Digital Transactions in Pakistan Soared 30% to $500 Billion in Fiscal Year 2020-21
Digital transactions in Pakistan soared 31.1% to Rs. 88 trillion or $500 Billion in fiscal year 2020-21, according to the nation's top centr...
Digital transactions in Pakistan soared 31.1% to Rs. 88 trillion or $500 Billion in fiscal year 2020-21, according to the nation's top central banker. “If the figure is $500 billion now, you can imagine the pace at which we are digitizing,” said Dr. Baqir Raza, Governor of the State Bank of Pakistan, adding that those transactions showed a year-on-year growth of 30.6% in volume and 31.1% in value. The nation's central bank also reported that the large-value payments segment, known as Real-time Inter-Bank Settlement Mechanism (PRISM), saw growth of 60% by volume and 12.8% by value to Rs. 444.6 trillion or $2.5 trillion in FY 2020-21.
Digital Transactions Growth:
Growth in digital transactions was led by major uptake in mobile banking (29% increase in the number of users and 133.6% and 178.7% hike in volume and value, respectively) and internet banking (32% increase in the number of users and 65.1% and 91.7% up in volume and value, respectively), according to the State Bank of Pakistan. “If the figure is $500 billion now, you can imagine the pace at which we are digitizing,” said Dr. Baqir Raza, the head of Pakistan's central bank.“Therefore, there is a huge potential for enhancing financial inclusion,” he added.
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 and securely connect government entities, a variety of banks, including microfinance banks (MFBs), electronic money institutions (EMIs) and State Bank authorized payment service providers (PSPs) like 1Link and NIFT which may choose to take advantage of it. Currency and coins in circulation account for about 43% of Pakistan's total money supply. 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. Digital financial services 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.
Payment Service Providers (PSPs) :
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 using just the phone numbers in Q3/2021 and then bring merchants on board with QR codes by Q1/2022.
Summary:
Digital transactions in Pakistan soared 31% to $500 billion in FY 2020-21. 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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Digital Transactions in Pakistan Soared 30% to $500 Billion in Fiscal Year 2020-21
Digital transactions in Pakistan soared 31.1% to Rs. 88 trillion or $500 Billion in fiscal year 2020-21, according to the nation's top centr...
