Despite a robust mobile money market, six years after the launch of the first branchless banking product, the number of active, registered mobile money accounts in Pakistan stands at only 0.4% of the population, according to the Financial Inclusion Insights study. The percentage of users of mobile money products, however, is 7%, which means that the majority of the customers prefer to transact over-the-counter via an agent. However, true financial inclusion only results when customers open their own mobile money accounts. It is only then that customers can avail of more advanced financial products such as insurance, savings, and credit. Hence, mobile money accounts are an important indicator for financial inclusion.
One of the principal barriers to mobile money accounts was the stringent Know-Your-Customer (KYC) requirements as set forth by the Central Bank in its branchless banking regulations. However, the recent government-mandated SIM biometric verification drive has resulted in very powerful KYC data: every mobile phone owner has now met the requirements for a mobile money account. If the regulators allow this data to be re-used, it could result in a boon for mobile money account registration drives.
Photo Credit: Ahsan-ul-Haque Helal
What has Easypaisa done about this?
A tension already exists between the lucrative over-the-counter (OTC) model and the growing realization that future revenue opportunities lie in mobile wallets. Acting on this realization, in September 2014, Easypaisa launched an experimental P2P campaign that eliminated all fees related to money transfers (P2P) between Easypaisa account customers and cash-out transactions. Aside from the daily transaction cap or 50,000 rupees ($500) for Easypaisa accounts with minimal KYC requirements, this campaign enables customers to make unlimited and free P2P transfers. Free cash-ins and cash-outs, however, are limited to 15 and five transactions per month, respectively.
What has been the progress so far?
Attributing the results in the market to any one initiative is never an easy task but this is especially true in the fast-moving world of wireless telecom services where multiple promotions with diverse goals can run at the same time. Additionally, the SIM biometric verification drive has provided a separate boost to mobile money account registration.
Nevertheless, Easypaisa tracks three key indicators they believe indicate the impact of the free P2P campaign on account usage. These are: number of active accounts, number of transactions, and the ratio of active to total accounts.
The number of ‘active’ mobile money accounts, defined by usage in the last 30 days, has grown by 160% since the campaign launched while the number of P2P transactions has increased by almost 2500% The ratio of active mobile money accounts to total mobile money accounts is an important statistic that often gets overlooked. The higher the ratio, the more likely it is that the customer is real (always important to financial inclusion goals), and that this customer is engaged in the mobile money account experience. Easypaisa has seen this ratio go up from 9% to 12% during the campaign.
Another indicator that could help illustrate the profile of the mobile money account user versus those who continue to utilize OTC services is the average P2P transaction size. The average ticket size in the P2P campaign is approximately 25% smaller than that in the OTC transactions. This has important implications for initiatives that aim to bring the bottom of the pyramid income earners, who generally send smaller ticket sizes, into the formal banking sector.
An employee leading this campaign at Easypaisa said in an interview that the uptick in mobile money account registration and an almost exponential growth in P2P transactions signify an encouraging trend in customers’ engagement with mobile money accounts. However, there is continued pressure to realize a minimum number of one million P2P transactions per month as an indicator of sustainable success. Easypaisa plans to continue this experiment until they have reached this critical mass required for network effects to fully take over and sustain the momentum of account registering.
What does CGAP conclude?
While the free P2P campaign was truly unique in the Pakistani market and demonstrates how Easypaisa is thinking ahead, growing mobile money accounts in an environment as cut throat as Pakistan’s branchless banking market was always going to be a tough slog. As a leader in the market, they have perhaps a little more latitude in such experiments even though the pressure to show positive results is always present. And competing marketing efforts can distort how much can be attributed directly to this campaign to grow wallets. Encouraging customers to replace OTC transactions with account to account transactions by ensuring that it is almost completely free is only one of the ways in which Pakistan can move towards universal financial inclusion. Other promising initiatives such as reduced National Database and Registration Authority (NADRA) verification fee and the government’s willingness to digitize it’s incoming (P2G) and outgoing (G2P) payment flows will also go far towards reaching this goal.
Great blog Sabahat,The free P2P transactions is a great strategy to introduce mobile wallets in a traditionally OTC market like Pakistan. Other markets that are contemplating transitioning like Zambia and Senegal may want to borrow a leaf. This strategy has been used by leading providers in Tanzania and worked really well. However the free service is a temporary campaign and providers need to have a an exit plan since this may lead to drastic drop in transaction volumes.