Changing trends: Technological developments in Pakistan’s banking sector
Monday, November 18, 2013
LAHORE: Technological advances are quickly changing the face of the Pakistani banking industry. Alternative channels are growing quickly and represent a sizable portion of banks’ revenue streams as all banks as well as mobile network operators are jumping on the ‘branchless banking’ bandwagon.
As I discussed in the previous piece about shrinking spreads, published on November 4, the business model utilised by commercial banks of collecting deposits and investing in treasury bills is not sustainable. No single additional revenue stream can completely compensate for the declining interest income, so banks will have to aggressively pursue revenue expansion from several diversified streams.
Competition is also expected to intensify in smaller cities as there are many underserved affluent customers in Hyderabad, Multan, Sukkur, etc. Aggressively growing mid-sized banks such as Bank Alfalah and Meezan Bank are looking to expand their branch network to these cities.
Given the intense competition and increasingly price-sensitive customers, price increase for standard banking services, such as cheque book issuance, is unlikely. To generate additional income, banks will have to develop new and innovative products and cross-sell to increase products per customer.