Digital payments have been paving the way businesses and consumers conduct payments and transactions. Taking a closer look at Pakistan, digital payments have provided the potential to drive the nation towards shifting into a completely cashless economy.
Safeer Khan, a tea merchant in Islamabad whose client base mostly consists of telecommunication company officers, was persuaded by his customers to introduce e-wallets, as the majority of them did not carry loose change with them most of the time. As a result, Khan opted for a digital payment system, and opened an account with a local payments firm.
Khan is one example of how digital payments are being integrated into Pakistani society. In Pakistan, 75% of the population is not included in the formal financial system, with only 25% holding a bank account or being in possession of some form of digital payment system.
Although digital payments are still being developed in the South Asian nation, there is potential to completely reform the country’s payments infrastructure. The State Bank of Pakistan has authorised move than twelve digital payment firms, licencing them to operate within the state.
“To unlock the $36-billion digital finance potential of Pakistan, it needs a high-level commitment, faster payment gateways, lower costs and fast-track licensing for the fintech sector and digitisation of government payments,” said World Bank Country Director for Pakistan Patchamuthu Illangovan in a tweet last month.
“Widespread use of digital payments in Pakistan can give a 7% boost to the gross domestic product (GDP) while creating four million jobs, mobilising over $250 billion in deposits and formalising large parts of the cash economy,” he added. “Only 18% of the population utilises digital payments in Pakistan right now.”
Illangovan noted that on average, Pakistani citizens make only one digital transaction every year, compared to five in India and seven in Indonesia, were digital payments have taken flight. He is confident however, that Pakistan has the potential to hike its digital payments use and eventually surpass its peers.
A platform for real-time retail payments, together with a burgeoning fintech industry could escalate the use of digital payments in Pakistan to at least 50% of the population by 2020, he believes.
Earlier this month, Pakistan rolled out a strategy to revolutionise its payment system from one that is primarily cash-based, to an almost cashless system. Backed by the World Bank, Pakistan announced plans to introduce a mobile app and install one million digital access points all over the country, within the next three years.
“The cost of cash right now is huge in Pakistan…[it] is one of the countries which stands out with a very large ratio of cash,” said State Bank of Pakistan (SBP) Governor Reza Baqir, prior to launching the National Payment System Strategy on November 1 together with World Bank President David Malpass.
The strategy will establish a road map for a modern and digital payment network. Its aim is to facilitate the process of accessing the financial system for new companies, banks, fintechs, and people in general.
“..For the people, it will be easier to make payments, it will be easier to receive payments, it will be easier to save and it will be easier to plan for your financial future,” Baqir added.