November 25, 2007	Sunday	Ziqa’ad 14, 1428

KARACHI, Nov 24: Banking has been brought to ground level as banking services will now be offered on mobile phone, petrol pumps, post office, courier companies, chain of stores, etc.

The State Bank on Saturday announced Branchless Banking (BB) and issued detail guidelines for banks willing to enter into this new field to offer banking services in those areas where they have no branches.

“This represents a significantly cheaper alternative to conventional branch-based banking and allows financial institutions and other commercial players to offer financial services outside traditional banks’ premises,” said the State Bank.

The SBP designed three basic models to offer these services. In the first model, one-to-one, mobile phone banking services will be offered by a bank in collaboration with a specific telecommunication company (Telco) to only those customers using mobile connection of that specific Telco.

In other model, one-to-many, 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.

In the third model, many-to-many, several banks and many telcos can 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.

“Branchless banking can also be done using agents other then Telcos (like Fuel distribution companies, Pakistan Post, chain stores etc.) and using technologies not limited to mobile phone (like GPRS, POS terminals etc.),” said the SBP.

In each case customer account relationship must reside with some FI and each transaction must hit the actual customer account and no actual monetary value is stored on the mobile-phone or TPS server (the balances shown on mobile phone etc., are merely a reflection of actual account balances).

Consequently, the use of the term e-money to represent the services offered under these guidelines is prohibited as being technically incorrect.

A BB account is an account opened and operated by a customer with a bank. Banks may associate such account to a particular branch or to a centralised branchless banking unit. Account capabilities or limits are commensurate with the level of customer due diligence (CDD) and KYC procedures the customer has undergone.

Customers may transfer funds to or from their BB account from or to their other pre-registered accounts (current/saving bank accounts, loan limit accounts, credit card accounts etc.)

Customer can transfer funds from their BB account to BB or regular accounts of other customers of same or some other bank (depending on the model capabilities).

Customers may deposit and withdraw funds to or from their BB account using a variety of options including bank-branch counters, ATM machines and authorised agent locations.A BB account can also be used to pay utility bills (e.g. gas, electricity, phone, etc.). Customers can use a BB account to make payments for purchases of goods and services.

The SBP said 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.

The SBP introduces idea of “Super Agent” which may be organisations 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.,” said the SBP.

There would be direct agents which may include large to medium sized stores etc., having a separate agency or service level agreement with the FI.

There are sub-agents also and these are the branches or outlets or agents not directly controlled by the FI on a day-to-day basis. These will be managed by a super agent.

“However, these must have a similar service level agreement with the super agent as the super agent will have with the FI,” said the SBP.