When Maliha Khan submitted her MBA thesis back in 2003, little did she know that her prediction about the spread of mobile technologies would prove so prescient.
Now, as Head of Wealth Management at United Bank Limited (UBL), she is harnessing the rapid adoption of mobile that she foresaw during her time at Durham University.
Mid-2000s too early for digital payments
Upon her return to Karachi following completion of her studies, Khan was keen to introduce digital transactions for farmers while consulting for the Asian Development Bank. However, she soon realised that mobile ownership rates in the mid-2000s were too low to support widespread adoption of digital payments.
In fact, it is only in the last decade that mobile phone ownership has become sufficiently common for Pakistan’s banks to embrace branchless banking.
Mobile wallets taking off
The trend towards digital has accelerated during the last couple of years, with telecoms companies, fintechs and traditional banks teaming up to enter the market as mobile wallet providers.
New entrants such as SimSim by Finja, Easypaisa by Telenor and JazzCash by Mobilink are enjoying rapid expansion due to easy-to-use text messaging-based payments and the fact that around half of Pakistan’s over 200 million population is unbanked.
Khan points out that this growth is in large part a response to the needs of people who move overseas to work and want to send money home cheaply, quickly and frequently.
Digital payments cost effective …
Today, UBL’s payments are increasingly conducted over its digital platform, with the bank targeting a significant shift in this direction over the next three years. The lower cost of facilitating digital transactions compared with counter service means that digital payments have proved hugely cost effective for the bank.
… and help reach unbanked areas
Digital solutions also provide a cost-effective way to reach unbanked areas – defined as locations with no banks within a 10-mile radius – without opening a branch. This is significant because while the regulator, the State Bank of Pakistan, offers tax breaks and other incentives to encourage branch openings in rural areas, it prohibits branch closures in previously unbanked areas, regardless of viability.
Slow start for digital wealth management …
In contrast to payments, enthusiasm for online wealth management solutions has been more muted in Pakistan. In fact, when Khan took up her current role in 2011, it was unclear if there would be a market at all. While UBL had a history of providing products such as mutual funds, shares and Pakistan Investment Bonds (treasury bonds), the impetus for a digital wealth management service actually came from the State Bank of Pakistan.
UBL heralded the 2013 launch of its digital wealth management offering with a comprehensive communication plan that included video tutorials, a blog, email and direct messages. However, adoption rates were low due to habit, a preference for human interaction, and a limited menu (the bank was unable to offer products such as shares online due to market dynamics).
… but incentives boosted demand
Then, the Securities and Exchange Commission of Pakistan, which regulates wealth management products, suggested that banks incentivise customers by waiving front-end loads, which are typically the highest fee for investors. After initially baulking at this, banks including UBL came up with solutions that launched in 2014. UBL’s current level of uptake is one of the highest in the market.
Lower thresholds broaden uptake
Predictably, the more modest cost base underpinning UBL’s digital wealth offering has enabled the bank to lower its threshold for wealth management clients. The current level is Rs10k (US$71k), down from Rs25k (US$178k), which is itself a reduction from an earlier Rs50k (US$355k). Thresholds are also dependent on the product, with minimum investments in mutual funds now as little as Rs9,250 (US$65). With a broader cross-section of society now able to access wealth management services, there is potential to further expand digital investment and savings products to serve the bank’s enlarged customer base.
New role for Khan
Since conducting this interview, Khan has stepped up to a new role in which digital also features prominently. As UBL’s Head of Governance & Business Controls, she is tasked with providing leadership against a constantly evolving backdrop that includes AML, FATCA and FATF*, not to mention rapid developments in digital.
Khan’s propensity for being ahead of the curve, evident even during her student days, should stand her in good stead.
* Anti-Money Laundering (AML), Foreign Account Tax Compliance Act (FATCA), Financial Action Task Force (FATF)