Branchless Banking

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

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

Advantages Disadvantages

It offers greater It lacks in outreach as it

customization, good is limited to the
service standards, customers of one telco
possibility of co only
branding and co
marketing
 One-to-many (1-∞) Model
In this model a bank offers mobile phone
banking services to customers using mobile
connection of any Telcos.
This model offers the possibility to reach to
any bankable customer who has a mobile
phone connection.
The example of this model is UBL Omni
 One-to-many (1-∞) Model

Advantages Disadvantage

It offers greater It lacks in outreach as it

customization, good is limited to the
service standards, customers of one telco
possibility of co only.
branding and co
marketing.
Many-to-many (∞-∞) Model
In this model many banks and many telcos join
hands to offer services to virtually all bankable
customers.
Under this system, a central transaction
processing system (TPS) is necessitated, which
must be controlled by an FI; 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.
It is just like the existing ATM network in the
country where customer of any bank can use ATM
of any other bank.
 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. Banks may associate such account to
a particular branch or to a centralized
branchless banking unit.
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, loan
limit accounts, credit card accounts etc.)
 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.

Cash-in and Cash-out:

• Customers may deposit and withdraw funds
from their BB account using a variety of
options including bank-branch counters, ATM
machines and authorized agent locations.
 Facilities offered by Branchless
Banking System
Bill Payments:
• A BB account can also be used to pay utility bills (e.g. Gas,
Electricity, Phone etc.)
Merchant Payments:
• Customers can use a BB account to make payments for
purchases of goods and services.
Loan Disbursement/Repayment:
• FIs, particularly MFBs may use BB accounts as a means to
disburse small loan amounts to their borrowers having BB
accounts. The same accounts may be used by customers to
repay their loan installments.
Remittances:
• BB accounts may be used to send / receive remittances
subject to existing regulations.
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.

• This approach is specific to the BB accounts

and does not apply to the regular full service
banking accounts.
 Risk-Based Customer Due Diligence

Account Level Level 1 Level 2 Level 3

Description Entry Level account sufficient for most Top level account offering all BB Account specific for merchants,
low income individuals facilities and subject to full KYC businesses, banking agents or
requirements as applicable to a third-party service providers.
full-service banking account.

KYC 1. Filling and signing an account 1. Filling and signing an 1. Fulfillment of all
Requirements opening application form. account application requirements of level 3
2. Photocopy of computerized 2. Fulfillment of all KYC account.
National Identity Card. requirements specified 2. Fulfillment of additional
3. Verification of CNIC by NADRA under Prudential requirements as specified
4. At least one personal face-to- Regulations issued by SBP by the FI.
face contact with a designated as amended from time to
employee of the FI or a biometric time. (Presently given under
fingerprint scan and a digital regulation M-1 of the PRs).
photo taken by a BB agent must 3. Verification of CNIC by
reach the FI NADRA
Maximum Rs. 60,000 FI must set limits commensurate FI must set limits commensurate
Balance with each customer’s profile. with each customer’s profile.
Limits
(debit/credit)
Maximum Rs. 10,000 per day
Throughput Limits Rs. 20,000 per month
(debit/credit) Rs. 120,000 per year
 Agent Structure
Super Agents:
These may be organizations having well-
established owned or franchised retail outlets,
or a distribution setup. These will be
responsible for managing and controlling
subagents. These may include fuel distribution
companies, Pakistan Post, courier companies,
chain stores etc.
Direct Agents:
These may include large to medium sized stores
etc., which have a separate agency/service
level agreement with the FI.
 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.
However, 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.
 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;
• Opening of BB Accounts (Level 1 accounts
only).
• Cash in / Cash out for BB accounts.
• Bills Payments (Both from registered BB
customers as well as from walk-in customers
(through cash) of any utility company).
• Loan disbursement / Repayment Collection
(Without involving into loan marketing/approval
functions).
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, an application describing the services to be
offered, infrastructure modifications and how these
services fit in the bank’s overall strategy.
2) 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
3) Based on the review, a principle approval of the
application will be granted.
4) After getting this principle approval the FI shall, in
turn notify the SBP on the actual date of launching/
enhancement of its BB services.
Branchless Banking Procedures
5) Within thirty (30) days from such
launching/enhancement, banks shall submit to the SBP,
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, SBP

still finds some unresolved issues and grey areas, the bank
may be required to make a presentation and/or to submit
any documents relating to of its branchless banking to
SBP.

7) Upon completion of evaluation, the Authorization will be

granted.
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.
 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. Mobile products:
where the customer can use their mobile
handset for financial transactions.
 Products and services
• Money Transfer:
Using Money Transfer from easy paisa, you can
send and receive money to and from anyone
from any easy paisa shop in the most efficient,
secure and convenient way.
• 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
4,000 easypaisa shops all over Pakistan
Service charges for money transfer
Transaction Tax on
Fee Total Charges
Amount Fee*
Rs. 1-1000 Rs. 50 Rs. 8 Rs. 58
Rs. 1001-2500 Rs. 100 Rs. 16 Rs. 116
Rs. 2501-4000 Rs. 150 Rs. 24 Rs. 174
Rs. 4001-6000 Rs. 200 Rs. 32 Rs. 232
Rs. 6001-8000 Rs. 250 Rs. 40 Rs. 290
Rs. 8001-10000 Rs. 300 Rs. 48 Rs. 348
All fees are subject to 16% FED as per Government Regulations
 Bill Payment
• Easypaisa bill payment service brings you a hassle
free yet secure solution to pay your Electricity, 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
Charges on payment of bills:
• Rs. 10 to be charged from the customer
for any Utility Bill Paid of any
denomination
• No FED is applicable here
 Mobile Account
• Telenor subscribers will now be able to pay bills,
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
Features
 Any Telenor current or new subscriber can open a
Mobile Account. No prior Bank Account is needed;
 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.
 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 5,000 easypaisa merchants in more than
450 cities in Pakistan
 How to open a Mobile Account
Easy Paisa Mobile Account is offered to only
Telenor customers. Steps to open an account are:

1) Go to any Telenor Service Center, 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.
 Transaction limits for Bank
Account
 The following transactional limits apply to all
easypaisa Mobile Account, as regulated by the
State Bank of Pakistan.
 Rs. 10,000 per day,
 Rs. 20,000 per month and
 Rs. 120,000 per year.
These limits apply on both credits and debits in a Mobile
Account

 A customer can only keep a maximum of Rs.

60,000 in his easypaisa Mobile Account at any
time
 Money Transfer
(from an easypaisa Mobile Account to another easypaisa
Mobile Account)
Slab Slab Total
Charges FED*
Start End Charges

1 1000 20 3.20 23.20

1001 2500 40 6.40 46.40
2501 4000 60 9.60 69.60
4001 6000 80 12.80 92.80
6001 8000 100 16.00 116.00
8001 10000 120 19.20 139.20
16% FED is applicable on banking services charges“
 Money Transfer
(from a CNIC to an easypaisa Mobile Account) `

Slab Slab Total

Charges FED*
Start End Charges
1 1000 30 4.80 34.80
1001 2500 60 9.60 69.60
2501 4000 90 14.40 104.40
4001 6000 120 19.20 139.20
6001 8000 150 24.00 174.00
8001 10000 180 28.80 208.80

16% FED is applicable on banking services charges“

 Money Transfer
(from an easypaisa Mobile account to a CNIC)

Slab Slab Total

Charges FED*
Start End Charges

1 1000 40 6.40 46.40

1001 2500 80 12.80 92.80
2501 4000 120 19.20 139.20
4001 6000 160 25.60 185.60
6001 8000 200 32.00 232.00
8001 10000 240 38.40 278.40
16% FED is applicable on banking services charges“
 Security Concerns
To ensure that all transactions made through easypaisa
are secure, 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.
 The security of all customer information is through
documentation that is based on State Bank of
Pakistan’s guidelines. Account opening involves
verification of CNIC through NADRA.
 Security of all transactions will be ensured using
Unstructured Supplementary Service Data (USSD)
protocol. USSD is a lot safer as compared to SMS
 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
 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, whether close to their home or place of
work, by using their CNIC number and mobile phone
number
• UBL Omni account holder will subsequently be able
to deposit and withdraw cash, make utility bill
payments, send or receive money, purchase mobile
card vouchers, make postpaid mobile bill payment.
• People without a UBL Omni bank account will also
be entertained at a UBL Omni Dukaan where they
can make utility bill payments, send or receive
money, purchase mobile card vouchers and make
postpaid mobile bill payments.
 Omni Services

For Walk In Customers

1. Account Opening
2. money Transfer
3. Mobile Voucher Purchase
4. Utility Bill Payments

For Account holders

1. Omni Dukaan
2. Internet Banking
 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,
– send or receive money,
– purchase mobile card vouchers and
– make postpaid mobile bill payments.
 Charges
Service Fee at UBL Omni Dukaan:
Utility Bill Payment Free
Mobile Voucher Purchase Free
Mobile postpaid Bill Payment Free
3.35% of the transaction
Omni money Transfer amount (Min. transfer amount
Rs. 500)
Cash Withdrawal 1.5% of the withdrawal amount
Account opening:
Initial deposit requirement Rs. 500
Minimum balance requirement Rs. 500
Minimum balance charges Rs. 25 per month
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.
– Physical or logical access to agents and TPS
information system without proper controls may
result into illegitimate access by disgruntled
employees and malicious persons.
Wireless/ e-Banking Technology Risks

– Technology risk but in particular strategic,

operational, legal and reputation risks, thereby
influencing the overall risk profile of banking.
– wireless communication are still evolving, 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.
– Customer without proper awareness might store
PIN on his/her mobile device which may be
revealed easily on stealing
Measures for Risk Mitigation
Physical Security of Telco, FI, 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.
Actors and Relevant Concerns
 Contribution Towards Economy
• Remittance flow is widely believed to be a strong
contributor to economy.

• Remittances also offer significant potential to

support low income and vulnerable groups in the
country.

• Currently, Pakistan’s figure for domestic remittances

through the formal channel stands at $6.95 billion.

• It is also estimated that approximately $2 to 4 Billion

is transacted through informal channels
 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, 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.
 Thank You
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