By Jahanzaib Haque
(Published in Nov-Dec 2009 issue of Aurora)
The banking sector in Pakistan has been abuzz with the terms, ‘branchless banking’ and ‘ADCs’ (alternate delivery channels) of late, as a wave of interest has arisen in bringing new, technology based offerings to the market this year.
The term branchless banking refers to giving customers the option to access banking services without physically entering a branch. The four major ADCs in the market which allow such access include call centres, ATMs, internet banking and the up and coming, mobile banking.
Consequently, multiple players have opted to develop and market these services, and a number of mass media campaigns, including the most recent MCB Mobile Banking and HBL Technology campaigns have underscored this trend.
The reasons for focusing on ADCs are many. A 2009 World Bank Report states that only 14% of Pakistan’s adult population has access to a formal financial institution. According to a source in the banking sector, there are only an estimated 8,100 physical branches (mostly located in urban areas) catering to a population of approximately 170 million. In such an environment, ADCs could extend banking into this vast, untapped market without requiring the huge investment of setting up branches.
Accordingly, the State Bank of Pakistan issued its Branchless Banking Guidelines in November 2007, allowing financial institutions to offer services outside traditional bank premises. This regulatory approval and an ongoing push by the State Bank has driven the focus on ADCs forward, while the enormous growth in the telecom industry has further sped up the process by providing the infrastructure necessary for the ADCs – particularly mobile banking, which is seen as the key ADC of the future.
From a marketing perspective, this emphasis on service delivery comes at a key time, when the banking sector has found itself competing on product offerings which are nearly identical, leaving the consumer little to differentiate one bank from another. ADCs can therefore serve as a USP, particularly as they can be marketed around the altar of convenience, which all bankers agree is the defining feature of consumer lifestyles today.
As Adnan Ahmed, Divisional Head, Marketing Services, MCB explains:
“The first stage of convenience is the number of branches and their proximity to the customer. The second stage came in the 90s with ATMs, leading up to 24/7 ATM access which was a revolution; call centres were developed during this time too. Then we followed US and British models and went straight to the internet, but it didn’t have a big impact due to low levels of internet penetration locally.”
Without undermining the importance of the internet, ATMs, call centres and branches, Ahmed says that MCB has now launched mobile banking to offer a level of convenience which eventually offers the greatest potential for reaching out to the untapped market:
“Pakistan over the last decade has seen a telecom explosion, with 90 million people now having mobile devices in their hands. Given low literacy, when it comes to mobile banking, all you need is basic numeric and alphabet literacy, and this is already present, as indicated by the fact that there are a significant percentage of people who use SMS.”
Currently, MCB Mobile Banking offers customers the chance to access basic services from balance enquiry to making transactions, mobile top-ups and utility bill payments.
According to Ahmed, over 25,000 customers have registered, including people from smaller towns and cities such as Dadu, Gujranwala and Sukkur. Ahmed adds that almost 2.5 million dollars worth of financial transactions have already been made.
“If we are bringing convenience to people, people will come to us,” says Ahmed.
“And our Mobile Banking is just the first step. We will keep on working on the features of the service, because right now it is a GPRS service linked to the bank account – it’s not a bank account on its own.”
Over at UBL, Abrar A. Mir, Executive Vice President, BDSI & e-Banking, UBL, who launched the UBL Net Banking campaign earlier this year clarifies that in his view, mobile banking which is currently linked to bank accounts is actually an extension of net banking, making the mobile phone another channel for existing account holders only.
“The two words mobile or branchless banking are being used interchangeably without any established definitions, none of which is incorrect or wrong. In my own view, however, actual mobile banking is when your mobile number is your account independent of your bank account. Currently banks are offering net banking through a WAP platform on the mobile, which is simply a nice way of presenting the net offering on the small screen. That is why our net banking campaign did not claim that we are doing mobile banking – we said our net banking now goes mobile, because that’s all it is.”
According to Mir, the banking sector has to be careful in how the ADC is positioned in ad campaigns at this early stage in order to avoid confusing the customer or over promising the service.
“If I have to tell my mobile banking customer you have to first go to my branch, and then you have to open an account, the customer will ask what is the difference? I can already go to a bank website to access my net banking with GPRS. However, with SMS banking they do get another channel to access their existing bank accounts.”
This current restriction of linking mobile banking offerings to bank branches is what has also limited UBL Orion Mobile Wallet from taking off. Orion was launched in Pakistan as an SMS-based mobile banking solution with customers’ mobile numbers serving as independent bank accounts, but the service was limited by users having to go to a UBL branch to load their account.
Consequently, Orion was not marketed heavily but served as an experiment upon which UBL plans to launch what Mir terms, “true branchless banking, and by that I mean retail agent-based mobile banking, not just making web-based or SMS banking available on your mobile for existing customers.”
In this mobile banking model, retail agents will serve as the front end of the bank, allowing customers to open accounts and recharge them from any store, while making deposits, withdrawals, etc., from their mobile phone.
As Mir envisions, “We have 300,000-350,000 shops in Pakistan, and this is not counting the khokas, so look at the potential that exists. If I could sign up 100,000 shops as my banking agents, all of a sudden I will be able to give banking access to a huge number of people.”
Given the massive potential for product offerings and brand building around mobile banking, there is already a tussle brewing between the telecom industry and the banking sector regarding control of the upcoming solutions.
“Telcos think that since a mobile is being used, it is their domain to offer solutions. There will be a lot of grey areas and it will take time to evolve. The telcos role as a technology platform and a partner in providing banking services to the public will always be very important,” adds Mir.
A case in point is Mobilink Genie – a telco-led banking solution which runs on a Java application downloaded from the internet and set up on the mobile phone.
So far, Atlas Bank, Citibank and KASB Bank have signed up with Genie to enable their customers to make utility bill payments and check their account balance.
“The best part about all this is that telcos are willing to put huge amounts of marketing capital into pushing mobile banking through campaigns, because value added services is the only platform left for them to generate revenue,” says M. Akbar Moghal,
Head of eBanking and CRM, Atlas Bank.
Moghal believes the next one to two years will see the banking sector and the telecom industry struggle to resolve how mobile banking services will be delivered to the customer.
“Every telco wants it to be their mobile banking service that banks use and all banks want it to be their service that telcos use, so you can imagine the kind of infighting we are getting into! But it will sort itself out to the customer’s benefit.”
Despite the high expectations riding on mobile banking as a revolutionary ADC, there are many challenges to be encountered, not the least of which is gauging how customers will react, and the marketing challenges involved in such a paradigm shift.
Having recently launched HBL’s Technology campaign with a focus on ADCs, Aly Mustansir, Head, Marketing & Brand Management, HBL, believes mobile banking will be an important channel if there is “integrity” behind the technological push.
“The term branchless banking is a big obsession right now, but my concern is how such obsessions have been dealt with in the past in the financial industry. It is often a fling with innovation… the education process has to be much stronger.”
According to Mustansir, the key challenge will be getting customers to trust the new service, given that “people may be afraid to move money via SMS because there is always the fear of making a mistake.”
To this end, Ahmed, Mir, Moghal and Mustansir are all in agreement that the education process has to begin at home, i.e. at bank branches, with ideas ranging from brand activation via trained brand ambassadors positioned on the floor, to branch-led direct marketing.
As for mass media campaigns, with MCB Mobile Banking leading the pack, Ahmed is adamant that BTL activity will be critical, as the service is first and foremost for customers within the bank.
“We’ve convinced more than 25,000 people to use this channel. How is it happening? There are BTL campaigns going on. To an extent we have to use ATL in terms of getting the brand out there, but the rest is done through in-branch activations.”
While mobile banking is still in its infancy, it seems likely that 2010 will see this ADC emerge as a branded offering led either by the telecom industry or the banking sector, or a mix of the two. What no one can predict is whether the customer education process will translate into banking through your local khoka, and to what extent the appeal of convenience will overcome the fear of letting your hard-earned money be exchanged via your mobile phone. A dropped phone call may be easily excused, but a dropped connection during a financial transaction is a different ball game.