VIRTUAL -DEVELOPING WORLD- VECTORS : BANKING

MOBILE WALLETS are becoming increasingly popular in the developing world, thanks to the increasing number of young, tech savvy people with limited familiarity or access to traditional brick and mortar banking systems.

Virtual banks, however, have not made significant inroads, even though they could theoretically take advantage of the same potential customer base.

For example, In Pakistan, just a few backs back, a new entrant to the market was granted SBP's [State Bank of Pakistan] approval to operate.

TAG bills itself as a ''super app'' which also gives its users debit cards and offers functionality much akin to virtual bank. According to its website, the app shpuld be available in early 2021.

It will be interesting to see how the company and its app fare in the market. Several brick and mortar banks already offer online banking products and apps of varying degrees of quality, while existing mobile wallet products offer many of the other services that traditional banks do not or cannot. 

That is not to say that the market cannot accommodate another player. Even after a spike in the use of  digital payments caused by Covid 19 lockdowns, the average number of interbank funds transfers were only around 350,000 per day - almost double the number at the start of the year, but still relatively low.

But we hope that new companies also offer innovative products rather than merely filling a void. In Mostar western countries, online banks provide remarkably high interest rates on saving accounts and friendly terms for loans and other form of financing.

Some also offer money management tips, often giving the young people the only access to honest, no strings financial advice that they can afford.

They can do this because virtual banks have significantly lower staff and office costs. In many cases, they will only have single brick-and-mortar office, and substantially lower staff since most operations are automated and don’t require staff.

This helps set them apart from established traditional banks and benefits consumers and the industry by introducing healthy new competition and better products.