Mobile Money in Pakistan: From OTC to Accounts, Part 2

Despite the continued dominance of agent-assisted OTC transactions in Pakistan, it is not all doom and gloom. We note here four recent developments that just might trigger a rapid expansion in mobile account usage in 2015. 

1. National ID verification fees reduced by 78%. State Bank of Pakistan (SBP) and the National Database Registration Authority (NADRA) signed an agreement to reduce biometric verification fees for mobile account registration from about 45 US cents to 10 US cents (and 5 US cents if the account is for government benefits). Today, 97 percent of adults have a national identification card, which is the highest coverage rate among developing countries. NADRA's identity verification system is top notch and a major asset to the financial system in Pakistan but the high cost of NADRA verification has undermined the commercial viability of offering mobile accounts to poor customers. Providers have sought better pricing from NADRA for over a year. While we would have preferred a charge of 1 US cent for verification, the new 10 US cent price is undoubtedly a big improvement and eliminates one barrier for providers to open more accounts.
2. Finance Minister’s open invitation to industry to digitize government flows. Pakistan Finance Minister Ishaq Dar gave the keynote speech at the recent branchless banking conference in Islamabad, organized by the State Bank of Pakistan, DFID and CGAP, where he stressed the importance of government payment digitization to strengthen e-governance in Pakistan, committed to joining the United Nations’ Better than Cash Alliance, and launched an inter-ministerial council on financial inclusion, co-chaired by the SBP Governor and the Finance Minister.  In an unprecedented move, he invited the industry to help him and the government to digitize all flows. If more government payments in Pakistan were directed into accounts, it would go a long way to stimulating mobile account adoption.

A man uses a mobile device. Photo courtesy of IMTFI.

3. More agents equipped to open accounts. The Pakistan Telecoms Authority (PTA) completed a biometric pilot for SIM card registration for new SIM cards. In the wake of that pilot, mobile operators have started to roll out biometric SIM registration terminals across the country at retail locations. Mobile money providers, especially five of the eight that involve mobile network operators, hope to piggyback off this infrastructure by ensuring that mobile accounts can be opened using the same devices. This will dramatically increase the number of mobile money agents who can open accounts.
4. Aggressive pricing approaches by providers. To shift customers from OTC into accounts, Easypaisa has eliminated account registration, cash-in, money transfer, and cash-out fees on an experimental basis. Mobicash has followed with a similar “freemiun” pricing. This is also a very big step and we hope it jolts the rest of the market to pursue aggressive pricing and product experimentation to encourage mobile account adoption.

These recent policy, regulatory, and commercial developments make us optimistic that the industry is taking the steps needed for growth in mobile account usage and to bring the real benefits of digital finance to all Pakistanis in 2015.

This is the second in a two-part series by Kabir Kumar and Dan Radcliffe. Read part 1.