JazzCash,
Mobilink’s favourite child?
The mobile financial services market has become significant for Jazz, and its success is one of the major things the company is betting on By Ahtasam Ahmad
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akistan’s largest telecommunication company, Jazz, is on an experimental spree to overhaul its business model. The Cellular Mobile Operator (CMO) is focusing on the 4G multiplay, meaning the operator doesn’t only want to remain a pipeline, but also evolve as a destination for its customers. Its focus is to encourage users to spend more time on the network by using its digital apps thus, generating incremental revenue. The CEO of Jazz, Aamir Ibrahim, while on a panel discussion arranged by Tabadlab last year, stated, “Jazz was a telecom company. Today we are a tech company; in the future, we’ll be a data company.’ But, what Jazz can be before that is a bank, a digital bank. The digital financial services (DFS) wing of the company that operates under the
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brand name of JazzCash has been a successful venture. Considering that this was not Jazz’s forte, the success on the financial services front becomes even more commendable. However, the company seems to be in a rush when it comes to DFS. It has set its sight on massive growth targets built on ambitious lending plans backed by growth in mobile wallet users. Yet, the journey is likely to be risky, with chances of regulatory, structural and internal deficiencies creating stumbling blocks along the way. In this article, we will try to explore where the telco’s financial services product currently stands, what is the journey ahead, and the myriad challenges they are likely to face.
JazzCash
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ontrary to popular belief, JazzCash is not a company but a brand under which Jazz offers its financial services. The service delivery is
governed by a joint venture contract between Mobilink Bank and Jazz. The bank takes care of the operational aspects while Jazz looks after technology, marketing and other stuff. As of December 31, 2021, JazzCash had around 39 million mobile wallet accounts holding around PKR 36 billion in deposits. This was a significant growth given that in 2020 it had approximately 28 million wallets while the digital deposit base was PKR 29.5 billion. Furthermore, the closing portfolio for digital lending was around PKR 2 billion while total loan disbursements grossed up to PKR 10-12 billion in 2021. The relatively short tenure for digital loans (around 4 weeks) means that Jazz can lend a more significant amount with a comparatively lower deposit base. Profitability, too, was great for digital lending as with a recovery rate of 95% and an exuberant annualised interest rate of between 160% to 180%, JazzCash lendings were clocking in an Earnings before Interest Tax, Depreciation and Amortisation (Ebitda) of approximately 50% However, the overall JazzCash operations still incurred a loss in 2020 and 2021. Why did this happen? Well, amid the pandemic, the State Bank of Pakistan (SBP) issued circular instructing banks to abolish Interbank Fund Transfer (IBFT) charges to account holders who could no longer go to bank branches or branchless banking agents because of the pandemic restrictions to make these transfers. Slashing these IBFT charges promoted digital payments but took away the primary source of revenue for branchless banking operations such as JazzCash. Simultaneously, growth in the adoption of digital financial services encouraged Jazz to re-think its strategy and move from a payment service provider to a digital bank. As a
