For decades, conventional or branch-oriented banking has dominated the retail banking industry in Pakistan. However, the birth of the internet and mobile technologies are gradually transforming financial service delivery models and reducing the use of branch-oriented banking by consumers. Increasing consumer choice for more convenient and innovative banking channels convinced the banking executives to start developing, deploying and integrating innovative distribution channels and creating a new but diligently regulated payment environment.
According to the Payment Systems Statistics prepared and published by the State Bank of Pakistan, as of 30 September 2017, out of 178 million electronic banking transactions consumers conducted in the country during the 4th quarter of FY2017, a meager 3.5 million (less than 2%) were conducted using cell phones. These statistics indicate that the present status of mobile and payment adoption and usage in Pakistan is unsatisfactory and, therefore, Pakistan is failing to reap the plentiful benefits mobile technology offers to consumers and service providers. These benefits include but not limited to increasing convenience, low transactions cost and the option of accessing the banking information anytime anywhere. Nevertheless, the branchless banking domain has begun to produce above satisfactory results in the country, and wider adoption and usage of branchless banking services (such as Easypaisa) among the under banked and unbanked population has been noticed recently.
Through my academic research, professional banking background and interactions with marketing, IT, and banking industry leaders and scholars, I have found that a successfully deployed service or product will reach scale only if people not only accept or adopt it but also continuously use it. In other words, the initial acceptance of any product or service is essential, but its prolonged usage is paramount in increasing financial and social inclusion as well as in providing a separate revenue stream for service providers, including banks. In academic studies that I have published in renowned scholarly journals, I provide comprehensive insight into the factors affecting the adoption and the usage of mobile financial services in Pakistan and elsewhere.
I have found that by and large, the consumer considers mobile payments to be an e-financial service offered by banking or telecom companies or mobile network operators for conducting financial (funds transfers, utility bill payments) and non-financial (digital service notifications/alerts) transactions using mobile devices. Earlier versions of mobile payments were largely SMS-based, and more secure downloadable mobile payment applications provide value-added services, thereby enhancing the scope and usage of the mobile banking and payment services.
Several characteristics of mobile banking technology and services could accelerate the acceptance and usage of mobile-based banking and payment services in Pakistan:
Increase The Usefulness And Ease-Of-Use Of Mobile Banking And Payment Services:
A useful service helps consumers achieve personal goals and causes them to have a positive attitude towards the service, which in turn increases its adoption and prolonged usage. Similarly, the ease-of-use or user-friendliness of service is also essential and typically increases satisfaction, consumer loyalty/stickiness, and positive word-of-mouth for the bank or service provider. Especially in Pakistan, with its low literacy and education ratios, the ease of use of any service is key to its successful adoption and usage.
It is also important to increase the compatibility of mobile banking and payment services with consumers’ lifestyles. This is especially important among consumers living in urban/metropolitan areas.
Control Risk Factors And Increase Trust In Mobile Banking And Payment Services:
Consumer perception of risk in using mobile banking and payment services has a clear negative effect on attitude. Providers’ addressing risk factors properly, such as through effective consumer awareness and empowerment programs increase consumer confidence and the credibility and trustworthiness of mobile banking and payment services.
Disseminate The Benefits Of Using Mobile Banking And Payment Services:
Sharing the value proposition of using mobile banking and payment services with potential customers increases adoption and use. For example, in 2007, Safaricom introduced a very successful mobile financial service called M-PESA in Kenya. Safaricom recognized the potential of this service, identified ‘send money home’ as the key value proposition, and focused its marketing campaign in this direction.
Increase Financial Literacy:
Although in some countries, governments initiate financial literacy programs, in Pakistan, the private banking sector plays a key role in increasing financial literacy. In this highly demanding financial environment with highly diversified product and service portfolios, consumers’ financial mistakes can be costly. Thus, many consumers wish they had more financial knowledge, and a proper financial literacy program will allow for better financial decision-making.
Ensure Adequate Regulatory Support:
Regulatory support is a significant element in providing comfort and confidence to the consumer when using financial services and products, as losing money is a central fear. The assurance regulators such as the State Bank of Pakistan provide that banks and other designated service providers in the payment ecosystem are proactively and diligently regulated accelerates consumer confidence and contributes to positive attitudes towards and a favourable atmosphere surrounding the development, deployment, adoption, and usage of mobile banking and payment services across the country. Along the same lines, a proactive regulatory management attitude from the regulators puts the onus on the banking and payment industries including fintech startups to think more holistically about consumers and their needs.
Social Media, Consumer Interaction, And Word Of Mouth:
Social media has intensified the communications and interactions among individuals and communities.
In addition, social influence (also known as social norms) indicates that when individuals perceive that others, including family, friends, and colleagues, believe they should use mobile banking and payment services, such belief greatly encourages consumer behaviour. The consumer’s opinion and feedback about a product or service on social media and freely available mobile messaging apps occupies an important position. Consumer referrals (also known as advocacy intention or word-of-mouth) are, therefore, influential and should be taken with extreme caution and care.
The consequences of ignoring, overlooking, or even underestimating any of these factors are significant and could damage mobile payment adoption, which in turn may lead to more financial exclusion and damage the payment outlook of the country.
In order to provide a cohesive mobile banking and payment experience in Pakistan, the focus should be placed first on a highly competitive pricing structure and second on the value of the service rather than the volume of transactions. To meet consumer expectations, service providers should improve product and service knowledge and produce innovations that put the customer at the center.
University Teacher, Jyväskylä University School of Business and Economics
P. O. Box 35, FI-40014, University of Jyväskylä, Finland