Impact of Payment Methods on Customer Experience in Pakistan

Pakistan's payments ecosystem is evolving rapidly, but its impact on customer experience is characterised by complexity due to infrastructure, financial penetration and regulatory environment. The impact and directions for optimisation are analysed below in terms of key dimensions:

I. Core impact of the status quo on customer experience

1. Cash dependency and the digital divide

   • sore point: About 60% of the population is unbanked (World Bank data), and cash transactions lead to inefficiencies (e.g., e-commerce COD share is over 70%, and return rates are as high as 30%).
   • chances: Mobile wallet users surpassed 50 million (JazzCash/EasyPaisa), with significant growth in the sink market after simplifying KYC.

2. The cognitive burden of fragmented payment options

   • The simultaneous presence of bank transfers, e-wallets, QR code payments (e.g. Alipay + localised partnerships), BNPL services (Postpaid), etc. makes it difficult for small and medium-sized merchants to integrate omni-channel acquiring.

3. Frictional costs of cross-border payments

   • Remittances rely on traditional channels (Western Union fees amount to 5-7%) and blockchain solutions such as Ripple have yet to scale.

4. Trust and security bottlenecks

   • 2022 Central Bank of Pakistan report shows that 45% users refused mobile payments due to fraud risk, enhanced biometric authentication (e.g. fingerprint payments by UBL) is needed.

II. Cases of industry differentiation

• E-commerce platform(Daraz): Launched the "Daraz Wallet" prepaid system, increasing COD conversion by 181 TP3T;
• financial service: HBL Konnect for instant rural deposits through agent outlets;
• state-run enterprise: KE Electric's access to Alipay reduces Chinese community bill payment time by 80%.

III. Suggestions for optimising the path

1. policy level: AccelerationRaastInstant settlement systems cover government payment scenarios (e.g., social security disbursements) and reduce the cash cycle;
2. technical layer: Promote low-code API toolkits (e.g. Telenor Bank's Asan Mobile App SDK) to help small merchants quickly access digital collections;
3. user education:: Digital financial literacy programmes in conjunction with mosques/community centres to address barriers to use by older people.

IV. [Key findings]

Pakistan needs to build a "hybrid financial ecosystem", i.e.:
\text{Customer Experience Enhancement} = \frac{\text{(Localisation Infrastructure + Cross-border Connectivity) × Trust Mechanism}}{\text{Technical Complexity}}
The key to the next three years will be the expansion of the correspondent banking network and the central bank's digital currency pilot (PBOC cooperation window).

V. Key leverage points for deepening the payments ecosystem

1. Scale-up of the Agent Banking network

• status quo: Only about 16 banks operate correspondent networks in Pakistan, covering about 500,000 outlets (SBP data), but rural penetration is still less than 30%.
• Optimisation direction::
  • Incentivise private banks to expand agent locations through tax breaks (e.g. UBL Omni offers cash access + bill payment in remote areas);
  • Transforming post offices (Pakistan Post) into financial inclusion hubs, integrating mobile recharges, remittances and microfinance.

2. Localised adaptation of BNPL (buy now pay later)

• sore point: Traditional instalments rely on high interest rate credit cards (28-36% annualised), excluding informal income earners.
• Case Breakthrough::
  • Finja has partnered with apparel brand Khaadi to offer '0% interest on 3 instalments' with a default rate of <5% (based on Social Chain Risk Control);
    → Can be replicated for agricultural input procurement scenarios by tying harvest repayment cycles.

3. Strategic window for CBDC (Central Bank Digital Currency)

Pakistan can learn from China's digital renminbi pilot experience:

1. targeted application: Prioritise the distribution of BISP poverty grants and eliminate intermediate deductions;
2. technological neutrality: Compatible with NFC mobile phones and SIM card hard wallets to cope with low smartphone penetration.

VI. Breakthrough Strategies for Cross-Border Payments

1. Payment synergies in the China-Pakistan Economic Corridor CPEC
   • Chinese companies in Gwadar Port have more than 2,000 employees, but rely on grey channels for payroll remittances.
     → Promote the interconnection of UnionPay with 1Link (Pakistan's local switching network) for real-time RMB-Rupee conversion;

2.Overseas Exchange Blockchaining Trial
Pilot Project Pathways:

[Dubai Labour] --(Stellar Protocol) --> [JS Bank Blockchain Node] --Automatic Conversion --> [Dependents Mobile Wallet]

                    ↓

               Handling fee from 7% → 1.5%

VII. [Road map for upgrading customer experience]
Implemented in three phases:

VIII. Risk hedging recommendations
Enterprises need to configure a "two-track system" to enter the Pakistani market:

graph LR

A [urban users] --> B [omni-channel digital payments]

A --> C [Agent Cash Recovery Node]

D [Rural Users] --> E [SMS/USSD Basic Services]

D --> F [Cash on Delivery + Charge Point]

The final customer experience formula evolved to:
\text{probability of success} = \frac{\text{policy stability} \times \text{quality of local partners}}{\text{exchange rate volatility index}}