Digital banking growth

Digital banking continues to show remarkable growth, with official figures for the second quarter of the current fiscal year showing that mobile banking users increased 8% and internet banking grew by 5%. However, the overall user figures — 16 million for mobile banking and 11 million for internet banking — are still extremely low with regard to our total population, meaning that growth rates would have to be significantly higher to help meet goals relating to digitisation of the economy.

Higher growth was seen in e-wallet users, with electronic money institutions reporting 15% growth to end the quarter with 2.7 million users, and branchless banking service providers showing their user base grew to 67 million. The real notable positives, however, were in overall retail transactions and funds transfers — digital transactions now make up 82% of all retail transactions, and over 90% of all funds transfers and 73% of bill payments were digital.

But while the increasing transaction volume is objectively good news, further efforts are needed to increase the adoption of digital banking, especially among poorer and less educated people, as with the right guardrails, it can also help protect their money. Another challenge is the digital divide between urban and rural areas. Access to reliable digital infrastructure would address this. There is also a need to ensure the safety and security of digital transactions. Some people are still hesitant to adopt digital banking due to security concerns. The government and private sector should work together to develop robust security systems to protect customers’ sensitive information.

Banks also need to continue increasing the range of products available through digital banking. Several banks in Western countries are adopting digital-only models, which the SBP should facilitate while ensuring a high level of security. Turning banking apps into one-stop service centres could almost eliminate cash transactions among regular users, which would have a knock-on effect on retailers and service providers with whom those customers interact.

Published in The Express Tribune, March 24^th, 2024.

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