As a result of the growth in mobile phone banking and internet banking, the total value of these two services increased by 141.1% and 81.1%, respectively, reaching Rsll.9 trillion and Rsl0.2 trillion. E-comrnerce transactions also witnessed similar trends as the volume grew by 107.4% to 45.5 million and the value by 74.9% to Rsl06 billion” digital
Despite slow economic growth and inflation, digital payments in Pakistan have continued to show a growing trend. Raast app and bank apps have also made transactions online hassle-free and risk-free.
During the last fiscal year, the State Bank of Pakistan (SBP) Annual Payment Systems Review for 2021-22 showed a massive expansion of the digital payments ecosystem. According to the report, mobile phone banking increased by 100.4% to 387.5 million during the year, while internet banking increased by 51.7% to 141.7 million.
A number of milestones were reached by the ecosystem in the past year that contributed to the impressive numbers. With the SEP-backed Raast gaining traction and electronic money institutions (EMis) becoming more popular among customers, money is becoming more digital. With ATM networks proliferating and withdrawals from ATMs also posting double-digit growth over the past year, cash transactions are also gaining momentum.
With a combined growth rate of 141.1 % and 81.1 %, mobile phone banking and internet banking have now reached Rsl 1. These amounts are Rs. 9 trillion and Rs. 0.2 trillion, respectively. Similarly, e-commerce transactions increased by 107.4% to 45.5 million and by 74.9% to Rs106 billion as the volume grew by 107.4%.
In FY22, 32,958 Point of Sales (POS) machines were deployed in the country, which led to a 45.8% increase in its network to 104,865. A total of 137.5 million transactions were processed through POS, up 54.5% from last year with a transaction value of Rs0. 7 trillion; growing by 56.1 %.
The number of e-commerce merchants registered with banks increased from 3,003 to 4,887 in FY21-22. SBP launched Raast Person-to-Person (P2P) as part of its efforts to promote and enhance the country’s digital payment system. This enabled people, businesses, and other entities to make payments in real time. Approximately 15 million Raast users were registered as of June 22, making 7.9 million transactions valued at Rs 102.1 billion. Raast was launched in November last year.
Real-Time Gross Settlement (RTGS) transactions in Pakistan reached 4.37 million by FY22, amounting to Rs 681.6 trillion, with a 53.3% annual growth in value. There was a 1.0% decline in volume, but a 25.6% increase in value for paper-based transactions during FY22.
From 63 million account holders in 2021 to 67.5 million account holders in 2022, according to the State Bank’s Annual Payment Systems Review. In contrast, branchless banking accounts increased by 18.6% from 74.6 million to 88.5 million.
In Pakistan, where cash transactions still dominate, there is a need for a strong ATM network to meet the growing needs. As a result, there are now 17,133 ATMs operating in the country, up 4.8% from last year.
A total of 692.3 million transactions were carried out through ATMs which amounted to Rs 9.6 trillion, 19.2% higher than in FY21. Meanwhile, cash withdrawals from ATMs picked up from 577.3 million in volume and Rs7.29 trillion in value in 2020-21, to 670.6 million in volume and Rs8.6 trillion in value. That’s a growth of 16.1 % in volume and 18% in value over the previous year.
There were 42.4 million payment cards in circulation in FY22 including 71.1% or 30.16 million debit cards; 24.3% or 10.3 million social welfare cards; 4.2% or 1. 79 million credit cards and the rest were pre-paid and ATM-only cards.
The overall number of payment cards, however, decreased during the year, from 45.9 million in 2020-21 to 42.4 million in 2021-22.
According to the State Bank’s Annual Report, the four fully licensed EMis ( electronic money institution); Sadapay, Nayapay, Finja and CMPECC, combined had 262,558 total active accounts and 514,961 payment cards issued to their customers. Last year’s numbers on EMis were not available for a comparison of how these numbers have grown.
The SBP has in the past often emphasised the potential fintech can play to boost digital payments and financial inclusion.
“As internet banking, POS, and e-commerce transactions poststrong growth, the digitalpayments ecosystem is picking up steam”
During his speech at the Institute of Banking Pakistan Annual Award Ceremony, Jameel Ahmad, Governor SBP stressed the need for banks to revisit their traditional approach to service delivery and adapt quickly as digitalization shifts the balance of power from banks to tech-savvy entities, hinting at the growing trend in fintech.
“Leveraging digital technology is essential not only to promote financial inclusion but also to ensure that the industry keeps pace with emerging global trends,” opined Ahmed.
Speaking on the importance of technology, the SBP Governor quoted M-Pesa, a Kenyan fintech. “An often-cited success story is that of M-Pesa in Kenya, where it single-handedly drove mobile financial services availability and successfully raised financial services access in Kenya. “
Jameel Ahmad pointed out that a number of factors already existed in Pakistan that could help drive digital financial innovation and the proliferation of a tech-based financial ecosystem. He pointed out that the nation had a fully functional digital ID system, the ubiquity of mobile devices, penetration of mobile and broadband services, availability of faster payment rails, remote account opening process, and a facilitative regulatory environment for enabling the entry of non-bank entities into the financial arena. The Central Banker also points out that while fintech has brought competition, it also presents the sector with an opportunity to create synergies and mutually beneficial partnerships.
“Banks and Fintechs can partner with each other to provide innovative products for customers that are otherwise not viable on a standalone basis. For banks, such partnerships can help with penetration in untapped segments like retail businesses and Micro and Small Medium Enterprises, yielding beneficial outcomes for all stakeholders,” he said.
Encouraging the banks that are yet to make consistent and sustained moves towards technological transformation, Ahmad advised the use of the digital bank frameworks and the instant payment system, RAAST, to position themselves for the future.