Making branchless banking a norm in Pakistan

ATMThe State Bank of Pakistan (SBP) has announced ‘Financial Inclusion Program’. One of its facets is developing branchless banking. While commercial banks are going for huge investment they are also joined by micro finance banks and telecommunication companies.

The SBP talks about success stories but millions of Pakistanis still remain outsides the formal banking system. This requires out of the box thinking and I have found some clues while studying Indian approach.

In the neighboring country which also has a similar social fabric and even literacy level banks are witnessing a sharp growth in electronic transactions, prompting them to increase their investment technology rather than creation of more bricks-and-mortar branches.

The top three private banks of India generate more than 60% of their total transactions using digital channels. While conventional transactions grew in single digits in the past two years, the digital channels saw a near doubling of transactions.

The impact of technology on the way banking is done has changed a lot. Branches are becoming smaller and tech savvy in terms of the number of machines in the branches than in the past. One finds today that branches have fewer employees than in the past but still more transactions being done in the branches.

One of the success stories is HDFC Bank, where transactions through internet and mobile phones have grown to nearly 63% from 44% two years ago. If one adds ATM and phone banking, then the bank is left with only 12% transactions that are done in branches right now, which at some point of time used to be 30%.

In September, at ICICI Bank transactions worth Rs 7,800 crore were executed through the mobile banking channel, while the figure for HDFC Bank was over Rs 6,900 crore and for Axis Bank it was nearly Rs 5,500 crore. With internet and phone banking becoming the channels of choice for customers, banks are reworking their branch banking strategy and adding recyclers and cash deposit machines, along with setting up e-corners in almost all branches.

Banks in India are focusing on how to automate their branches and make them more digital. Almost all the new branches that are being opened have an e-lobby before one enters the branch. This lobby allows customers to do all transactions on their own before they step in the branch.

All the new branches have a self-service e-lobby. Axis Bank recently set up express branches that are conveniently located in either a mall or office complex to provide 24×7 customer service. The express branches offer facilities for instant cash and cheque deposits, instant account opening and online purchase of insurance and advisory services. While the percentage of transactions that are executed through branches has come down drastically but has not slowdown opening up of new branch.

Branch expansion is really necessary, because beyond the top cities banks still need branch penetration. Branches are a symbol of trust. Currently, ICICI Bank has more than 4,000 branches, while HDFC Bank has over 4,200 branches and Axis Bank has over 2,700 branches.


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