With new regulation and licences, what are the implications for branchless banking?

Perhaps nothing speaks to the success of JazzCash and Easypaisa more than the fact that they control 70% of the total value of branchless banking transactions that take place in the country, and just over 80% of the total volume of these transactions. 

It is important to define a few terms here before we get into why this matters. Branchless banking is a very specific category within the banking sector, defined by what licence has been granted to a financial institution by the State Bank of Pakistan (SBP). Branchless banking is not a term used to define online banking as a whole, but for institutions like JazzCash and Easypaisa which provide certain financial services without having branches. And these two are not the only players in the market, even though they have become synonymous with the concept. In fact, traditional banks like HBL and UBL have also introduced their own branchless banking services such as Konnect and Omni. 

That is what really matters. Even though major banks made a pretty big splash trying to get in on the branchless banking segment, the telco backed JazzCash and Easypaisa have dominated the segment. But the era of branchless banking might be changing. The SBP has introduced new regulatory measures, particularly its new digital banking licence, that could signal a turning point for the industry. 

These digital banking licences, set to launch operations by 2025, may alter the landscape as existing branchless banking providers evaluate whether they should transition fully to digital banking models or remain within the branchless banking framework. This article explores the history of branchless banking in Pakistan, its rise through the efforts of telecom giants, challenges faced by traditional banking institutions, and the regulatory changes that may redefine this sector.