As Digital Bridge Limited, PTA and VRG square off, Asaan Mobile Account scheme takes a hit

The Sindh High Court on Wednesday dismissed a case filed by Digital Bridge (Pvt) Limited (DBL) against Pakistan Telecommunication Authority (PTA) which had been awaiting decision by the court since February this year. The recent judgment clears the way for Virtual Remittance Gateway (VRG) to move ahead with the commercial launch of Asaan Mobile Account (AMA) scheme of the State Bank of Pakistan (SBP) under its National Financial Inclusion Strategy (NFIS) to bank the unbanked. 

The case appears to be one of those old school moves in the business world of using courts to slow things down for a competitor from launching a scheme which can potentially benefit the economy at large. Digital Bridge Limited, allegedly backed by some serving and former executives of Pakistan’s telecom companies is another third-party service provider gunning to launch the AMA to bank the financially excluded. It’s competitor, Virtual Remittance Gateway, is ahead of DBL in terms of readiness for the launch of AMA and claims to have already crossed 1 million AMA accounts in it’s pilot phase. 

The final authorisation for the commercial launch has to come from the PTA in the form of a ‘commencement certificate’ granted to a company that has fulfilled all the prior conditions and VRG was on the verge of getting it that worried DBL. Before VRG could get their hands on the commencement certificate, in August last year, DBL approached the Sindh High Court and obtained a stay order against PTA to stop it from granting the commencement certificate to VRG, citing that the PTA was giving preferential treatment to VRG for the launch of AMA under TPSP license and discriminating against DBL. 

There are insinuations of collusion and conspiracy, outright claims of harassment and high-handedness, playing victim by a party and between all that, the collateral damage is the scheme called Asaan Mobile Account scheme (AMA) which can be a phenomenal opportunity to give access to formal financial services to the underprivileged segments by allowing them to open transactional banking accounts over feature phones. 

The AMA dream of the SBP was mandated under infrastructure sharing where banks and telcos would share their infrastructure to achieve interoperability. Banking for the underprivileged population would be possible in remote areas where 3G/4G and wi-fi access is restricted, through a system of USSD codes on non-feature phones. The current branchless banking agent network uses the USSD code system for banking on EasyPaisa and JazzCash using non-feature phones. 

This interoperability is going to be powered by a third-party service provider (TPSP) under a license from the PTA which will be authorised by the SBP. Both VRG and DBL are licensees at different stages of the 11-step process to a full-scale launch.  VRG is simply far ahead in this process which DBL alleges VRG was favoured by PTA to achieve. 

A delaying tactic at best

DBL approached the court apparently with a fear that if the court did not intervene, the telecoms regulator PTA was likely to destroy the prospects of DBL of having a successful business by allowing VRG to move in first and capture the market. In it’s petition, DBL asserted that PTA was favouring VRG in the award of the TPSP license and DBL gets to lose on the market share. 

Under the requirement for the TPSP license, DBL asserts that it is the only TPSP with its own USSD (Unstructured Supplementary Service Data) platform, inspected and approved by the regulator in 2019. But despite being inspected and approved, the regulator was not issuing DBL the commencement certificate which was the final step before a TPSP licensed company can commence commercial operations. 

On the other hand, PTA had issued a letter in June 2020 regarding the ‘Readiness of Commercial Launch of AMA Scheme’, in which it had endorsed that VRG was ready for commercial launch. The aggrievement here was that under the TPSP license, a company is required to have its own USSD platform to qualify to provide TPSP services and DBL asserted that VRG did not have its own USSD platform and was entering into partnerships with telcos to use their USSD platforms for TPSP services.

DBL perceived the letter as an approval from PTA to VRG to launch commercial operations when VRG had not yet fulfilled all the requirements, making DBL the wronged party in the arrangement. If VRG had started commercial operations without having its own USSD platform, it would be with an unfair advantage given to VRG while DBL had to build its own platform. And because it thought it was being wronged, it straight out pleaded the court to stop VRG from undertaking any commercial activity, declare some of their agreements illegal, and take penal action against the company to the extent of cancelling VRG’s TPSP license if necessary. 

While DBL insinuated that there was some sort of a collusion between PTA and VRG which was hurting DBL, it also asserted that VRG, at the same time was able to assert pressure and harass the telecoms regulator which was hindering PTA’s capacity to act partially, and the only way to stop the regulator from acting partially was through the oversight of the court. 

The assertion is debatable because there is a history of antagonism of telcos with the TPSP regulations which earlier faced an inordinate delay allegedly because of the lobbying by the telcos. The initial memorandum between PTA and SBP to launch TPSP regulations was announced in 2012 and it took three years to finally announce TPSP regulations. Add on the fact that the PTA is a telecoms regulator and telcos have been around for decades while VRG is still a young company only a couple of years old. 

Telcos are likely to have more clout in PTA by virtue of being associated with the industry for a long time than VRG, and there are rumours in the market too that DBL was launched by telcos, which adds more weight to the fact that telcos have purpose towards dragging the launch of AMA. In fact, VRG has earlier alleged that PTA was favouring DBL and was delaying issuance of VRG’s commencement certificate for commercial operations. 

Both VRG and DBL were granted a TPSP license in 2018, which would eventually culminate in the commercial launch after fulfilling all requirements of the 11-step process, from submission of application for license to issuance of commencement certificate by PTA for commercial launch. 

VRG has thus far completed all steps, however the commencement certificate was delayed because of the court order. The court also said that VRG had, in fact, installed its own USSD channel and gave a successful demonstration to the State Bank of Pakistan and the finance minister. 

VRG further launched a pilot in September 2019 which was completed in January 2020 and court observed that records show that VRG fulfilled all the requirements for the issuance of commencement certificate and that the PTA several times inspected USSD channels installed by VRG and confirmed its satisfaction to the cellular mobile operators. 

The ‘Readiness of Commercial Launch of AMA Scheme’ letter was also hence sent to cellular mobile operators by the PTA to apprise them of the operational readiness of the scheme so that they could execute agreements with TPSP. In fact, the letter was not even received by VRG and was not at all tantamount to giving the final commencement certificate to VRG. 

An official application to request the commencement certificate was submitted to PTA by VRG nearly two months after the readiness letter was sent to telcos.  VRG has already signed an agreement with Jazz, the biggest cellular services operator in Pakistan and others are also in the final phases of the conclusion of the agreement. 

On the DBL side, PTA said that Digital Bridge Limited counsel confirmed that they had not yet satisfied requirements for the commencement certificate and had not even filed an application for getting the certificate. In fact, DBL had even not submitted an application at the SBP for their authorisation (Step 10 in the flow chart), therefore it had wrongly asserted that their launch was being delayed by PTA. 

The argument also turns then, insinuating that the entire court case was simply a malicious ploy by DBL to delay VRG’s commercial launch by blaming the regulator which argues it was acting impartially. The counsels of both VRG and DBL also argued in the court that because DBL was lacking on the requirements to fulfil for the commercial launch because of its own lethargy, it was now dragging the regulator and its competitor to court to delay the commercial launch of competitor just so that it does not get a head start in the market, and hence obtained a stay order from the court.

To reiterate again, VRG claims to have crossed 1 million Asaan Mobile Accounts on its platform and it is still in the pilot phase and plans to add another 4 million accounts by the end of this year and 10 million more by the first quarter of next year. VRG is aggressive but DBL has not been able to keep up the pace, and in its desperation, it perhaps had no other way but to use delaying tactics like obtaining a stay order. 

What the regulator did affirm was that the commencement certificate will not be granted if the PTA finds any shortcomings at VRG’s ends. VRG counsel also affirmed that VRG will not commence operations until a commencement certificate was received from PTA. And even if VRG somehow did get the commencement certificate while flouting rules, and what goes on to prove as well that the case was filed to delay the launch of AMA, the aggrieved party has the right to appeal the regulator’s decision under the Telecom Act which governs the regulator. 

Section 7 of the Telecoms Act gives right to any person aggrieved by any decision or order of any officer of the PTA to appeal the decision with Pakistan Telecommunication Authority and the authority has shall decide the appeal in 30 days. 

Going to the court could have been avoided and the matter could have been resolved with the regulator. Even if PTA had issued commencement certificates to VRG and DBL had a cause to believe that PTA had gone over the top and overlooked rules in doing so, DBL could have simply appealed the decision with PTA under the Telecom Act. 

Even after the appeal if DBL was not satisfied with PTA’s ruling in respect of VRG’s certificate, it could reach out to court to seek respite against the appeal decision. Instead, DBL chose the more lengthy and arduous process of reaching out to courts first asking for a stay order, perhaps knowing that the stay would be lifted because the court in its judgment also said that the stay order could not be maintained because DBL failed to make a case that its grievances were unjustified with respect to restraining VRG from doing business. 

What it did for DBL was give it time. The stay order was obtained on August 18, 2020. The court, being a steward of justice and due process, took its time to evaluate the case and eventually lifted the stay after over 14 months on November 3, 2021.  That is 443 days for DBL to remove any deficiencies in its systems and comply with its obligations with regards to the process for obtaining commencement certificate for itself while VRG was embroiled in the case and could not move forward with anything because it had no other requirements to fulfil. All the while, the costs caused by the delay were also borne by the VRG sponsors. 

The victim

It’s a win for DBL but an inglorious one. DBL lost the case but it succeeded in getting done what it had intended with the filing of the case; that is delaying VRG from launching AMA which can potentially be a game changer for the economy. It can still file the appeal with PTA if it has reservations since the commencement certificate has been granted to VRG, and can still choose to go to court just to frustrate the process and competitor. 

But what’s really going to be delayed is the Asaan Mobile Account scheme through which the underprivileged and the poor can gain access to formal financial services. Bare access to a bank account can ease the bare basic function of transferring money from one bank account to another for those that have less means. Funds transfers from banks alone are still the best option cost-wise for transferring money than the traditional ways of transporting cash from one place to another and transferring money through branchless banking agents. 

AMA will have functionalities more than just funds transfers like mobile top-ups and payments of utility bills. With the launch of AMA being delayed, however, the underprivileged are being deprived of their right to less costly banking facilities which are currently restricted to cities only. It would have been a different case if users had not shown interest towards AMA but if VRG’s numbers are to be believed, 1 million plus AMA accounts in the pilot phase that have processed 11 million transactions worth over Rs6.2 billion turnover, show that the project holds promise which can eventually help with digitisation of economy, lead to introduction of new financial products for the low-income groups such as micro loans or micro insurance, encouraging economic development eventually.