Using Mobile to Spread Financial Inclusion

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People with access to a formal financial account with a bank or on a mobile money application are considered to be financially included. These lucky individuals can avail loans and insurance, safeguard their savings and safely and conveniently transfer money.

Several studies highlight that inclusion could improve income and increase savings thus enabling the previously underserved to invest in necessities such as healthcare, education, food, growing their business, and managing financial risk.

Globally, as per World Bank 2017 data, close to 69 percent of the world population is financially included.  But in Pakistan, this number alarmingly stands at 21 percent. In 2015, the State Bank of Pakistan, under its National Financial Inclusion Strategy, set out on an ambitious journey to ensure 50% of Pakistani adults are banked by 2020.  As 2019 draws to a close, it is easy to say this target now seems unattainable.

In a country with more than 160 million mobile phone users, it seems like enough has not been done to address this issue. One impediment to achieving the inclusion target is trust. Apart from major urban centers, Pakistanis usually do not trust financial institutions. Moreover, given a lack of education in towns and rural setups being a hindrance in proper mobile phone usage, most adults prefer to transfer or receive money through mobile money agents instead of setting up their own mobile money accounts.

Building trust is a long-term challenge, but improving financial services providers’ capacity and ambition to reach a large scale, especially with mobile wallet account ownership, can be addressed in the shorter term; Ghana is a strong success story for this tactic.

Exponential growth in Ghana’s financial inclusion numbers – from 40% in 2014 to 58% in 2017 – was powered solely by mobile banking; in comparison, Pakistan’s financial inclusion grew just 8 percentage points in the same period.

Ghana’s success was strongly aided by policymakers that kept an open mind by allowing new players to participate in the provision of financial services and providing space for experimentation and forming person-to-government (P2G) mobile payment flows to encourage usage.

In Pakistan, regulators, post-2015, have been supportive of mobile money institutions, but there is a real lack of P2G payment via mobile concept.

In February 2016, JazzCash (then Mobicash) launched a mobile passport payment product in partnership with the Directorate General of Immigration & Passports (DGI&P) and the National Bank of Pakistan (NBP).

The agreement for this product was signed with DGI&P first and shared with the State Bank of Pakistan.  DGI&P also got written approval from the Ministry of Interior after which the contract between NBP and DG Passports was signed at NADRA HQ in the presence of the then-Interior Minister.

The initiative aimed to increase customer satisfaction by reducing the time it takes to submit a passport application and increase operational efficiency by reducing the number of people queuing at NBP branches and passport centers.

An effective pilot solution made use of by many in the twin cities – close to 15,000 monthly transactions – was soon scaled-up nationwide through other mobile banking services e.g. Easypaisa and UPaisa.

Passport fee service became the first nationwide P2G service and aided in putting an end to corruption both within the government and the rackets that operated privately. This digital service quickly becomes user heavy in various cities, as it offered convenience to the users, who no longer had to stand in long queues to pay their passport fees. This led to an increased number of empowered mobile money users and encouraged similar public-private partnerships for other government services.

However, at the start of 2019, this service was abruptly brought to a standstill. The necessary protocols remained unarticulated by the government and rolled back the impact the service aimed to create. The opportunity cost to both the government and society is huge.

The abrupt closure of this effective payment solution has affected the common folk and dedicated internal passport fee service teams and has also shaken the confidence of mobile banking institutions working to forge similar partnerships to facilitate P2G payments. Currently, there are other mandates like KPK services commission, Islamabad Traffic Police and Karachi Police Department, where JazzCash and Easypaisa are following a similar arrangement.

It is imperative to understand that digitizing P2G payments is the key in nudging the majority of the 160 million mobile users towards mobile banking channels, thus improving on the country’s miserable financial inclusion figures. Such a move also holds significant benefits for governments, consumers and businesses, in the form of alleviated costs, greater convenience and overall safety of transactions.

The Pakistan government’s Vision 2025 includes e-governance, e-commerce, and e-services showcasing a strong affinity towards digitizing P2G payments, but to achieve its goals, there needs to be a greater element of trust and maneuverability amongst key government departments and the mobile financial players in the market.

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