Pakistan Banks Paying Up to Rs15 Billion Annually for Mandatory SMS Alerts as Telecom Costs Surge
KARACHI: Mandatory transaction alert SMS services have become a major financial burden for banks in Pakistan, with the banking industry forced to pay telecom companies up to Rs15 billion annually due to regulatory requirements.
Under directives from the State Bank of Pakistan and other regulatory obligations, banks are required to send SMS transaction alerts to customers for every digital banking activity, regardless of whether customers have subscribed to SMS alert services or not.
Banking sources told The News Eyes that the mandatory SMS notification system has significantly increased operational costs for financial institutions. Despite charging annual fees to some customers for SMS alert services, banks are still incurring heavy financial losses because of rising telecom charges.
According to industry sources, telecom operators — which offer bundled SMS packages to retail consumers at very low prices — are charging banks and financial institutions between Rs3.50 and Rs4 per SMS. Despite the massive transaction volumes generated by the banking sector due to rapid growth in digital banking, telecom companies are not offering discounted or bundled packages to banks.
Sources said that if a customer performs two to three transactions daily, resulting in 60 to 90 monthly transactions, the SMS cost to the bank reaches around Rs180 to Rs240 per month, or Rs2,160 to Rs2,880 annually per customer. For customers conducting around 10 transactions daily, SMS costs for banks can climb to nearly Rs900 monthly or close to Rs10,000 annually.
Because of regulatory and legal compliance requirements, banks have no choice but to continue sending transaction alerts and absorbing the continuously rising telecom costs.
A senior banker, speaking on condition of anonymity, said his bank alone pays between Rs3 billion and Rs4 billion annually to telecom companies for SMS services. He estimated that the total cost for the entire banking industry could reach as high as Rs15 billion every year.
Industry analysis further shows that even banks charging customers between Rs2,200 and Rs3,000 annually for SMS alert subscriptions are still operating these services at a loss instead of generating revenue.
Bankers have now urged regulators to allow the use of alternative digital communication channels, including mobile banking apps, push notifications, emails, and internet-based messaging platforms, instead of relying solely on mandatory SMS alerts.
Banking officials say telecom pricing has become the key driver behind rising SMS alert charges across Pakistan’s banking industry, while billions of rupees continue to flow annually from banks to telecom operators for mandatory customer communications.
