KARACHI:
Pakistan is witnessing a remarkable increase in the number of digital payment transactions that increased by six percentage points to 80% in retail banking in the quarter ending September 30, 2023, helping to document the economy and reduce reliance on cash.
In its latest “Payment System Review for the Quarter Ended 30 September 2023”, the State Bank of Pakistan (SBP) reported that the share of digital payment transactions was 74% in retail banking in the same quarter last year (Q1FY23 ). .
The share of over-the-counter (OTC/physical) trading fell to 20% in the July-September quarter of FY24. The value of online transactions, however, remained low, averaging slightly over Rs 80,000 each compared to physical transactions valued at Rs 830,000 each.
This suggests that the use of electronic payments is increasing among people-to-people (P2P), but remains low among businesses where the size of transactions is usually large.
According to the SBP, currency in circulation plays a critical role in shaping the payments landscape. As of the quarter ended September 2023, the currency in circulation was Rs 8.29 trillion compared to Rs 9.15 trillion in the previous quarter. “The decline in currency in circulation coupled with the rise of digital payments reflects a shift in customer preferences towards using electronic payment methods over traditional cash-based payments.”
Pakistan, as an emerging economy, has seen remarkable growth in the digitization of its payment systems, a testament to the nation’s forward-thinking approach. The emergence of digital integration, Raast (instant payment system), real-time gross settlement (RTGS) and fintechs have brought convenience and easy access to banking to individuals and businesses. Pakistan has undergone a transformational change, shifting from traditional models to adopting innovative technologies, paving the way for a more progressive economic landscape. These advances revolutionize payments, making them instant and transparent.
“This leap forward is not only about technology, but also about building more trust and efficiency in the financial system,” the SBP said. The central bank clarified that the number of total transactions was recorded at 702 million in retail banking, including 561 million (or 80%) through digital means and 141 million (20%) over-the-counter.
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In terms of transaction value, the retail banking system recorded payments worth Rs 134 trillion in the quarter under review (Q1 24Y) including Rs 45 trillion (or 13%) through online channels and Rs 117 trillion (87%) OTC.
The number of online banking users rose to 10.3 million in the quarter ending September 30, 2023 compared to 9.6 million in the previous quarter.
Mobile banking users increased to 17 million compared to 16.1 million in the previous quarter. The number of e-wallet holders increased to 2.4 million compared to 2 million earlier.
There were 61.3 million m-wallet holders (issued by branchless banking providers) by the end of the July-September quarter. At the same time, 54.3 million payment cards were issued to customers, of which 79% were debit, 17% social welfare cards and 4% credit.
All these retail transactions were facilitated by the payment network provided by banks, Micro Finance Banks (MFBs) and Electronic Money Institutions (EMIs).
This included a network of 17,768 bank branches, 18,117 ATMs, 118,444 point-of-sale terminals and 7,310 registered e-commerce merchants (with banks/MFBs).
As of the end of the quarter, there were 33 banks, 11 MFBs, four EMIs and 5 payment service providers/system operators (PSOs/PSPs) providing payment services across the country.
In addition, the Real Time Gross Settlement System (RTGS) and Raast – an instant payment solution, both managed by SBP, further enriched the country’s payments infrastructure. In addition, 16 banks and MFBs have extended their offerings to Branchless Banking (BB) services thereby widening the accessibility of financial services.
Published in The Express Tribune, December 31St2023.
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