Qudsia Bano

The State Bank of Pakistan (SBP) has recently released its quarterly payment systems report for the first quarter of the fiscal year 2023-24, showcasing a remarkable surge in digital payments, constituting a whopping 80% of the country's retail transactions. As of the quarter-end, the financial landscape was dominated by 33 banks, 11 microfinance banks (MFBs), four electronic money institutions (EMIs), and five payment service providers/system operators (PSPs/PSOs) providing extensive payment services throughout the country. The report underscores the pivotal role played by the Real-time Gross Settlement System (RTGS) and Raast, an instant payment solution, both operated by the SBP, in enriching the nation's payment infrastructure. Expanding financial accessibility, 16 banks and MFBs extended their services to branchless banking (BB), contributing to the widespread adoption of digital financial services. The digital platform witnessed a significant user base, with 17 million mobile banking users, 10.3 million internet banking users, 2.4 million e-wallet holders (issued by EMIs), and a substantial 61.3 million m-wallet holders (issued by BB service providers) by the end of the quarter.

Furthermore, the issuance of 54.3 million payment cards, comprising 79% debit cards, 17% social welfare cards, and 4% credit cards, signifies the expanding digital footprint in Pakistan. A noteworthy revelation is the surge in the share of digital payments in retail transactions, reaching an impressive 80%, compared to 74% in the corresponding quarter of the previous year. This paradigm shift reflects the increasing trust and reliance on digital channels for everyday financial transactions. Despite the digital surge, over-the-counter (OTC) transactions maintained a significant presence, constituting 20% of retail transactions by volume. However, their share by value stood at a staggering 87%, indicating a strong customer preference for the OTC channel, especially for higher-value transactions. In terms of volume, Large Value Payments (LVPs) settled by RTGS amounted to 1.4 million, totalling Rs199 trillion. Concurrently, retail transactions processed by banks, MFBs, and EMIs during the quarter reached 702 million with a value of nearly Rs134 trillion. The breakdown of retail transactions included funds transfers (37%), cash withdrawals (36%), purchases at Points of Sale (POS) & and e-commerce platforms (10%), bill payments & and mobile top-ups (7%), and cash/cheque deposits (7%).

Dr Hamid Haroon, a former economist at the World Bank, suggests that this surge in digital payments is indicative of a broader societal shift towards a cashless economy, driven by the convenience and accessibility offered by digital financial services. Talking to WealthPK, he said, "The robust growth in digital transactions signals a positive trajectory for Pakistan's financial landscape. The diverse range of digital services and the substantial increase in their adoption reflect a growing financial inclusivity and technological integration." Haroon added, "The expanding user base of mobile and internet banking, coupled with the impressive growth in non-tax revenues and the surge in digital transactions, underscores a positive trajectory towards a cashless economy. It's encouraging to witness the resilience of Pakistan's financial institutions in adapting to these changes, demonstrating the potential for continued growth and innovation in the country's payment ecosystem."

Credit: INP-WealthPk