­forms to achieve max­i­mum outreach to peo­ple at the ear­li­est pos­si­ble. In the re­vised reg­u­la­tions, the daily, monthly and yearly trans­ac­tion lim­its have been raised for both level 0 and level 1 BB ac­counts. It is ex­pected that this would greatly help in­crease ac­count ac­tiv­ity, be­cause at present only 41 per­cent of the 15.3 mil­lion BB ac­counts are ac­tive. In or­der to mo­ti­vate peo­ple to open m-wal­lets in­stead of trans­act­ing over-the-counter (OTC), the funds trans­fer lim­its have also been sig­nif­i­cantly ex­panded for those users who will be bio­met­ri­cally ver­i­fied. As per the re­vised reg­u­la­tions, from July 1, 2017, only those agents who have bio­met­ric ma­chines will be able to per­form OTC trans­ac­tions for their cus­tomers .

The lat­est fig­ures show that 34 per­cent of cus­tomer trans­ac­tions were ini­ti­ated via m-wal­lets in Oct-Dec 2015. This com­pares favourably with an in­crease of only 14 per­cent in the same quar­ter of the pre­vi­ous year. It is es­ti­mated that the re­vised rules would lead to fur­ther im­prove­ment in the m-wal­let-to-OTC trans­ac­tion ra­tio, which stood at 52 per­cent in the Oct-Dec 2015 quar­ter. The new reg­u­la­tions are de­signed to greatly ex­pand the scope of branch­less bank­ing. Pre­vi­ously, agent kiosks and mo­bile wal­lets were run on cel­lu­lar (2G) tech­nol­ogy, but branch­less bank­ing will now also be served by In­ter­net bank­ing.

With­out doubt, the new SBP reg­u­la­tions will have a pos­i­tive im­pact on the Na­tional Fi­nan­cial In­clu­sion Strat­egy which seeks to ex­pand the outreach of bank­ing ser­vices to all seg­ments of so­ci­ety. At present branch­less bank­ing is the most ef­fec­tive tool for achiev­ing the tar­gets set in NFIS which en­vis­age a growth of 50 per­cent in bank ac­counts held by the adult pop­u­la­tion by the year 2020. The growth in branch­less bank­ing so far has been very en­cour­ag­ing in the ur­ban areas. The num­ber of BB ac­counts wit­nessed a three­fold growth, ris­ing from 5.4 mil­lion in De­cem­ber, 2014 to 15.3 mil­lion in De­cem­ber, 2015. On an an­nual ba­sis, the num­ber of trans­ac­tions grew from 278 mil­lion (Jan-De­cem­ber, 2014) to 374 mil­lion (Jan­uary-De­cem­ber, 2015), show­ing an in­crease of 35 per­cent while av­er­age de­posits in BB ac­counts reached Rs 8.8 bil­lion in De­cem­ber, 2015 from Rs 6.6 bil­lion in De­cem­ber, 2014. How­ever, rural areas of the coun­try are still largely de­prived of BB ser­vices which calls for spe­cial at­ten­tion of the State Bank.

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