Karachi, June 30, 2021 (PPI-OT): Online banking – a long way to go

Alongside growth in quality advances, we believe the banking sector continuously strives to expand network size and offer wider range of products to existing and potential clientele in a more efficient manner. Banks have overtime increased spending on IT related expenditures as they realize benefits of deposit mobilization, contribution to fee income and relatively lower administrative expenses compared to physical branches that come with the expansion of branchless banking.

Signs of robust growth in Pakistan’s online banking were visible long before the pandemic (refer to next page). In the past 4 years, Internet banking and Mobile banking users have grown by ~40% per annum (Internet banking users: ~20% per annum; Mobile banking users: ~55% per annum).

Despite the encouraging growth trend, Pakistan currently falls short on the financial inclusion yardstick as currently less than 30% of the population owns a bank account. However, users of mobile and internet penetration are relatively stronger (83% Pakistanis use mobile phones and 46% use the internet) reflecting a huge untapped potential for the banking sector. We highlight more than 30% of the population uses branchless banking in Pakistan, where market leaders are said to be telecom companies.

Guidelines in the Federal Budget FY22 regarding tax incentives on installation of 500,000 Point of Sale (POS) machines (current: ~67,000), in addition to lower costs on Inter Bank Fund Transfer (IBFT) are some of the recent steps by the government and the State Bank of Pakistan (SBP) that are expected to boost online banking transactions. Nonetheless, more is expected from the sector, along with regulators, in order to avail the opportunity at hand.