I would be pretty annoyed if my bank started to charge me for putting money in to my bank account. What strategy would CGAP’s partner in Pakistan, Tameer Microfinance Bank consider with their “mobile wallet”?  I spent a week in Pakistan with Ali Abbas Sikander and the Easypaisa team who have been thinking about their pricing strategy for the past three months.

EasyPaisa, a new brand of financial services offered by Telenor and Tameer, was launched on 14 October 2009 as an over-the-counter (OTC) bill payment service. A month later an OTC domestic money transfer product also became available. Both of these services are open to customers on any network as the agent carries out the transaction on her or his mobile phone. The “mobile wallet” will be available only to customers of Telenor (the MNO that has bought a majority stake in Tameer) who will be able to carry out bill payments, make money transfers and in the future access a whole range of financial services from their phone. Customers will have to visit an EasyPaisa agent to load up their mobile wallets or to make a withdrawal. Tameer and Telenor are considering whether to charge either a flat or a tiered-fee  to cash-in and cash-out to the wallet. Evidence from other countries suggests that customers will accept real negative interest rates to safely store their money , but being charged a fee to deposit their own money may prove to be a big a psychological barrier. Other services that have tried to charge a fee to cash-in (such as WIZZIT in South Africa) have struggled to build customer numbers.  How would the scenario be different with Easypaisa?

There are already some hints that customers value the convenience of EasyPaisa products enough to pay a premium for their use. In the first three months following the launch of EasyPaisa they have processed around 275,000 bill payments through their network of around 4,500 agents. For this service they charge a fee of Rs 10 – 25, (12 – 30 US cents) depending on the size of the bill. But Pakistani regulations ensure that the same bill can be paid for free at any commercial bank or through a network of government agents. So why would anyone chose to pay even a very small fee to process a bill?

There are a number of possible reasons for this. Firstly, agents tend to have longer opening hours than banks and government agents. Rs 10 might be a price you consider worth paying if it means that you don’t have to close your shop for two hours to wait in line at a bank. Secondly, banks are not very keen to attract such low margin business at their branches and long waiting times or just a lack of familiarity with banks may mean that customers may feel more comfortable at an EasyPaisa agent. Part of the reason for this may be related to their proximity to alterative service providers.

Telenor will pay commissions to their agents for loading up customers’ mobile wallets (and will want to ensure that agents receive commission for loading up a wallet as for processing an OTC transaction).  This will obviously push up the cost of the service. Research being conducted by CGAP’s Mark Pickens and Claudia Mackay which will soon be released looks set to show that some of the best known branchless banking services are actually more expensive than other alternatives available in the market. Customers it seems will pay for convenience, reliability and good quality services (haven’t we all at some point chosen to pay ATM fees when we can’t be bothered to walk to the nearest branch of our own bank?)
EasyPaisa has a lot of factors in its favor. The 2008 Branchless Banking Regulation  issued by State Bank of Pakistan has created possibly the most progressive regulatory environment in the world. And although attention is often focused on the enormous market in neighboring India, Pakistan’s population of 170 million makes it an attractive market (especially when you consider that 86% of Pakistanis do not have access to any form of formal financial services). But whether customers will pay cash-in fees is another question – and something that we will be watching carefully over the coming months if EasyPaisa does decide to charge.

-Chris Bold