According to the most recent numbers from the State Bank of Pakistan, the performance of Pakistan’s branchless banking (BB) sector has been mixed so far in 2022, after posting strong results in 2021. (SBP). Could it be that the BB industry as a whole has felt the effects of the recession? Or, are there industry-specific factors involved? So, let’s find out.
There were 43 million functional BB accounts (or “m-wallets”) as of the end of June 2022, a drop of 6% from the previous year’s tally in the same month. (An “active account” is one that has been used at least once within the past 180 days or was created within that time frame.) Despite the fact that the overall number of accounts climbed by about 20% to 88.5 million during this time, this trend persisted.
When compared to keeping new customers engaged, it’s clear that BB service providers are more successful in attracting new consumers. That’s worrisome since it likely reflects the need to rapidly acquire new users. As a result, the proportion of active accounts to total accounts dropped precipitously from 61 percent at the end of June 2021 to 49 percent at the end of June 2022. We can’t say that this huge drop bodes well for the industry’s long-term health.
The transactional front appeared more promising. The number of transactions reached 729 million and the value of transactions reached Rs2.94 trillion by the end of the fiscal quarter ending June 30, 2022, representing annual increases of 17% and 32%, respectively. Accordingly, when isolating customer-focused transactions from the overall mix, the average transaction size increased by 21 percent year over year to Rs3,257 in the quarter under review.
Were BB transaction volumes also impacted by the increase in consumer prices? Moving to yearly data, estimates based on SBP data show that during the complete FY22, the BB transactions totaled 2.7 billion in number and Rs10.6 trillion in value, consequently expanding by 27 percent year-on-year and 59 percent year-on-year. Again, just as in the latest quarterly data, it looks that value growth is nearly twice as fast as volume increase. It is unclear whether this expansion continued into the flood-affected July-September 2022 quarter.
To sum up, it seems that existing users may have boosted their payments/transfers via the BB channel, while new users may find it difficult to join and remain active. Considering that macroeconomic headwinds have not yet slowed and floods have impacted rural markets and supply chains, BB service providers have a huge task to improve their outreach and shield their transaction flows from adverse consequences. Let’s see what the future weeks and months have in store for this digital payment avenue.