Digital Payments
Digital payments now constitute an astonishing 84% of Pakistan’s total payment ecosystem, nearly marking the end of paper-based banking in the country. The State Bank of Pakistan (SBP) published its annual report on Friday, showing how an extensive proliferation of digital payment solutions over the year 2023-24 has transformed the nation’s financial landscape.
The SBP report further reveals dramatic shifts towards digital payment channels, thereby thus underlining the increasing role of such channels in the country’s financial system. A review of the report brings forward that this largely relates to greater availability and relative ease of access to digital banking services that have become integral to day-to-day transactions by consumers in Pakistan.
These channels not only increase the speed and ease of transactions but also reduce dependence on the traditional banking method. This drive toward digital is linked by the fundamental three factors: advancements in technology, innovative financial products, and shifts in consumer mindsets that are gradually swinging toward requiring speed and flexibility.
The growth in retail payments as noted by the SBP during FY24 is of a huge order. Transactions went up from 4.7 billion to 6.4 billion; on the value side, from Rs403 trillion to Rs547 trillion. Thus, both the volume and value grew growing about 35%.
Digital payments share by volume has risen highly from FY23 to FY24, with an increase of 76% to 84%. This reflects a rapid increase in the adoption rate of digital payment modes by the Pakistani population, and digital transactions have become integral to everyday commerce.
The SBP states that the surge in digital payments is due to several reasons. The first amongst these is the growth in user base, which directly results from making the digital channels convenient and broad services on mobile banking apps, internet banking portals, and mobile wallets. As reported, the increase in users for mobile app banking was 16%, for internet banking 25%, and upward by a staggering 85% during FY24 in e-wallets.
These trends reflect the notion of digital financial services turning out to be the next preferred method of conducting financial transactions. Since it is easy and simple to use mobile wallets and banking apps, coupled with secure and fast payment options, has helped to greatly push the adoption process.
Digital payments benefited greatly through mobile banking applications and Internet banking portals; they recorded 62% growth in transaction volumes from 1,346 million. The value realized in transactions increased significantly by 74% to Rs70 trillion.
Mobile app-based wallets especially, saw the biggest jumps. The No. of payments through branchless banking mobile application wallet was 2,697 million other than 85 million payments through EMI e-wallets. That growth reflects the way people are gaining confidence and relying on mobile-based financial products for daily and pocket transactions.
An important aspect of this digital revolution was the growth in the point-of-sale network in Pakistan. The number of POS machines, which was one of the key indicators of the importance of card-based transactions at the retail outlets, grew by 8.9 percent to reach 125,593. This ensured that card-based transactions gradually took place at more and more retail outlets and shops, supporting the new cashless transactions and integrating digital payments into the mainstream at retail.
E-commerce payments also had an unprecedented growth rate; now, 87% of digital payments for online shopping are made either by a bank account or digital wallet. The total e-commerce payment hit a record 309 million during FY24 with a transaction value of Rs406 billion, as consumers are increasingly looking at digital alternatives in the online world.
The report underlines Pakistan’s resilience and robust digital payment infrastructure since the country stands at a leading position in digital financial services in the region. SBP remains centered on innovation and enhancing the digital financial landscape of the country throughout.
As the payment ecosystem continues to evolve, the SBP remains committed to fostering further innovation and strengthening the digital financial landscape in Pakistan, it said. The central bank’s push towards supporting change is helping to enable Pakistan to catch up with trends in digital banking and financial services around the world.
The shift towards digital payments in Pakistan forms a major revolution in the country’s banking and financial ecosystem. Digital transactions have gained dominance over the mainly paper-based paradigm, putting the country clearly on the path to a more modernized, efficient financial infrastructure. SBP’s crusade for this digital evolution not only transforms how people conduct their transactions but also puts Pakistan at the head of the region’s pack in terms of the financial technology space.
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