Branchless banking seen as test case in Pakistan

MANILA, Philippines - A World Bank report said that Pakistan is in the best position to launch branchless banking, and that it is in the envious position “to yield important lessons for the rest of the world.”

The report, entitled “Branchless banking in Pakistan: a laboratory for innovation” said that the next 12 months will be critical for the newly emerging branchless banking sector in Pakistan.

Branchless banking, or providing basic banking services to the under-banked or unbanked through mobile technology, in Pakistan is still in its embryo state, and that it was the best time to put in place the property regulatory and technical infrastructure.

The World Bank however warned that these promising experiments might fail or languish at small scale unless providers can overcome several challenges. These are: build customer confidence and increase use; reach commercial viability in the absence of donor funding or government subsidy; and, prevent fraud and abuse.

So far, the State Bank of Pakistan (SBP) has shown that it is committed to making branch-less banking in Pakistan commercially viable. The SBP is the country’s monetary regulator.

“If G2P (government-to-person) pilots using branchless banking channels are successful and taken to scale, they could provide an important additional revenue source for providers while sending a strong message to customers regarding government’s confidence in these services,” the report said.

Since 2008 when branchless banking regulation was first introduced in Pakistan, a variety of business models emerged that involves a wide range of players, including mobile network operators (MNOs), technology companies, and even a courier business.

Following the military action in the Swat valley in May 2009 the government of Pakistan and the World Food Programme worked issued automatic teller machine (ATM) cards that were used to make payments to 12,000 beneficiaries.

After the floods in August 2010, the government worked with four banks to issue Visa branded cards to nearly one million victims who had lost property.

Beneficiaries could withdraw money at ATMs or use their cards to purchase goods.

Two pilots use branch-less banking agents. The first uses a card with a barcode on the back that is read with a scanner.

The second uses mobile phones.

Four banks agreed to provide a combined total of 180,000 free mobiles to beneficiaries in order to be included in the pilot.