Pakistan embraces digitalisation in 2020

In wake of pandemic, more people turned to remote working, digital payments and online shopping

Omar Qureshi January 05, 2021
A Reuters file image

While 2020 can be termed a hazardous year for most sectors of the economy, it has been phenomenal for steering digitalisation and giving a boost to e-commerce in Pakistan.

Following the Covid-19 outbreak in Pakistan in late February, many businesses began implementing work-from-home models and a majority found it a viable option.

Around mid-March, the government announced a full-fledged lockdown across the country, which prompted businesses to either operate from home or close down temporarily till the restrictions were lifted. It was this turning point when digitalisation in the country recorded a steep rise.

An industry source, heading an e-commerce-based start-up, termed 2020 the year in which the pace of digitalisation accelerated and people skewed more towards adopting digital solutions in Pakistan.

“In 2020, the mindset of a majority of Pakistanis changed,” he said. “Firstly, people started taking digitalisation seriously and secondly, work from home became widely acceptable.”

He added that work from home for any profession prior to 2020 was not considered respectable but it all changed during the year.

From March 2020 onwards, people knew digitalisation was the only way to sustain economic activity and it became an integral part of their life, he said. The official expected more businesses to move towards digitalisation in 2021.

In the State of Pakistan’s Economy report 2019-20, the State Bank of Pakistan (SBP) detailed that in the backdrop of lockdown imposed in March, the shift towards electronic channels became inevitable for government institutions, businesses and households.

It added that during that time, a sharp growth was witnessed in internet usage across the country as traffic surged 15% immediately as soon as lockdown was imposed.

In FY20, the highest growth in internet data usage was recorded in the fourth quarter (89%), with government institutions, and especially the central bank, actively encouraging and facilitating people to use digital communications and payment channels, it said.

Households began utilising online solutions for purchasing essentials (groceries) and other items as the containment measures extended.

Since Pakistan’s digital infrastructure was still under development in the early 2020, countless problems were faced in the way of swift digitalisation.


Speaking to The Express Tribune, Prime Minister’s Task Force on IT member Parvez Iftikhar said, “First and foremost problem for Pakistan’s digital infrastructure is that optic fibre penetration is low due to which the pace of digitalisation remained sluggish in 2020.”

He underlined that though many big cities of the country had modest penetration of optic fibre, some small towns lacked even mobile towers or 4G services.

“On the other hand, mobile operators have low availability of spectrum, which posed additional trouble,” he added. He stressed that taxes in Pakistan were still high as far as ICT was concerned, which discouraged the country from digitalising itself.

Iftikhar said that prices of ICT equipment were high, which discouraged internet and telecom operators from investing in the country’s digital infrastructure.

“ICT devices are not affordable for some of the prominent companies,” he said. “Investment by telecom operators helps steer digitalisation.”

Supporting his views, Pakistan Software Houses Association for IT and ITeS (P@SHA) Chairman Barkan Saeed said that the biggest problem was the failure of the government to digitalise its machinery.

According to him, governments of tech-savvy nations are spearheading digitisation and since Pakistan is way behind in it, so is the infrastructure.

“The government of Pakistan has digitalised token tax and allowed a few more similar electronic payments but the pace remains below par,” he said.

He highlighted that during Covid-19, the preference for everyone, including government officials, turned towards digital solutions.

“Never before were ministerial meetings held online on apps like Zoom but still Pakistan has a long way to go to achieve digitalisation in a true sense,” Barkan added.


Iftikhar said that government departments had to digitalise first to give a boost to overall digitalisation in the country.

“When the government adopts a model, people follow it, hence the top hierarchy of the country should be the first mover in this regard.”

If the leader begins to focus on digitalisation, prices of ICT equipment are expected to fall, which will make it easier to implement the model throughout the country and encourage telecom and internet companies to invest further.

He lamented that at present, almost all services available to citizens were paper-based rather than being digital.

Digital payments and e-commerce

Though stakeholders agree that e-commerce thrived in 2020, they lament that the rise in digital payments was way below expectations. The Express Tribune reached out to a few e-commerce marketplaces and all agreed that the rise in digital payments was way below expectations.

Telemart Co-founder and Director Hamza Abdul Rauf said, “A jump was surely witnessed in digital payments on the platform, however, the traffic, number of orders, registered items and sales grew at a much steeper rate than electronic payments.”

“There was a rise in payments received through digital channels but a sharp spike, which was expected, was not witnessed,” he said.

He detailed that digital payments were an alternative to cash and Pakistan failed to lift digital payments because they were mostly done through banks and the consumer base of commercial banks in Pakistan was limited.

“Given the total population of the country, the banked segment is small,” he said. In such a scenario, digital payments will remain limited.

He added that being an alternative, digital payment was difficult to promote because no incentives were offered and instead, such payments costed more than cash payments.

Banks charge 2.5-3% duty per transaction in the name of Merchant Discount Rate (MDR).

He added that in e-commerce market places, competition is tight and margins are slim so platforms could not absorb the impact of MDR hence they transferred it to customers.

“This is one reason why we cannot promote digital payments, our profits will be dented,” he said.

Even those e-commerce platforms which enjoy a substantially larger digital payment base, only limited banks are listed hence few customers, who are willing to pay electronically, are forced to pay in cash.

Giving suggestions, he said banks should incentivise digital payments and keep MDR zero for customers for first one to two years so that consumers would be encouraged to pay online and e-commerce will receive a significant push.

“With this, the working capital of online marketplaces will improve and we will promote digital payments ourselves,” he said.

In addition, he stressed that there was a severe need for digital wallets in Pakistan as they helped raise digital payments.

Pervez Iftikhar echoed similar views and said despite Covid-19 pandemic, a massive chunk of public was still averse to digital payments.

Giving reasons, he said cash payment is easy and considered secure and digital payments were non-tangible hence they were considered dangerous and vulnerable to cyberattacks.

In addition, digital payments leave an electronic trial hence tax evaders prefer to deal in cash and it is difficult to motivate them to pay digitally.


Lamenting that digital payments failed to skyrocket in Pakistan despite soaring all across the world, CEO Adnan Shaffi also emphasised dire need for digital wallets.

“We have an out-dated banking system and digital wallets are needed to give a boost to digitalisation,” he said.

On the positive side, he said many digital wallets were on way to kick start operations in Pakistan as the SBP has granted them the required approval to operate in the country.

Due to SBP measures, freelancing will grow in 2021 as companies introducing digital wallets are looking for a huge freelancer base. In absence of digital wallets, freelancers used to receive amounts from abroad in dollars and banks offered poor conversion rates so ultimately they faced losses.

This is the prime reason behind the soaring demand of PayPal in Pakistan, he said.

However new wallets which are expected to become functional in 2021 will offer competitive exchange rates and absence of PayPal might not be felt in a few years.

Taking about digital wallets, P@SHA Chairman Barkan Saeed said Pakistan needed a payment gateway which offered the facility to receive and retain money in dollars as well as to make dollar based payments. He said if such as gateway was introduced and it had a feature where the money could be transferred from the e-wallet to linked bank account and converted into rupees, then Pakistan would not need PayPal at all and all demands of freelancers would be met.

Outlook for 2021

All stakeholders remain positive that digitalisation will rise steeply in 2021.

Shaffi said that e-commerce is expected to grow manifold next year and even those who remained averse to e-commerce in 2020 would shift towards it in 2021 because it seems that the virus would remain evident throughout next year as well.

“Those people who used digital payments for the first time in 2020 and had good experience with it, would be enhancing their use in 2021,” he said.

On the other hand, he said local companies would continue observing work from home in Pakistan but its post-virus implementation was questionable as it would depend on a lot of factors.

At present, many local enterprises have enhanced work from home model till June 2021, he said.

Rauf added that digital payments would persist well in 2021 but the spike witnessed during first wave of the pandemic will not be experienced because during first lockdown, many people had no option but to make digital payments.

“Even during second lockdown such is not the case and though digital payments are on an upward trajectory, they are not where near March-May 2020 levels,” he said.

Nevertheless he remained optimistic for improvement in digital infrastructure in 2021.

Saeed said the growth of digital channels will persist in 2021 fintech would particularly be on the rise.

Iftikhar was positive that trajectory of digitalisation will increase further in 2021.

“Right now, we are at a tipping point and I expect a massive change [in 2021],” he said.

He underlined that Covid seemed to be staying for the time being as a new strain, discovered in UK and South Africa, is proving to be more infectious than the Covid-19.

We should be ready for a worst case scenario and ICT is the solution for it however the country has to make stringent efforts to uplift digitalisation.

SBP measures

The central bank remained active throughout 2020 and provided massive support to digitalisation.

In October 2020, the central bank launched the SBP FX Regulatory Approval System (RAS) for end-to-end digitalisation of foreign exchange related case submission process.

According to SBP, the objective of this initiative is to provide a fully digitalised platform to the business community and individuals in approaching banks for their foreign exchange related requests.

“The initiative will transform foreign exchange operations by replacing the paper-based requests with electronic submissions, which is not only efficient but also cost effective,” SBP said. “This development is also congruent with the government of Pakistan’s vision of Digital Pakistan.”

In addition, SBP is expected to launch the micropayment gateway (MPG) in the next few days to allow government and private sector entities, banks, merchants and consumers to make swift digital payments.

In this regard, the SBP collaborated with international partners, experts, vendors and financial industry.

The SBP expects rapid digitisation of public and private sector collections and payments, particularly of salaries and pensions, following completion of the project.

MPG is an instant payment mechanism. The central bank took the initiative to achieve the strategic goal of developing modern and robust payment systems in the country, the report added.

In September 2020, the country launched the Roshan Digital Account for overseas Pakistanis which provide banking solutions to expatriated seeking to undertake banking, payment and investment activities in Pakistan.

The account can be opened in both foreign currency and Pakistani rupees mode. Through the Roshan Digital Accounts, overseas Pakistanis can invest in capital markets of Pakistan. Roshan Digital Account initiative remained one of the most successful schemes of 2020 as over $200 million were remitted through them till December 24, 2020.

Alpha Beta Core CEO Khurram Schehzad said since its launch, a total of 59,700 accounts have been opened by overseas Pakistanis from 91 countries.

The average deposit per account comes at around $3,350, up from nearly $1,100 in the initial month when the Roshan Digital Account which shows a 300% growth per account.

“In the last one month, about $100 million have come into the country through these accounts, or about $3.6 million per day,” he said

He added that at this pace and given the rising number of accounts and flows per account, achieving a couple of billion dollars would not be a big deal.

Published in The Express Tribune, January 5th, 2021.

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