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Murtaza and Qamar

Branchless Banking

Presented By
Murtaza Ali Mohammad Umair Qasim Usman Qamar F09MB021 F09MB034 F09MB045

Branchless Banking (BB) represents a significantly cheaper alternative to conventional branch-based banking that allows financial institutions and other commercial players to offer financial services outside traditional bank premises by using delivery channels like retail agents, mobile phone etc. BB can be used to substantially increase the financial services outreach to the un-banked communities.

United Kingdom is an early pioneer of Branchless banking service. Launched by Midland Bank (now part of HSBC) in 1989, First direct accounts are operated solely via the Internet, post, or telephone, and they do not themselves operate any retail branches (although HSBC branches can be used to make deposits) while at the same time offering a full range of banking services.

Permissible Models for Branchless Banking .

the services may only be offered to customers using mobile connection of that specific telco. As a consequence. . one telco can have several one-to-one arrangements with many banks.One-to-one (1-1) Model In this model one bank offers mobile phone banking services in collaboration with a specific Telco. one bank can have several one-to-one arrangements with many telcos or alternately. Therefore. The example of this model is Easy Paisa It may be noted that one-to-one model does not necessarily require exclusivity.

One-to-one (1-1) Model Advantages It offers greater customization. good service standards. possibility of co branding and co marketing Disadvantages It lacks in outreach as it is limited to the customers of one telco only .

The example of this model is UBL Omni . This model offers the possibility to reach to any bankable customer who has a mobile phone connection.One-to-many (1-‘) Model In this model a bank offers mobile phone banking services to customers using mobile connection of any Telcos.

good service standards.One-to-many (1-‘) Model Advantages It offers greater customization. . possibility of co branding and co marketing. Disadvantage It lacks in outreach as it is limited to the customers of one telco only.

or by a subsidiary owned and controlled by an FI or a group of FIs. or by a third party service provider under proper agency agreement with a bank. Under this system. It is just like the existing ATM network in the country where customer of any bank can use ATM of any other bank. a central transaction processing system (TPS) is necessitated. which must be controlled by an FI. .Many-to-many (‘-‘) Model In this model many banks and many telcos join hands to offer services to virtually all bankable customers.

.Many-to-many (‘-‘) Model The TPS should be capable of. i) settling all transactions on real time basis. ii) storing all proofs of transactions and iii) providing a day end statement of account to all member banks.

Facilities offered by Branchless Banking System Opening and maintaining a BB Account ‡ A BB account can be opened and operated by a customer with a bank through use of BB channels.) . credit card accounts etc. Account-to-account Fund transfer: ‡ Customers may transfer funds to/from their BB account from/to their other pre-registered accounts (current/saving bank accounts. Banks may associate such account to a particular branch or to a centralized branchless banking unit. loan limit accounts.

Facilities offered by Branchless Banking System Person-to-person Fund Transfers: ‡ Customer can transfer funds from their BB or regular account to BB or regular accounts of same or some other bank of other customers. . ATM machines and authorized agent locations. Cash-in and Cash-out: ‡ Customers may deposit and withdraw funds from their BB account using a variety of options including bank-branch counters.

Gas.Facilities offered by Branchless Banking System Bill Payments: ‡ A BB account can also be used to pay utility bills (e. Merchant Payments: ‡ Loan Disbursement/Repayment: ‡ Remittances: ‡ . The same accounts may be used by customers to repay their loan installments. BB accounts may be used to send / receive remittances subject to existing regulations. Phone etc. particularly MFBs may use BB accounts as a means to disburse small loan amounts to their borrowers having BB accounts. Electricity.) Customers can use a BB account to make payments for purchases of goods and services.g. FIs.

‡ This approach is specific to the BB accounts and does not apply to the regular full service banking accounts. .Risk-Based Customer Due Diligence ‡ To maximize the share of branchless banking and to reach those area where conventional banking is not available. a risk-based approach to customer due diligence is mentioned here.

20.000 per day Rs. 60. Photocopy of computerized National Identity Card. Filling and signing an account application 2. businesses. 3. banking agents or third-party service providers.000 1.000 per month Rs.000 per year . Rs. 1. 2. KYC Requirements 1. Verification of CNIC by NADRA FI must set limits commensurate with each customer s profile. (Presently given under regulation M-1 of the PRs).Risk-Based Customer Due Diligence Account Level Description Level 1 Entry Level account sufficient for most low income individuals Level 2 Top level account offering all BB facilities and subject to full KYC requirements as applicable to a full-service banking account. 10. Fulfillment of additional requirements as specified by the FI. Level 3 Account specific for merchants. Maximum Balance Limits (debit/credit) Maximum Throughput Limits (debit/credit) FI must set limits commensurate with each customer s profile. 3. 2. Fulfillment of all KYC requirements specified under Prudential Regulations issued by SBP as amended from time to time. Filling and signing an account opening application form. Fulfillment of all requirements of level 3 account. 120. Verification of CNIC by NADRA 4. At least one personal face-toface contact with a designated employee of the FI or a biometric fingerprint scan and a digital photo taken by a BB agent must reach the FI Rs.

These may include fuel distribution companies. ..Agent Structure Super Agents: These may be organizations having wellestablished owned or franchised retail outlets. These will be responsible for managing and controlling subagents. or a distribution setup. Direct Agents: These may include large to medium sized stores etc. courier companies. chain stores etc. Pakistan Post. which have a separate agency/service level agreement with the FI.

. However.Role of Agents Sub Agents: These are the branches/outlets or franchised locations managed by a super agent and not directly controlled by the FI on a day-to-day basis. in case of franchised locations. these must have a similar service level agreement with the super agent as the super agent will have with the FI.

Loan disbursement / Repayment Collection (Without involving into loan marketing/approval functions). Cash in / Cash out for BB accounts.Role of Agents Agents may perform any or all of the following functions depending on the agency agreement and agent type as detailed in the following sections. Bills Payments (Both from registered BB customers as well as from walk-in customers (through cash) of any utility company). Opening of BB Accounts (Level 1 accounts only). .

infrastructure modifications and how these services fit in the bank s overall strategy. After getting this principle approval the FI shall. an application describing the services to be offered. 2) 3) 4) . in turn notify the SBP on the actual date of launching/ enhancement of its BB services. a principle approval of the application will be granted.Branchless Banking Procedures 1) Banks wishing to provide branchless banking services or to bring in substantial changes in underlying technological infrastructure shall submit to the State Bank. SBP shall pre-screen the overall financial condition of the FI as well as the compliance with the SBP rules and regulations based on the latest available onsite and offsite reports Based on the review.

the bank may be required to make a presentation and/or to submit any documents relating to of its branchless banking to SBP. 7) . the Authorization will be granted. Upon completion of evaluation. SBP still finds some unresolved issues and grey areas.Branchless Banking Procedures 5) Within thirty (30) days from such launching/enhancement. the following documentary requirements Business objectives Description of Banks electronic system List of Software and hardware components Contingency and Disaster recovery plan Copy of Contracts with service provider 6) If after the evaluation of the submitted documents. banks shall submit to the SBP.

Major Branchless Banking Service Providers in Pakistan Market Leaders in Branchless Banking: 1. Easy Paisa (Telenor in collaboration with Tameer Microfinance bank) 2. Omni Shop (UBL) .

.Easy Paisa The largest branchless banking service in Pakistan which offers the most convenient access to Financial Services for all Pakistanis.

. Mobile products: where the customer can use their mobile handset for financial transactions.Easy Paisa Easypaisa offers two kind of services : 1. Over-the-counter (OTC) products: where the customer can go up to any of the 5500 plus certified merchants for financial transactions 2.

000 easypaisa shops all over Pakistan .Products and services ‡ Money Transfer: Using Money Transfer from easy paisa. ‡ Features: Any person with a valid Nadra CNIC can send money or receive money This service is not limited to Telenor subscribers. other mobile network subscribers can also use this service Sending/Receiving can be done from more than 4. you can send and receive money to and from anyone from any easy paisa shop in the most efficient. secure and convenient way.

250 Rs. 200 Rs. 290 Rs. 174 Rs. 1-1000 Rs. 48 Total Charges Rs. 32 Rs.Service charges for money transfer Transaction Amount Rs. 8 Rs. 100 Rs. 300 Tax on Fee* Rs. 4001-6000 Rs. 50 Rs. 232 Rs. 150 Rs. 348 All fees are subject to 16% FED as per Government Regulations . 2501-4000 Rs. 116 Rs. 8001-10000 Fee Rs. 58 Rs. 40 Rs. 6001-8000 Rs. 24 Rs. 16 Rs. 1001-2500 Rs.

Gas and Telephone (PTCL) bills: ‡ ‡ ‡ ‡ ‡ ‡ Utility Companies On Board PTCL (Pakistan Telecommunication Company Limited) SSGC (Sui Southern Gas Company) SNGPL (Sui Northern Gas Pipelines Ltd) KESC (Karachi Electric Supply Company) HESCO (Hyderabad Electric Supply Company) MEPCO (Multan Electric Power Company) .Bill Payment ‡ Easypaisa bill payment service brings you a hassle free yet secure solution to pay your Electricity.

10 to be charged from the customer for any Utility Bill Paid of any denomination ‡ No FED is applicable here .Bill Payment Charges on payment of bills: ‡ Rs.

transfer money and use many more services from their own mobile phones ‡ Mobile Accounts are actual bank accounts and work just like a normal bank account ‡ Can be opened through: ± Telenor Sales and Service Centers. ± Telenor Franchise ± Tameer Bank branch .Mobile Account ‡ Telenor subscribers will now be able to pay bills.

No prior Bank Account is needed.000 easypaisa merchants in more than 450 cities in Pakistan . Anyone with a Telenor SIM can avail and use this service Send money to any person with a valid NADRA CNIC or to any other easypaisa Mobile Account.Mobile Account Features      Any Telenor current or new subscriber can open a Mobile Account. Utility bills can also be paid instantly from an easypaisa Mobile Account Cash Deposit into a Mobile Account or Cash Withdrawal from any Mobile Account can be done at more than 5.

Steps to open an account are: 1) Go to any Telenor Service Center.How to open a Mobile Account Easy Paisa Mobile Account is offered to only Telenor customers. Franchise or Tameer Bank 2) You should have a Telenor SIM (registered in your name) 3) You should carry original CNIC 4) Fill in a form plus photograph (will be taken by Telenor Staff in real time) 5) Sign the form plus thumb impression 6) Get the receipt and you are done .

Account Number You will be provided an account number. . exactly same as your mobile number plus an additional number at the end of your Telenor number.

120.000 per day.  Rs. These limits apply on both credits and debits in a Mobile Account  A customer can only keep a maximum of Rs.  Rs. 20. 60.000 per month and  Rs.000 in his easypaisa Mobile Account at any time .ransaction limits for Bank Account  The following transactional limits apply to all easypaisa Mobile Account.000 per year. 10. as regulated by the State Bank of Pakistan.

20 16% FED is applicable on banking services charges³ .20 23.40 69.20 6.40 9.00 19.80 16.Money Transfer (from an easypaisa Mobile Account to another easypaisa Mobile Account) Slab Slab Total Charges FED* Start End Charges 1 1001 2501 4001 6001 8001 1000 2500 4000 6000 8000 10000 20 40 60 80 100 120 3.60 92.60 12.20 46.00 139.80 116.

00 28.80 Total Charges 34.20 24.80 9.00 208.60 104.40 139.Money Transfer (from a CNIC to an easypaisa Mobile Account) ` Slab Start 1 1001 2501 4001 6001 8001 Slab End 1000 2500 4000 6000 8000 10000 Charges 30 60 90 120 150 180 FED* 4.80 16% FED is applicable on banking services charges³ .20 174.80 69.60 14.40 19.

60 232.80 139.60 32.Money Transfer (from an easypaisa Mobile account to a CNIC) Slab Start 1 1001 2501 4001 6001 8001 Slab End 1000 2500 4000 6000 8000 10000 Total Charges 46.00 38.20 25.20 185.40 92.80 19.40 16% FED is applicable on banking services charges³ .00 278.40 12.40 Charges 40 80 120 160 200 240 FED* 6.

USSD is a lot safer as compared to SMS . Account opening involves verification of CNIC through NADRA.  Security of all transactions will be ensured using Unstructured Supplementary Service Data (USSD) protocol.Security Concerns To ensure that all transactions made through easypaisa are secure.  The security of all customer information is through documentation that is based on State Bank of Pakistan s guidelines. important security needs have been addressed:  The selection of merchants through which transactions are taking place has been governed by all stringent measures described by the SBP.

UBL Omni Customers across Pakistan can open a UBL Omni bank account at any UBL Omni Dukaan of their choice by using their CNIC number and mobile phone number .

‡ ‡ . make postpaid mobile bill payment. make utility bill payments. by using their CNIC number and mobile phone number UBL Omni account holder will subsequently be able to deposit and withdraw cash. whether close to their home or place of work. purchase mobile card vouchers and make postpaid mobile bill payments. send or receive money.UBL Omni ‡ ‡ ‡ Direct challenge to Telenor Easy paisa All mobile networks have a support for UBL omni Customers across Pakistan can open a UBL Omni bank account at any UBL Omni Dukaan of their choice. purchase mobile card vouchers. send or receive money. People without a UBL Omni bank account will also be entertained at a UBL Omni Dukaan where they can make utility bill payments.

Omni Services For Walk In Customers 1. Utility Bill Payments For Account holders 1. Omni Dukaan Internet Banking . 2. money Transfer 3. Account Opening 2. Mobile Voucher Purchase 4.

purchase mobile card vouchers and make postpaid mobile bill payments. send or receive money. .Omni Dukan ‡ ‡ ‡ ‡ People without a UBL Omni bank account will also be entertained at a UBL Omni Dukaan Located in more than 100 cities Customer can open a UBL Omni bank account at any UBL Omni Dukaan Omni account holders can make ± ± ± ± utility bill payments.

500 . 500 Rs. 500) 1. transfer amount Rs. 25 per month Account opening: Initial deposit requirement Minimum balance charges Minimum balance requirement Rs.5% of the withdrawal amount Rs.35% of the transaction amount (Min.Charges Service Fee at UBL Omni Dukaan: Utility Bill Payment Mobile Voucher Purchase Mobile postpaid Bill Payment Omni money Transfer Cash Withdrawal Free Free Free 3.

± Physical or logical access to agents and TPS information system without proper controls may result into illegitimate access by disgruntled employees and malicious persons. .Risk Associated to Branchless Banking Agents Related Risks ± Agents may operate in hard-to reach or dangerous areas & they lack physical security systems and specially trained personnel ± Use of retail agents raises special concerns regarding consumer protection and compliance ± Client's profiles and financial data stored unencrypted on information systems of agents and TPS premises is vulnerable to leakage.

legal and reputation risks. ± Customer without proper awareness might store PIN on his/her mobile device which may be revealed easily on stealing . operational. thereby influencing the overall risk profile of banking. creating considerable uncertainty regarding the scalability of existing wireless products ± Physical or logical access to Telco facilities by unauthorized person especially in case where Short Message Service (SMS) ± Interruption in services of Telco due to technical or non-technical issue and non availability of any parallel system may cause disruption in service availability. ± wireless communication are still evolving.Wireless/ e-Banking Technology Risks ± Technology risk but in particular strategic.

Measures for Risk Mitigation Physical Security of Telco. Agent and TPS Facilities should be properly managed Availability of Services and back up plan in case of disaster. . Client transit data confidentiality and integrity Client stored data confidentiality and integrity Client profiling and maintenance of clients spending behavior Accountability and Non-Repudiation in case of criminal incidents Error messaging and exception handling to avoid exposure of clients information Authentication of client To educate End User about information security. FI.

Actors and Relevant Concerns .

Currently. Remittances also offer significant potential to support low income and vulnerable groups in the country. It is also estimated that approximately $2 to 4 Billion is transacted through informal channels ‡ ‡ ‡ .Contribution Towards Economy ‡ Remittance flow is widely believed to be a strong contributor to economy.95 billion. Pakistan s figure for domestic remittances through the formal channel stands at $6.

Branchless Banking aims to bring the bulk of informal activity into formal sector which will contribute to the economy of the country in a substantial way. ‡ .Contribution Towards Economy ‡ There are multiple entry barriers which push people towards informal channels: this includes ‡ absence of any infrastructure close to home ‡ cumbersome documentation process By breaking these barriers.

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