Read the status and trends of payments in Pakistan in one article

Status and Trends of Payments in Pakistan: in one article

I. Overview of the payments market

1. cash-led

   • Cash is still the main payment method, accounting for more than 80%, especially in rural areas and small transactions with absolute dominance.
   • Reasons: low financial penetration (only 21% of adults have a bank account), lack of trust in digital payments.

2. Limited use of bank cards

   • Debit card issuance is around 36 million (2022) but active utilisation is low; credit card issuance is only around 2 million, concentrated amongst higher income groups.
   • Insufficient POS terminals (about 80,000 nationwide) and high processing fees.

3. Mobile wallets explode in growth

   • JazzCash, EasyPaisa and other mainstream e-wallets have a combined user base of over 50 million (2023), covering scenarios such as remittances, bill payments and online shopping.
   • State Bank of Pakistan (SBP)-promoted Raast Instant Payment System accelerates cashlessness, processing over 1 million transactions per day.

II. Core drivers

1. Policy support

   • SBP launches National Payment System Strategy (2021-2025), targets to increase share of digital transactions to 651 TP3T.
   • Raast system enables free real-time inter-bank transfers, with the number of users exceeding 30 million within six months.

2. E-commerce and takeaway platforms pull

   • Platforms such as Daraz (Ali-based), Foodpanda, etc. driving demand for online payments, e-commerce market size of $6bn by 2022 (CAGR of 35%).

3. The rise of "buy now, pay later" (BNPL)
   Local platforms such as QisstPay offer instalment services to cater for the spending needs of the younger demographic.

III. Challenges and bottlenecks

1. Infrastructure shortcomings

   • 4G network coverage is only 50%, with unstable signals in rural areas.

2. regulatory friction
   Strict anti-money laundering regulations have resulted in some cross-border payments being blocked; e-wallets require biometric verification and cumbersome processes.

3.Consolidation of user habits
It is common for small and medium-sized merchants to refuse digital payments to avoid taxes.

IV. Outlook for future trends
Short-term (1-3 years)
✅ Expansion of correspondent banking network : Provide cash access through convenience stores/petrol stations to solve the "last mile" problem.
✅ QR Code Popularity SBP pushes for unified interoperability of UPQR standards, following China's model.

Medium- to long-term (more than 5 years)
🚀 CBDC Pilot : Expected to launch digital currency tests after 2025 in response to cryptocurrency shock.
🌍 Cross-border interconnection: co-operation with China UnionPay and Saudi SPAN to open up remittance channels (annual inflow of about US$31 billion).

V. Business Entry Recommendations
✔️ prioritises local licensees (e.g. HBL Bank, Jazz Telecom) to reduce compliance risk.
✔️ designs lightweight products (e.g. USSD menu payments) for low-end mobile phone users.
✔️ focuses on specific scenarios (tuition fee payment, farm machinery leasing) rather than generic solutions.

📌 Key Stat: By 2030, digital payments in Pakistan are expected to reach $45 billion (McKinsey forecast). Seizing the window requires immediate layout of agent ecosystem and localised operations team

In-depth Opportunities and Strategies in the Pakistan Payments Market (cont'd)

VI. Analysis of market segmentation opportunities

1. Cross-border payments and remittances (Remittances)

   • Pakistan is the 6th largest remittance-receiving country in the world, with overseas labour remittances amounting to $31 billion in 2023 (8% of GDP).
   • sore point: Traditional channels (Western Union, etc.) have fees as high as 5%-7% and are slow to arrive.
   • opportunity point::
     ✅ Localised digital wallet direct connectivity (e.g. Alipay with UBL);
     ✅ Blockchain technology to reduce settlement costs (pilot projects such as SBP's Roshan Digital Account).

2. Digitalised acquiring for Micro, Small and Medium Enterprises (MSMEs)

   • Over 5 million small and medium-sized merchants nationwide, only 15% support electronic payment.
   • Innovative model references::
     📌 Paytm India : Capture the market through low-cost QR codes + 0.5% rates;
     📌 M-Pesa Kenya : Agent outlet cash exchange builds habits.

3. Government Payment Scenario G2P (Government-to-Person)

   • SBP makes it mandatory for social security payments, agricultural subsidies, etc. to be distributed through Raast, covering 12 million people by 2023.
   • Companies can bid to become distribution channels or offer value-added services (e.g., insurance bundles).

VII. Competitive Landscape and the Key to Localisation

🔑 The Key to Breaking the Game: Choose the 'rural-urban' route - prioritise penetration of second-tier cities (e.g. Lahore, Peshawar) before attacking Karachi/Islamabad's high-end market.

VIII. Early warning of risks
⚠️ Exchange rate fluctuations : The rupee has depreciated by an average of 10% per annum in recent years, requiring dynamic adjustments in pricing strategies;
⚠️ geopolitical : FATF grey list history leading to stringent foreign investment review (JV shareholding ≤49% recommended);
⚠️ Data localisation :: SBP requires payment data to be stored in-country, increasing the cost of IT inputs.

IX. References to successful cases

• 🏆 JazzCash The company's daily activity exceeded 2 million through "mobile phone recharge cashback";
• 🏆 Keenu (Pakistani version of Venmo): Focus on social AA payments for college students , user growth of 300% in 6 months.

X. List of actions
1️⃣ [Compliance] Apply for an E-Money Institution licence (capital requirement ~$500,000);
2️⃣ 【Cooperation】 Access to Raast system to realise zero-fee interbank clearing;
3️⃣ [Scenario] Targeting three major high-frequency needs - school fees/medical expenses/religious donations (Zakat);
4️⃣ 【Promotion】Urdu tutorial video with local KOL to solve the problem of "can't use".

💡 Ultimate Trend: the next 5 years will be Pakistan's jump from a cash-based society to digital payments, and it is imperative to get stuck in the core ecological niche before the window closes - either by becoming an underlying facility (e.g. node of Raast) or monopolising the vertical scenarios (e.g. cross-border e-commerce settlements).