Booming e-banking – BR Research


Concentration of digital payments is improving in the banking system. In the first full fiscal year after the pandemic started, cash-light banking sector payment channels have shown immense growth. As per the latest SBP data for the year ended June 30, 2021, the four prominent alternate delivery channels (ADCs) for banking payments – ATMs, point-of-sale machines, Internet banking and Mobile banking – have all shown considerable growth in transaction volume and value, some more pronounced than the others.

It is the ATM transactions – which arguably aren’t entirely contact-less – that continue to dominate the electronic banking channels. Customers undertook roughly 600 million ATM transactions to withdraw over Rs8 trillion during FY21, with volume growing 17 percent year-on-year and value increasing 26 percent year-on-year. Average transaction size at the ATMs was Rs13,489, growing 7 percent over FY20 size. It must be pointed out, though, that the growth trend isn’t necessarily due to expansion in ATM infrastructure – the 16,355 ATMs in June-end 2021 show only a 5 percent annual increase in machines.

As highlighted in the previous coverage of e-banking channels, the pandemic-era growth has been extraordinary in the true-digital conduits of Mobile banking and Internet banking. As a reference, these two channels together used to equate 24 percent of ATM transactions (by value) in FY17 – fast forward to FY21 and the two channels generated transaction value that was 131 percent of ATMs! It helps that the combined user-base of these two channels (16 mn as of June 2021) has more than tripled in four years.

The early-pandemic regulatory decision to waive fees on transfers made via digital channels was a game-changer that catapulted transaction volumes into the sky. There is now a qualified fee waiver, but bulk of the banking population can still make transfers for free under the Rs25,000 per month limit. Internet banking continued to grow strong with 93 million transactions worth Rs5.7 trillion in FY21, resulting in yearly growth of 65 percent in volume and 92 percent in value. Average transaction size increased by 16 percent year-on-year to reach Rs60,613 in FY21 – the largest size among the four ADCs under review.

Be that as it may, the growth among ADCs was particularly exceptional in Mobile banking. The roughly Rs5 trillion in transactions made via this avenue is an amount value that almost tripled over the same period last year. Average transaction size came in at Rs25,415 for FY21, showing 19 percent growth over previous year and highest growth rate among the four ADCs studied here. Expect this channel to continue the march considering rising smartphone penetration, 4G coverage and trust in digital payments.

Meanwhile, there was also healthy growth seen in POS transactions during the fiscal. Some 89 million customer transactions over POS generated Rs453 billion in retail value, signifying volumetric and value growth by a quarter over FY20. Roughly 72,000 POS machines were plugged in as of June 2021, which was encouragingly nearly 1.5 times of the machines working as of June 2020. Regulatory incentives and tax concessions seem to be working, as does the taxman’s drive to document retail transactions. Average POS transaction size was Rs5,102 in FY21, about the same size as in the previous fiscal.

With the consumers and businesses gradually coming out of the Covid-related difficulties, let’s see what FY22 has in store for e-banking.


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