Her Majesty Queen Maxima of the Netherlands just rounded up her trip to Pakistan. She was here as the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development in Pakistan. In recent years, the country has achieved numerous milestones in bringing a larger chunk of the unbanked population under the financial inclusion umbrella and digital banking has had a significant role in this.
The year 2019 was declared as the year of big changes in the banking industry by the State Bank of Pakistan. The year is almost at its end and the Pakistani banking sector can boost some considerable achievements. SBP also released a new digital payment adoption strategy that promotes financial inclusion to the masses in the country with a particular focus on women.
The banking sphere in Pakistan remains limited. Only 21% of the population has an active bank account of which merely 7% are women. Cash transactions heavily dominate Pakistan's $300 billion+ economy with salaries, merchant to distributor payments and normal day to day transactions all happening in paper form. Pakistan's financial inclusion ratio is one of the lowest in the region and also amongst the countries in the same economic standing. To put it into perspective, the segment of population with a bank account in India is more than 80%.
"In the 21st century, having a bank account is basic human right. Unfortunately, in Pakistan, there are a number of hindrances that conventional banks face when trying to improve the acceptance of digital channels. Almost three quarters of the population doesn't have a simple account and it is mostly because they remain unaware about the processes involved. Social limitations and lack of resources are common reasons that women face when trying to avail conventional banking facilities. As the population grows, the problems continue to increase too" stated Omer Salimullah, Head of Open Banking and Ecosystem Development at JS Bank.
India was able to add 300 million bank accounts to improve its financial inclusion ratio from 53% in 2014 On the other hand, Pakistan lacks on a number of fronts when it comes to even conventional banking. In Pakistan there are only six ATMs for every 100,000 people according to a report by GSMA Intelligence. Similarly, the number of PoS terminals stands at just 26 for the same number of people.
The State Bank of Pakistan is partnering with local financial institutions which include both retail and microfinance banks to change the situation at hand. The SBP's new Digital Financial Inclusion strategy aims to improve the country's economy by 7% and create four million jobs in the process. Private sector banks are playing their role by creating opportunities for consumers to access more financial services through digital banking channels.
"Although the banked population of Pakistan is just 12%, a lot is being done to target and expand this number. The regulator has recently come out with a few very progressive regulations which will allow new & existing players to bring a lot more Pakistanis into the banked segment. Additionally, banks are bringing innovative use cases into the digital payment realm. A recent use case was done for Islamabad Police with the digital traffic challan and policing system introduced for them and powered by a private sector bank" noted Omer Salimullah.
Leading financial institutions including HBL, National Bank of Pakistan, UBL and JS Bank have all created extensive digital strategies which are being implemented to ease the lives of consumers around the country. Initiatives being taken by these organizations include educating consumers about the benefits of digital banking, investment is sophisticated tools and processes for provision of digital support, creation of digital labs, extension of branchless banking to far flung areas and digitizing payments like traffic challans etc.
The Pakistani digital financial landscape is transforming rapidly with more and more people showing an inclination of shifting towards high-end, cashless solutions. Taking the recent developments into account, World Bank President David Malpass praised Pakistan for its new digital transformation strategy. With new and innovative prospects on the horizon, things are heading towards a bright future for the digital banking in Pakistan.