EasyPaisa is a mobile phone based account offering quick and easy payment services across Pakistan. Launched in 2009, it provides mobile phone wallet accounts for registered users of the Telenor Pakistan mobile phone service. EasyPaisa is the third largest mobile money deployment in the world and serves 7.4 million unique users. Of these customers, 2.4 million are wallet users and another 5 million are unique over-the-counter customers. EasyPaisa users can pay bills, transfer money, buy airtime, and receive government benefits. EasyPaisa anents also offer OTC (over-the-counter) remittance services, and bill payments, where customers can transfer money without opening a mobile wallet account.
Tameer Bank and Telenor, Pakistan launched the EasyPaisa service in 2009. When we began, we predicted international remittances would have the most pick-up from customers. We also assumed that we would reach a reasonable volume of over-the-counter (OTC) services for utility bill payments because there was a large service gap for customers and we expected to easily beat out other banks. We did not expect domestic person-to-person transfers to be very significant. We knew that there would be some customers who did not have a Telenor mobile subscription or a Tameer Bank account who might use an OTC solution from EasyPaisa, but we expected this to be a relatively small segment of customers.
The evolution of the EasyPaisa so far has generated quite different and unexpected results. The service of OTC remittances is the dominant activity for EasyPaisa as well as in Pakistan’s overall mobile phone banking services industry, which processed forty-one million transactions, worth $1.6 billion in the first quarter of 2013 (State Bank of Pakistan). Only 2.4 million customers have mobile phone wallets equipped with EasyPaisa accounts, though we have collected the unique names of another 5 million unique users who use EasyPaisa for OTC payments. We have found the process of shifting users from OTC transactions to EasyPaisa mobile wallets to be slow.
Why do customers like OTC services?
First, we have to recognize that OTC is a real solution for a particular segment of the unbanked and is there to stay. Regardless of how convenient and attractive we make mobile wallets, there will always be a segment of customers who will prefer the OTC solution because they find it easier to rely on the agent to send money and they prefer not to open an account for themselves. They may be particularly uncomfortable with phones or technology, for example. We need to accept this and determine how to retain profitability because the OTC-only segment will increasingly face competition as new entrants grow and pressure our margins. Beyond maintaining our OTC market, our current aim is to data mine our OTC customers (five million unique customers) and transition some of them over to mobile wallets. We believe there is rich data on their socioeconomic status, behaviors and preferences which if we understand better will allow us to segment and better target. Using this information we can build a stronger base for customer retention and the ability to begin to cross-sell other financial services.
Why is the migration from OTC to mobile wallet so slow?
The transition to e-wallets is slow for two principal reasons. Although the State Bank of Pakistan is very progressive in creating branchless banking regulations that enable innovation, it has yet to approve regulations which will allow the smallest entry level branchless banking account to be commercially viable at each and every EasyPaisa agent location (currently we have more than 30,000). Presently the “know your customer” (KYC) requirements for account opening, are very expensive for EasyPaisa’s business.
Secondly, we at EasyPaisa, along with other players in our industry, have yet to build an ecosystem of providers and services that acts as the tipping point for mass adoption of e-wallets. Currently, there are relatively few merchants who accept payments or allow customers to store value through e-wallets, so the use of EasyPaisa is still limited.
We have taken early steps to expand the offerings by creating a savings account with insurance features, and we will soon launch a credit product tied to mobile wallet use. However we are still in the early stages and more applications for mobile wallets will need to be developed. Within three years I see a very different scenario. As the ecosystem of providers and services – including embedded savings, insurance, and credit, – expands, I see e-wallets becoming EasyPaisa’s dominant service offering. At the same time, OTC transactions will remain a parallel (and highly valued) service for some segments of customers in Pakistan. Competition will however reduce OTC to a commodity and clients may use the OTC offerings of EasyPaisa and others interchangeably.
Would I have done anything different with EasyPaisa?
If given the advantage of hindsight, I still would have launched the business with OTC as the leading service. It takes time to create the confidence in a customer to start using an agent as a bank branch. When EasyPaisa started, there was no wider market awareness of mobile payments – we had to introduce the concept and build trust. We have also built up a large agent network on OTC volumes reaching some 30,000 points of service across Pakistan that are spreading awareness of the EasyPaisa brand. OTC is a permanent part of our business and is there to stay. But it is critical that the wider ecosystem evolves providing a setting where the e-wallet business can thrive.
What time line you are looking to develop ECOsystem for wallets? I believe SBP should also intervene to shift UBPs/School Fee/salary account less then 10K/repayments etc to branchless banking. Even, Prime minster youth scheme must be disbursed ONLY through this channel. It will have postive impact on ROI of agent network. These steps will pave a path for BB industry in Pakistan
I exect that the Eco system will develop fully within the next five years. All stakeholders will need to work together. Currently, cash outside the banking system is Rs 3 trillion. In my view the SBP has no role in mandating what should be electronic versus cash. These are market decisions. However Government schemes certainly can benefit from this
How feasible is it to change agent incentivisation from OTC transactions to mobile wallets? If agents are incentivised for wallet type transactions rather than OTC type transactions, will they promote wallet opening and P2P transactions. Or do you believe customers need to be made aware of the potential cost savings for using wallets? Or is it a combination of both?
The agent makes money everytime there is an OTC transaction. On the M wallet fees are only paid at the activation of the wallet. Hence, while it is in our interest to convert OTC to m wallet it is not in the agents interest. We are providing incentives to the end user. The incentives are being funded by the reduction in the fees paid to the agents