Dateline: Wednesday, March 7, 2012

The second event in the P@SHA Speaker Series 2012 was held in Karachi on March 7. The talk was centered on the concept of branchless banking and the opportunities that exist for our member companies.

Ammar Bin Mujeeb (CIO Dubai Islamic Bank) and Habib Ali (Head of Branchless Banking Tameer Bank) were kind enough to grace us with their presence and valuable insights.

Habib Ali is Executive Director Central Operations & Head of Branchless Banking at Tameer Microfinance Bank Limited. He currently serves on Tameer’s extended Management Committee and is a member of Easypaisa Management committee.

Habib joined Tameer in 2009 and prior to Tameer he worked with Citibank Pakistan for 16 years in Cash, Trade, FI and Treasury Operations. Habib holds bachelor degree from Karachi University. With 19 years of experience in the banking sector, he proved to be a great knowledge source at the session.

Our second speaker, Ammar Bin Mujeeb has more than 14 years of national and international experience in systems implementation and banking industry under his belt. As the CIO of Dubai Islamic Bank he has implemented the complete IT infrastructure for the bank, and has been delivering competently at this position for the last three years.

Prior to this, he has worked for Reckitt Benckiser Pakistan at Country IS Manager, Saudi Pak Bank as Head of e-Banking, and Unisys (Pakistan and Dubai) as Banking System Consultant.

After a few opening words by Jehan Ara (President, P@SHA) and Jawwad Farid (Founder, Fourquants) who happened to be moderating the session, Habib led the audience through the current standing of microfinance and branchless banking in Pakistan.

He pointed out that Pakistan still has a vast majority classified as unbanked customers, people who want to, or can use the banking services, but are unable to do so for various reasons. Only 14% of Pakistan is currently classified as having access to banking services. In the absence of a credible transaction mechanism this bulk of unbanked crowd resorts to outdated mediums (which are slow, susceptible to frauds, lack documentation and in instances are illegal).

Branchless Banking (BB) is trying to fill this gap, the total number of conventional bank branches (CB) in Pakistan are around 9,000 whereas EasyPaisa has 16,000 agents nationwide, UBL Omni another player in the BB sector contributes 5000 agents; all of which virtually takes the banking network from 9,000 to 30,000 branches.

EasyPaisa already has more than 750,000 account holders and is processing 3 million transactions every month which translates to a current run rate of just under one billion US dollars annually. BB does not only hold the growth potential but has strong business feasibility too. Some of the other payments processed include G2B payments, cash-in cash-out, salary disbursement, pension disbursement, loan repayment, ISP payments, ATM connectors and  prize bonds to be added soon.

For international remittances SBP has allowed only Tameer Bank Branches and Telenor Service Centers to facilitate the transactions for now where the average transaction is worth Rs. 40,000. However EasyPaisa is in negotiations with the central bank to permit 1,000 of its agents where EasyPaisa biometric machines are deployed for processing PRIs.

He also commented on mPesa a very successful mobile banking service launched by Safaricom in Kenya where it has been able to get 7 million account holders in a country of just 40 million population.

Ammar bin Mujeeb discussed the reasons why BB has sky rocketed in Pakistan, with mobile phone penetration at 61%* it has reached more users faster than anticipated. The other aspect is its acceptability, for example of all the DIB account holders less than 10% register for internet banking whereas SMS alerts remain the popular choice. Remember DIB is a new/ modern bank in Pakistan with most of its customers using internet.

Sourcing mobile banking solutions from international companies such as Fundamo and Sybase are costing more than what the local market can offer, said Ammar bin Mujeeb. Local companies of great repute have had to consider these solutions of mobile banking to compliment their e-banking offerings.

This brought the discussion to the inevitable need for a common mobile banking switch which enables interoperability between different services. He mentioned that SBP and PTA are already working on TPS licensing (Third-party Service Provider) in an effort to establish interoperability similar to ATM networks.

Some of the takeaways from the session were

• EasyPaisa is starting internet banking services by the third quarter of 2012
• In response to a question regarding the possibility of BB cannibalizing conventional banking, the speakers said that they do not see BB as a threat primarily because it is targeting the unbanked masses where CB has not been able to reach and areas such as internet banking hold tremendous opportunities for CBs. BB is a serious threat to the old prevalent payment mechanisms.
• With the cost of smart phones plummeting and their increased usage, the speakers believe that mobile financial applications are an area in which P@SHA member companies should be working on. Banks such as DIB are willing to purchase cost effective solutions from the local market
• On the hardware side the BB growth will translate into the increased need for better POS & biometric devices and the long awaited introduction of off-premise ATMs ( UL 291 or similar)
• The demand for Pakistani expertise both in hardware and software can be created in new BB markets such as Nigeria replicating the lessons learnt here (with a population of 170 million it is among the most lucrative markets where PagaTech a similar service has been recently introduced)
• Unfortunately BB lacks comprehensive legislation and legal supervision, something for the entities in Islamabad to ponder upon.

The event was wrapped up with a networking session over hi-tea.  P@SHA hopes to continue holding such events, identify synergies and bridge the gap between the customers and P@SHA member companies representing the IT and ITES sector.

*Source: PTA