May 23 - 29, 20

Despite the rising usage of mobile phones virtually almost all over the country in view of the figure of mobile subscribers surpassing 10.5 crores, mobile banking is yet to catch the speed to deliver the banking services to the underprivileged mobile phone users in the far-flung locations in the country and the unbanked population.

Mobile banking is the top sluggishly performing segment amongst other modes of the e-banking including internet banking, real time online banking, call centres, etc. The financial transactions through mobile banking were recorded at meagrely Rs1.8 billion and 0.8 million in numbers during the three months (Oct-Dec, 2010) compared with Rs45 billion internet banking transactions. Only 11 banks have gone mobile out of the 40 banks operational in the country. Mobile banking registered users stand at 0.8 million.

Mobile banking can play an effective role in reducing the poverty and improving standards of living of people living in the underdeveloped areas. Traditional banking has many obstacles from weak physical infrastructure to the reluctance of people in the way of financial inclusion of rural population that has majority of people out of the range of banking and financial services.

Mobile telephony can be harnessed to extend microfinance to the underprivileged people living in the underdeveloped areas.

Microfinance can prove an appropriate measure to empower economically low-income group in the country. Providing loans on flexible conditions, microfinance can address financial problems of financially strained individuals and small businesses. On the back of mobile phones, impact of microfinance can be expansive.

Mobile banking service EasyPaisa lending money on easy terms to the borrowers received much local and international attention.

Natural and manmade disasters inhibit the progress of mobile microfinance. Only last year floods rendered multimillion dollars losses to the microfinance institutions because of the infected assets accumulated in the livestock and small scale sector that were severely damaged.

High interest rate is also a chief deterrent to the growth of lending to private sector development. When it comes to microfinance, the negative effects of high interest rate aggravate. Cost of capital for the microfinance institutions ramp up in the soaring interest rate regime since they have to pay exorbitant price to get funds from the commercial banks and thereby their products become unaffordable for the debtors.

The mobile banking products include Tameer Bank's easypaisa, UBL Omni, MCB Mobile, KASB Mobile, and HBL-Ufone.

Pakistan telecommunication authority (PTA) introduced SMS-based secure mobile payment technology to give mobile users an interactive platform to interact with their financial institutions. There is a third-party mobile banking regulation expected to unveil this year. Third party payment handing agents are allowed to work with several cellular service providers at once and the regulations will help the providers to increase range of pan-Pakistan banking applications, according to an official.

The international examples substantiate the fact that mobile is popularly used to extend banking outreach to the rural areas devoid of physical infrastructure and where other modes of e-banking are not workable due mainly to the illiteracy.

In fact, worldwide people are benefiting from the simplicity and ease-of-use of mobile phones. Underdeveloped countries that are seeing robust growth in the mobile industry are using mobile phones to tap their unbanked population. Africa that has many of the poorest developing economies in its realm has seen miraculous impact of mobile telephony on the lives of regional population. At present, amazingly Kenya, South Africa (regional largest economy with 40 per cent of total population having bank accounts), and Nigeria have subscribers transferring money, making purchases, and checking their bank statements through the mobile phones. Like Pakistan, banks in African continent are also facing the stumbling blocks such as lack of logistics, inapt physical infrastructure, and public financial literacy to spread the traditional banking services to the masses. Africa has an estimated 278 million mobile subscribers as compared to one million cellular phones in 1996.

Global mobile banking transactions are expected to reach at US$37 billion this year, according to the world's leading information technology research company. Gartner said mobile payment users were expected to cross 103 million by 2011. US banks staggered to go mobile in past because of the fear of loss of brand identification as mobile applications could distort the appealing factors of the products, Indian Infosys observed in its white paper. It is a fact that applications have to have light graphics and constrictions of small screen and load-time effects to be compatible with the mobile platforms. Legislative hurdle was also noted as one of the main reasons of slow move of US banks towards the mobile devices. However, iPad and other internet-enabled smart phones are addressing these constrictions with providing to the users web solutions.

Pakistan's telecom industry needs to travel a long way to provide the local customers modern mobile solutions. At present, banks and telecom operators find themselves capable to formulate applications for the locally available cell phones. This is not difficult economically for subscribers and businesses since prices of internet-enabled handheld devices are decreasing and people are buying these phones without benefiting from their modern features.

Telecom services in Pakistan are rapidly growing with telecom operators investing in the infrastructure that is covering remote locations where banks think twice to set in motion their basic fixtures. Banks can penetrate in such areas by banking on the telecom infrastructure.

Banks should come up with cinchy banking applications with the user interfaces in vernacular that are self-explanatory for the uneducated mobile users to extend financials services to the unbanked population.

Mobile banking can reduce operational costs and improve efficiency of services by speeding up the processes while it can play an important role in extending financial outreach to the vulnerable population.