A shift toward digital financial solutions in Pakistan
“Ignoring technological change in a financial system based upon technology is like a mouse starving to death because someone moved their cheese.” – Chris Skinner
Pakistan is a country with a population of over 225 million and growing at a pace of 2% each year. Youth form 60% of the population and with the rate of internet penetration in Pakistan, at least 54% are ripe for a digital revolution.
Covid, a catalyst for Digital Financial Services
We have witnessed a remarkable development in Pakistan’s digital eco-system, Covid-19 simply acted as a catalyst with the slogan of “Stay Home and Stay Safe” which was possible due to the digitally enabled financial channels and interfaces while providing various financial services to the customers. We observed an uplift in the usage of online banking, and payments (EasyPaisa, JazzCash) which supported the lockdown businesses & took off with the online order from channels like Facebook, Amazon, Daraz, FoodPanda, etc with banks being the financial arm of the digital payments. The online transactions increased in volume and value terms showcased digital adoption. A change in user behaviour towards digital platforms also increased the regulatory focus on the fintech sector. Mobile banking transactions increased by 50% and mobile money transactions by 34.3% from 2019 to 2020.
A shift toward digital financial solutions in Pakistan
“Ignoring technological change in a financial system based upon technology is like a mouse starving to death because someone moved their cheese.” – Chris Skinner
Pakistan is a country with a population of over 225 million and growing at a pace of 2% each year. Youth form 60% of the population and with the rate of internet penetration in Pakistan, at least 54% are ripe for a digital revolution.
Covid, a catalyst for Digital Financial Services
We have witnessed a remarkable development in Pakistan’s digital eco-system, Covid-19 simply acted as a catalyst with the slogan of “Stay Home and Stay Safe” which was possible due to the digitally enabled financial channels and interfaces while providing various financial services to the customers. We observed an uplift in the usage of online banking, and payments (EasyPaisa, JazzCash) which supported the lockdown businesses & took off with the online order from channels like Facebook, Amazon, Daraz, FoodPanda, etc with banks being the financial arm of the digital payments. The online transactions increased in volume and value terms showcased digital adoption. A change in user behaviour towards digital platforms also increased the regulatory focus on the fintech sector. Mobile banking transactions increased by 50% and mobile money transactions by 34.3% from 2019 to 2020.
Elucidating the transition from conventional to digital banking
Digital banking is the transition from traditional banking activities that were previously availed through physical presence in the bank branch. Documentation for KYC (Knowing Your Customer) is a time-consuming process that involves manual work from officers and customers. On the other hand a digital account is comparatively easier.
SBP launches ‘Raast’ commencement of cashless economy
Pakistan has launched ‘Raast,’ the country’s first instant digital payment system. This is the first time the Pakistani government has launched an initiative aimed at boosting government revenue in a country where keeping track of economic transactions is a challenge, owing to high dependency on cash.
According to the State Bank of Pakistan, (DFS) Digital Financial Services comprise a vast range of financial services through digital channels. This solution will uplift living standards, reduce poverty, decrease the fiscal deficit, and provide equal income opportunities in Pakistan. SBP has directed banks and other financial institutes to increase the transaction limit for Raast person-to-person (P2P) payment service.
In compliance with the relevant anti-money laundering and counter-financing of terrorism, banks, microfinance banks, and EMIs can set limits in their systems based on the risk profile of their customers. The aggregate transaction limit for Raast payments and available limit for customers will be available on their mobile application and banking portals and shall not be less than interbank funds transfer (IBFT).
The state-of-the-art faster payment system can be used to settle small value retail payments in real time while also providing cheap and universal access to all players in the financial industry, including fintech and banks. This will serve as a direct connection between users located anywhere. Apart from that, this move is aimed to boost the formal economy, increase the financial inclusion of women, and eradicate poverty in the country.
Key Facilitators and barriers
The primary variable to promote DFS (digital financial services) is the literacy rate in Pakistan which for now is 62% and simultaneously focuses on enhancing the internet connectivity services to meet the potential market and to fully operate instant transactions. A case in point is Easy Paisa & Jazz Cash, as they well-orchestrated their execution by educating their target audience and converting them into their user base. The progress of both players has been commendable in connecting the audience of the dislocated locations and the way they built their trust was a hard shell to crack.
Elucidating the transition from conventional to digital banking
Digital banking is the transition from traditional banking activities that were previously availed through physical presence in the bank branch. Documentation for KYC (Knowing Your Customer) is a time-consuming process that involves manual work from officers and customers. On the other hand a digital account is comparatively easier.
SBP launches ‘Raast’ commencement of cashless economy
Pakistan has launched ‘Raast,’ the country’s first instant digital payment system. This is the first time the Pakistani government has launched an initiative aimed at boosting government revenue in a country where keeping track of economic transactions is a challenge, owing to high dependency on cash.
According to the State Bank of Pakistan, (DFS) Digital Financial Services comprise a vast range of financial services through digital channels. This solution will uplift living standards, reduce poverty, decrease the fiscal deficit, and provide equal income opportunities in Pakistan. SBP has directed banks and other financial institutes to increase the transaction limit for Raast person-to-person (P2P) payment service.
In compliance with the relevant anti-money laundering and counter-financing of terrorism, banks, microfinance banks, and EMIs can set limits in their systems based on the risk profile of their customers. The aggregate transaction limit for Raast payments and available limit for customers will be available on their mobile application and banking portals and shall not be less than interbank funds transfer (IBFT).
The state-of-the-art faster payment system can be used to settle small value retail payments in real time while also providing cheap and universal access to all players in the financial industry, including fintech and banks. This will serve as a direct connection between users located anywhere. Apart from that, this move is aimed to boost the formal economy, increase the financial inclusion of women, and eradicate poverty in the country.
Key Facilitators and barriers
The primary variable to promote DFS (digital financial services) is the literacy rate in Pakistan which for now is 62% and simultaneously focuses on enhancing the internet connectivity services to meet the potential market and to fully operate instant transactions. A case in point is Easy Paisa & Jazz Cash, as they well-orchestrated their execution by educating their target audience and converting them into their user base. The progress of both players has been commendable in connecting the audience of the dislocated locations and the way they built their trust was a hard shell to crack.