Can In-Store Merchant Payments Become a Game Changer for Mobile Financial Services in Pakistan?

Last week, I attended the 9th Mobile Commerce Conference at Movenpick Hotel in Karachi.  The participants from all over the country, in this annual event, provided an excellent networking opportunity. Besides, the event developed an improved understanding of the issues the industry is trying to address.

The efforts of the branchless banking industry are commendable, as they’ve done an outstanding job in developing and shaping up the mobile financial services in Pakistan. However, I noticed a rather disheartening point during the event.

Active Accounts are Not Catching Up

The governor of the State Bank of Pakistan and the chairperson of  the Pakistan Telecommunications Authority highlighted that registered branchless banking accounts have reached 15-million mark; however, only 3.2 million accounts are active in reality.

When I drilled down a little deeper, I came across yet another interesting observation. If you investigate how state bank defines active accounts in “Issue 17: Quarterly Branchless Banking Newsletter“, you’ll find one important condition: the account-holder should’ve done at least one transaction using the account in the past 180-days, over the platform. Keeping this definition in mind, the bulk payments – precisely G2P payments, for example, BISP and IDP have a significant share.

The newsletter didn’t mention the exact number of the accounts, the providers specially created for these payments. However, assuming the similar trend would’ve persisted for another quarter, the transaction distribution suggests that out of these active accounts, a sizable portion (almost 30-40%) was active just for the aid. I’m guessing the number of the non-government-payment accounts to be around 2-2.5 million.

In-Store Payments are Untapped

According to the same newsletter, the retail payments contribute less than 0.1% out of 29.9 million transactions done using these accounts for the quarter.

A greater number of providers are targeting three customer segments: the masses in need of help for their survival, people working away from home and need to send money to their families, and those who need trouble-free payments of utility bills. The large population that might be willing to use the accounts for their day-to-day purchases is largely untapped.

The people buy goods or to pay for the services over the month, even on the daily basis, for example, bakery and grocery items. Just enabling deposit and withdrawal, when these transactions are done once or twice a month will not motivate the use of these accounts.

Need to Build Merchant Networks

Facilitating people to pay in the store is the very lucrative area. The mobile financial services will thrive and create value for the entire chain, once we truly engage account-holders on the daily basis.

A secure, fast, reliable and user-friendly method is needed to motivate account-holders to buy stuff using their accounts. However, that’s one side of the picture.

The service providers are building their agent networks and for obvious reasons. In addition to that, they should find superior ways for merchant onboarding and of course, need to provide a different experience altogether. After all, merchants are different from agents. They use the platform as a means to an end – to sell their goods and services. The current acquiring business works around discount rate – a charge to the merchants. In contrast, in the agent services, agents are given commission – a reward for their services. Moreover, different regulations and risk considerations for merchant acquiring. Therefore, a different approach is necessary to encourage retailers to use the platform.

The Real Challenge is Awaiting Just Next Door

Both the established and new players have already started paying attention to retail payments.  Nevertheless, these efforts need to be scaled-up, and using the existing infrastructure of +40k POS devices could be the first choice for them, at least to start with.

The in-store payments may involve issuing virtual cards with PIN against the accounts, integration with the merchant acquiring banks and third-party players, for example, Orix and  Wemsol and some tweaking in the existing POS (point-of-sale) infrastructure. The integration part could become less painful if the players agree on interoperability. Naturally, 1Link has a vital role to play as a domestic, POS Switch.

These +40k POS are just the beginning. The real motive of mobile financial services is to serve the underbanked and the underserviced masses, populated in rural areas; where, these POS are not available.

Eventually, mobile POS devices are essential to increase the use of these accounts. Mobile POS can be adapted for cardless use and adopt new the technologies – NFC tags, QR code or anything similar to NSDT can be combined to improve the effectiveness of the platform.

That’s just not over, there lies the next and greater challenge.

Currently, a single merchant counter, at times, has up to three POS from different banks. A similar approach will not work – interoperability and mobile financial services aggregators are the only logical response.


The players in the mobile financial services space should look beyond the legacy transaction mix should focus on the in-store merchant payments to motivate the consumers to start using their accounts as a daily driver.

I consider this as the primary factor that could become a game changer. Do you agree? And what else would you suggest, will increase the use of the branchless banking accounts?

I would love to hear from you.

The above image “Inexpensive, thing Business, OK” by “ Joe The Goat Farmer ” is available on Flickr  under an Attribution 2.0 Generic (CC BY 2.0) license.

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