According to the State Bank of Pakistan (SBP) Annual Payment Systems Review, there has been a significant expansion of the national ecosystem for digital payments over the past few years, and the number of digital accounts has tripled in the past three years. According to the report, internet banking grew by 51.7% to 141.7 million last year, while mobile phone banking increased by 148.4% to 387.5 million.
The launch of SBP-backed Raast, which is gaining traction, and the growing popularity of electronic money institutions (EMIs) among customers contributed significantly to the significant increase in numbers. All indications point to the rapid digitalization of money. On the other hand, cash transactions have increased in popularity as a result of expanding ATM networks and double-digit growth in cash withdrawals from ATMs over the previous year.
The volume of e-commerce transactions increased by 107.4% to 45.5 million, and the value increased by 74.9% to Rs106 billion.
The country’s network increased by 45.8% to 104,865 during fiscal year 2022 as a result of the deployment of 32,958 POS machines. The total number of POS transactions, 137.5 million, was 54.5% higher than the previous fiscal year, and the value of those transactions reached Rs0.7 trillion, an increase of 56.1%.
The four fully licensed EMIs (electronic money institutions), as stated in the State Bank’s annual report; Together, Sadapay, Nayapay, Finja, and CMPECC had 262,558 active accounts and issued 514,961 payment cards to customers. It was not possible to compare the growth of the EMI numbers from the previous year.
In FY21-22, there were 4,887 e-commerce merchants registered with the banks, up from 3,003 the year before. Raast Person-to-Person (P2P), which made it possible for payments between individuals, businesses, and other entities to settle transactions in real time, was launched by SBP as a continuation of its efforts to promote and improve the nation’s digital payment system. The report states that as of June 22, there were 15 million registered P2P Raast users who were involved in 7.9 million transactions that were worth Rs 102.1 billion. Raast went live in November of this year.
By FY22, Pakistan’s Real-Time Gross Settlement (RTGS) system had processed 4.37 million large-value transactions totaling Rs 681.6 trillion, representing a 53.3% annual increase in value. Paper-based transactions’ volume decreased by 1.0 percent in FY22, but their value increased to Rs 190.4 trillion, almost 25.6% higher than last year.
Conventional bank account holders increased by 4.5 million, from 63 million in 2021 to 67.5 million in 2022, according to the State Bank’s Annual Payment Systems Review. However, branchless banking accounts increased by 18.6% from 74.6 million to 88.5 million.
In FY22, 42.4 million payment cards were in use, including 30.16 million debit cards, or 71.1%; 10.3 million social welfare cards, or 24.3%; Pre-paid and ATM-only cards accounted for the remaining 4.2%, or 1.79 million credit cards.
The SBP has frequently emphasized the role that fintech can play in expanding financial inclusion and digital payments.
Jameel Ahmad, Governor of SBP, made the point in his speech at the Institute of Banking Pakistan Annual Award Ceremony that banks need to reconsider their traditional approach to service delivery and quickly adapt as digitalization shifts the power balance from banks to tech-savvy entities, pointing to the growing trend in fintech.
Ahmed stated, “Not only is it essential to promote financial inclusion, but it is also essential to ensure that the industry keeps pace with emerging global trends” by utilizing digital technology.
Ahmad uses the Kenyan fintech M-Pesa as an example of the significance of technology.
“The success of M-Pesa in Kenya, where it drove the availability of mobile financial services and successfully raised financial services access, is an often-cited success story.”
Ahmad said that Pakistan already has a lot of things that can drive digital financial innovation and the growth of a tech-based financial ecosystem. He said that the country has a digital ID system that works, that mobile devices are everywhere, that mobile and broadband services are popular, that faster payment rails are available, that remote account opening is easy, and that the regulatory environment makes it easy for non-bank entities to enter the financial sector.
The Central Banker goes on to say that while fintech has created competition, it also gives the industry a chance to create synergies and partnerships that benefit both parties.