Digital payments

A recent SBP report offered some good news on the digitisation front, as total transactions through the Pakistan Real-time Inter-Bank Settlement Mechanism (PRISM) during the previous fiscal year grew a commendable 60%, and almost 13% in terms of cash value. While part of the increase can be credited — or blamed — on changes in shopping habits forced upon us by the Covid-19 pandemic and lockdowns, the government and financial institutions deserve some credit for significantly increasing ease of use and accessibility of digital transaction services. For many years, credit cards were the only option, and few were in circulation — even today, only about 600,000 credit cards are in circulation, compared to 40 million debit cards. But even after debit cards became relatively widespread a few years ago, several types of digital transactions, especially online, were still credit card only. Today, debit cards are widely accepted, as are other digital payment services such as mobile wallets.

It is thus unsurprising that the SBP’s Annual Payment System Review also shows that e-banking transactions surged 31.1% last year. That said, Pakistan is still well behind the rest of the world in terms of digital transactions as a share of total transactions. While this can be seen as a great opportunity for rapid growth, it is also a significant hurdle that needs to be overcome. There is also the problem of increasing cybercrime and card-related fraud, largely due to the rapid adoption of new technologies by people who were previously unfamiliar with the workings of the formal banking sector as a whole and digital banking and transactions in particular. Given the simplicity of some of the prevalent scams, we will need several years of education and awareness efforts to make digital transactions safe, both on the technical side and on the user end.

That said, market factors such as the growth of e-commerce platforms and attractive promotions from sellers and digital payment platforms will continue helping the sector grow. Regulators just need to ensure that this growth is equitable.

Published in The Express Tribune, October 31^st, 2021.

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