Booming e-banking – BR Research

The concentration of digital payments is improving in the banking system. In the first full fiscal year after the onset of the pandemic, cashless banking industry payment channels experienced immense growth. According to the latest SBP data for the fiscal year ended June 30, 2021, the four main Alternative Distribution Channels (ADCs) for bank payments – ATMs, ATMs, internet banking, and mobile banking – have all posted considerable growth in transactions. volume and value, some more pronounced than others.

It is ATM transactions – which are arguably not entirely contactless – that continue to dominate electronic banking channels. Customers completed around 600 million ATM transactions to withdraw over 8 trillion rupees in FY21, with volume increasing 17% year-on-year and value increasing 26% year-on-year. The average ATM transaction size was 13,489 rupees, an increase of 7% over the size of FY20. It should be emphasized, however, that the growth trend is not necessarily due to the expansion of ATM infrastructure – the 16,355 ATMs at end-June 2021 show only a 5% annual increase in the number of machines.

As highlighted in the previous coverage of online banking channels, growth in the era of the pandemic has been extraordinary in the truly digital channels of mobile banking and internet banking. For reference, these two channels together accounted for 24% of ATM transactions (by value) in FY2017 – fast forward to FY21 and both channels generated a transaction value that was 131% of ATMs! It helps that the combined user base of these two channels (16 mins in June 2021) has more than tripled in four years.

The regulatory decision taken at the start of the pandemic to waive fees on transfers made through digital channels was a game-changer and catapulted transaction volumes into the sky. There is now a qualified fee waiver, but most of the banking population can still make free transfers under the limit of Rs 25,000 per month. Internet banking continued to grow strongly with 93 million transactions worth 5,700 billion rupees in FY21, resulting in annual growth of 65% in volume and 92% in value. The average transaction size increased 16% year-over-year to Rs 60,613 in FY21 – the largest size among the four ADCs examined.

However, the growth of ADCs has been particularly exceptional in mobile banking. The roughly 5,000 billion rupees of transactions made through this avenue represent an amount that nearly tripled during the same period last year. The average transaction size was 25,415 rupees for FY21, showing 19% growth from the previous year and the highest growth rate among the four ADCs studied here. Expect this channel to continue to grow given the growing penetration of smartphones, 4G coverage and confidence in digital payments.

At the same time, POS transactions also experienced healthy growth during the year. Some 89 million customer transactions through point of sale generated 453 billion rupees in retail value, meaning a volume and value growth of a quarter in fiscal year 20. About 72,000 point of sale machines. sales were on in June 2021, which was encouraging nearly 1.5 times the machines running in June 2020. Regulatory incentives and tax breaks appear to be working, as does the tax authorities’ willingness to document retail transactions. The average POS transaction size was Rs 5,102 in FY21, roughly the same size as in the previous fiscal year.

As consumers and businesses gradually emerge from Covid-related difficulties, let’s see what FY22 has in store for e-banking.

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