One of the revolutions that have taken place worldwide in the Small and Medium Enterprises (SME) sector is the use of mobile banking. According to a report on mobile banking published by KPMG last year, mobile is the largest banking channel for the majority of banks by transaction volume.
Developing nations such as India and China have an adoption rate of 60-70 percent when it comes to mobile banking technology, higher than developed nations including America and the UK. The next five to ten years will see exceptional growth in mobile banking with a rapid rise in the number of global mobile banking users.
Even in Pakistan, banking transactions through mobile platform has been seen as an emerging trend. This can be witnessed from the Payment Systems Statistics report published by the State Bank of Pakistan (SBP), which shows annual growth of mobile banking as 4.8 percent and a volume of Rs25.8 billion as compared to the previous year.
On Monday, SBP introduced “Regulations for Mobile Banking Interoperability” to keep the momentum flowing for the sector by facilitating mobile banking service providers. According to SBP, the regulations will be crucial in providing a conducive regulatory environment as well as setting benchmarks for mobile and branchless interoperability.
For SMEs, the capability of managing their banking needs through a mobile platform is a useful tool as it allows them to concentrate on core business operations. Usually operating as a sole proprietorship, a single individual deal with all aspects of their business thereby necessitating the use of a convenient mobile banking platform to save them time. Moreover, the increased penetration of smartphones and other mobile devices in Pakistan indicates potentially lucrative mobile-based banking services beneficial to all stakeholders involved.
Especially for emerging economies, SMEs have extremely limited access to financial services. A pertinent solution to address this hurdle as well as to unlock the entrepreneurial potential of the informal SME sector would be to ensure large-scale implementation of mobile banking.
For banks, there is ample incentive as the average cost of servicing a transaction on the mobile channel is lowest, making it a profitable segment. As mobile banking is still relatively in its infancy stage in Pakistan, the potential is ripe for banks to tap into the SME customer base with innovative mobile solutions.
It is now up to the banking sector to come up with an effective strategy that results in revolutionizing the mobile banking industry of Pakistan. This is possible by developing innovative and low-cost SME-focused products that place special emphasis on convenience and ease of use.
First published: May 20, 2016.
