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Fast changing trends of financial digitization


Within branchless banking framework, Over the Counter (OTC) Model is agent facilitated which no matter how convenient and reliable, is slowing down the pace of promotion of financial inclusion by limiting customers’ access to facilitated transactions only. This barrier could be addressed via a shift from OTC to mobile wallets. Presently, OTC dominates over mobile wallets in terms of volume and value of customers. However, with the SBP approval of mobile wallet account opening through biometric verification, it now takes less than five minutes to open a mobile wallet.


Another area that may offer promise for financial inclusion is the rise of digital currencies such as bitcoin. Bitcoin is a virtual private currency that is not controlled by any central authority or supported by any economic system but offers the promise of substantially reduced fees. Although its use has grown in developed countries, lack of a broad technological understanding and infrastructure to handle transactions in digital currencies have limited and will continue to limit its implementation in developing economies in the near term.

A distant but existential threat related to Bitcoin is ‘Blockchain’. Instead of traditional double-entry book-keeping by banks, blockchain based ledgers is an open-source, publicly accessible payment log that could be inspected and verified by anyone with an internet connection. Transactions would be logged without the need for any manual supervision or reconciliation potentially eliminating an entire class of financial service jobs. Paired with a reliable digital currency, blockchain technology could provide a way to bypass traditional payment structures and banking networks altogether. Other crypto currencies include Dogecoin and Ethereum.


For financial service providers, like banks, and microfinance institutions, Big Data’s predictive power can open doors they have never walked through before. Armed with the right data and algorithms, financial service providers could assess clients in terms of their future potential, rather than their past behavior.

Conceptually, this is a game changer. Traditional credit scores are calculated on the basis of previous credit re-payment behavior. A forward looking, data driven approach could be groundbreaking in markets where otherwise credit-worthy individuals do not have any traditional credit history.

Big data can increasingly make the invisible visible, which will benefit everyone involved. By utilizing available data – from cell phones, social media connections, utility payments, government statistics, and elsewhere much-needed financial services such as loans, savings vehicles, and insurance to new segments of customers could be extended.

In Pakistan, the availability of big data coupled with the rising sophistication in data sciences implies that this disconnect could be addressed through analysis of non-financial data in a manner that is beneficial for both the banks and borrowers.Now Big Data is being replaced by Smart Data since it involves humongous amount of information.


Although P2P is still only a small part of the global banking landscape, a number of convergent trends are powering its growth as an industry.

 The youth are increasingly eager to transact online round-the-clock.

 The Big Data has removed banks’ information advantage and the need for expensive infrastructure.

 Current low interest rates have raised alternate investment profile.

 P2P providers are able to provide better services as compared to conventional banks.

P2P seems to represent real competition in what has been a closed market for a very long time. For investors, P2P providers can offer better returns than conventional banks, but do carry more risk. The platform itself carries no risk, so capital requirements are much lower.


New technologies, new business models, rapidly changing customer expectations and tighter regulations mean that banks, like many other categories, are struggling to align with a rapidly transforming world. In this flurry of change, banks would love to use the opportunity to improve their relationship with customers. In a future where the premise underpinning banks is unraveling and for the first time there are real alternatives, building emotional bonds with customers increasingly looks like a strategic imperative.

Banks, fully aware of the problem, are responding to the challenge and are under-going significant change programs. But do the current change programs play any significant role in building a bond with customers? Typically:


– Is often driven by the need to play ‘app catch up’ to deliver parity with competitors and add a channel rather than rethinking the opportunity
 Is disjointed and does not rethink proposition, experience, relationship and economics as a co-dependent ecosystem, it just adds a channel
 Creates non-coherence in the customer experience because the businesses are siloed

If the above is a fair summary of the customer-facing change programs in banks, then, despite the professed purpose of most banks to add value, we should conclude that they are not doing enough to build the emotional connections with customers that would help protect their businesses in a transforming world. They are making change at the edges of a product-centric concept, not changing the role of the bank in customers’ lives.

Perhaps the best way forward for banks is to maximize their usefulness to the customers’ whole financial lives, across the whole of their lifetime, on the customers’ terms. But given all the legacy systems and culture, inertia and challenges within banks, how would one even start? The answer surely, is to just begin by:

1. Knowing your customers on a whole new level
2. Equipping the organization to innovate
3. Re-purposing the organization

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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