Banking sector of Pakistan is
demonstrating satisfactory expansion providing modern facilities like e-banking,
branchless banking, micro finance sector, installation of more automated teller
machines (ATMs) and increased percentage of real time online branches (RTOBs).
Also growth of conventional banking services by increased number of physical
branches. Although these formal banking solutions are showing rapid growth yet
only 16 million account holders in Pakistan comprise only 9% of the population.
General reasons faced by public to access formal banking channels are distant
branches, complex procedures while opening accounts, lack of documents required
by banks, trust issues and also high living cost that depletes the probability
of savings. To utilize the full potential of financial markets state bank of
Pakistan (SBP) is playing key role resolving these issues. It has been made
mandatory by SBP licensing policy for banks that 20% of the branches will be
planned for rural and distant areas.
Comparing the stats presented in recent reports by SBP the banking
infrastructure has grown remarkably. According to quarterly review of fiscal
year 2011 FY11Q2, the ATMs infrastructure was added with 172 machines bringing
the total to 4,734 from 4,217 in FY10Q2. Whereas 309 branches were upgraded to
ROTBs accounting a total of 7,036 ROTBs from the previous value of 6,587 ROTBs
stated in FY10Q2. This growth trend followed by the latest reports has hit
record numbers with 6,232 ATMs and 9,869 ROTBs now operational according to
quarterly review of fiscal year 2013 FY13Q2. Thus 94% of the bank branches are
now offering RTOB services out of total 10,523 branches.
SBP also sees e-banking as relatively simple and save method to assist unbanked
population. E-banking umbrella covers major services including internet banking,
mobile banking, ATMs network, point of sales (POS), and ROTBs. There are 120
million connections provided by cellular companies of Pakistan which surely
cover a major portion of unbanked population. Mobile banking provides services
like bill payments, mobile top-ups and easy transactions. Electronic money
transfers through mobiles phone services provide better security and convenience
over cash based transactions and extends its access to unbanked low income
individuals as well. These facilities attract banking institutions because these
are cost effective as they reduce the costs incurred by physical branches and
hired employees. The issuance of ATM cards also removes the hassles of counter
based withdrawals and is also available 24/7, these facilities can be further
modernized as practiced in countries like China where money deposits are
possible through ATMs. Further expansions to mobile banking can bring new loan
schemes, insurance schemes or similar products.
Another area that has seen tremendous growth is the branchless banking, a very
attractive way of facilitating the unbanked population. According to stats our
country has the largest branchless network of Asia with about 42,000 agents
working. These services provide facility to open current or saving accounts,
however 87% of the transactions through this channel is over the counter where
money is directly handed over to the agent and the transaction is made to the
recipient rather than through the account. The reasons being people don’t see
the need to open an account or nobody in their family possesses an account and a
large percentage of population is still unaware of the branchless banking. Also
to open an account at branchless terminal agent needs to send photgraph and NIC
copy to banking officials for verification. This process requires agents to be
equipped with camera, database access and internet facility, thus the process
become costly so a small percentage of such agents is authorized to register a
new account. To resolve this issue a new term is introduced ‘shared agents’
providing services to multiple providers at the same time. Branchless banking
grows significantly and there are now 2.1 million registered accounts. During
the Oct-Dec 2012 quarter according to SBP quarterly review 35 million
transactions of worth Rs.151 billion have been carried out through branchless
banking.
Despite the attraction and ease provided by these solutions to unbanked
population, such services are still not able to draw customers up to the
potential seen by analysts. There are multiple reasons hindering utility of
these services including low literacy rate, unawareness, lack of interest and
slow penetration rate of internet services. However on the brighter side growth
in these services will eventually lead a smooth transition of major percentage
of unbanked population availing these services. With proper awareness programs
and more flexible procedures the margins of unbanked population and the ones
having access to formal banking channels will be narrowed down boosting the
financial industry as well as country’s economy. Finally with 65% of the country
population below 25 years bringing latest technology and innovative banking
methods is always a welcome sign and the adaptability trend is definitely going
to rise.