Digital payments

According to the SBP's latest Payment System Review for FY16, the volume and value of Real-Time Gross System (RTGS) transactions reached 930,501 and Rs 230.70 trillion during 2015-16, showing a sharp increases of 21 percent and 29 percent, respectively, over the previous year. Inter-bank funds transfers with a 55 percent share in gross payments were the major contributor to the number of the RTGS transactions while the securities settlement constituted 66 percent of the overall value of the RTGS transactions during FY16. Inter-bank funds transfers increased 25 percent in terms of volume and 16 percent in terms of value. Total number of payment cards issued by the banks was 33.7 million as of June 30, 2016. Debit cards had the largest share among all payment cards (27 million) followed by ATM-only cards (4.8 million) that include social welfare and branchless banking cards and credit cards (1.4 million). Use of banking channels rose by 16 percent in volume and 4 percent in value terms while real-time online banking transactions rose by 19 percent in volume terms and 2 percent in value terms during the year. Internet and mobile banking experienced a steady growth, rising by 18 percent in volume and 10 percent in value terms, respectively. The payment system infrastructure also showed a commendable growth during 2015-16, with the number of branches offering such services rising from 11,937 to 13,179 and the number of ATMs installed soaring from 9,597 to 11,391. However, as expected, the volume of paper-based transactions decreased by 6 percent to 339.7 million in FY16.

The overtaking of the conventional banking delivery channels by digital/electronic channels on a rapid pace during the past few years may have been surprising for a certain class of clients but was not unexpected; it has benefited the economic and financial system in many ways.The pace of change is going to be faster in Pakistan than in some other countries due to the National Financial Inclusion Strategy followed by the State Bank and vigorous campaigns and tailor-made product offerings by almost all the commercial banks in the country. The SBP is currently working towards facilitating the adoption of electronic/digital payments by public in Pakistan and urging upon banks to expedite the process of infrastructure development like wallets, access points and central payment processers. The rapid development of digital/electronic devices would not only enable the Pakistani financial institutions to compete more effectively at the international level but would be very beneficial to business, industry and various other sectors of the economy in real-time settlements, and doing away with the need of maintaining records in old fashioned registers. The fast-paced digital system would also increase the geographical coverage of the banking system without establishing more branches on the ground, increase saving rate of the economy by increasing the number of depositors and accelerate the employment rate at local levels by promoting entrepreneurship. Efficient use of the digital system would also reduce the establishment expenditures of the financial institutions which, in turn, could be shared by equity-holders, depositors and borrowers of banks. However, while Pakistan will eventually adapt, albeit slowly, to new technology and innovations to compete with the rest of the world, certain vulnerable sections of society would be finding it extremely difficult - if not impossible - to become adjusted to new conditions. Backward districts of the country would not be able to compete on an equal footing and catch up with the rest of the country due to lower level of education and lack of entrepreneurial skills. The new technology would also displace certain employees, particularly of lower cadres with inadequate qualifications, who would find it very hard to find new employment opportunities and feed their families.