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Raast Aims to Create Pakistan's Unified Digital Payments Infrastructure

RiazHaq

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Oct 31, 2009
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Pakistan's central bankers have taken the plunge into the world of digital payments with their own offering: Raast. It aims to create an instant low-cost payment system that can seamlessly connect government entities, a variety of banks and State Bank authorized private payment processors like 1Link and NIFT which may choose to take advantage of it. Currency and coins in circulation account for about 43% of Pakistan's economy. The introduction of Raast is part of the government's effort to modernize and document the nation's cash-based informal economy. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion. It will also promote e-commerce in Pakistan.






Raast Digital Payments:

Raast is a system of digital payment infrastructure. It is essentially a pipe that is intended to connect government and financial institutions with consumers and merchants with each other to process payments instantly at very low cost.

Raast will be boosted by Pakistan government's decision to use it to pay salaries, pensions and pay welfare recipients under Benazir Income Support and Ehsaas Emergency Cash programs.


It has been developed in-house by the State Bank of Pakistan in collaboration with Karandaaz, Bill & Melinda Gates Foundation and supported by the World Bank, the British government and the United Nations.

Private Payment Apps:

Several private payment apps, including EasyPaisa and JazzCash, are already operating in Pakistan. These apps lack interoperability with each other. Each operates in its own silo. Neither of these offer links to financial institutions and government entities.

There are also several EMIs (Electronic Money institutions) in Pakistan. These include NayaPay, SadaPay and Finja. EMIs are not banks, but can store deposits. These are not tied to any banks or telcos. They could all use back-end plumbing offered by Raast.

Private Payment Processors:

1Link and NIFT payment and switch networks, supported by different groups of Pakistani financial institutions, currently process the bulk of credit/debit card and ATM transactions as well as e-payments in Pakistan. State Bank's Raast promises to be cheaper and faster than these networks,. Raast also offers processing of e-payments by government entities.

Raast Future Roadmap:

State Bank of Pakistan intends to demonstrate Raast's usefulness by first processing government payments to individuals, including government employees and Ehsaas welfare beneficiaries, before expanding it for business applications. SBP’s plan is to start person-to-person (P2P) payments in Q3/2021 and then bring merchants on board by Q1/2022.


Summary:

State Bank of Pakistan's launch of Raast digital payment infrastructure represents a great leap forward for the use of financial technology (FinTech) and financial inclusion in the country. It will also promote e-commerce in Pakistan. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion. Raast is part of the government's effort to modernize payment systems and document the nation's cash-based informal economy.

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