A panoramic view of Pakistan's payments ecosystem: a market of opportunities and challenges

Introduction: Pakistan Payments Market Overview

As the second largest economy in the South Asian region, Pakistan has a population of over 220 million people, with about 116 million internet users and 183 million mobile users. This large population base provides a vast space for the digital payments ecosystem to grow. In recent years, the payments market in Pakistan is undergoing unprecedented transformation with the rise in smartphone penetration, government policy support and the emergence of fintech startups.

This paper will provide a comprehensive insight into the current state of the payments ecosystem in Pakistan, key players, technological infrastructure, regulatory environment, and future trends, providing valuable reference information for companies interested in entering the market.

Part I: Convergence of the traditional banking system with modern payments

Status of bank account penetration

Despite its large population, according to World Bank data, only 211 TP3T of adults in Pakistan will have a formal financial institution account in 2021. This figure is well below the regional average (the South Asian average is 781 TP3T), indicating a large unmet demand for financial services. The traditional banking sector faces significant challenges in promoting financial inclusion.

Analysis of bank card usage

Visa and Mastercard are the main local card organisation brands:

• debit cardsCirculation is about 40 million
• credit cardsOnly about 2 million
• Less than 100,000 POS terminals
• About 16,000 ATMs (mainly in major cities)

This uneven distribution of infrastructure limits the popularity of card payments.

The Role of IBFT Instant Transfer System

The "Inter Bank Fund Transfer (IBFT)" system was created to solve the problem of interbank transfers:

• on-line processingcross-bank transaction
• 24/7 availability
• Advantage of low commission

IBFT has become one of the common ways for individuals and small businesses to transfer funds.

Part 2: Mobile wallets and the rise of correspondent banking

Easypaisa and JazzCash double-header

Mobile wallet services led by the two major telecoms operators:

These platforms reach the unbanked population through a large network of agents (over 500,000 outlets combined).

Innovative attempts by emerging players such as SimSim

Included:
–biometric verification
–QR code payment
–E-commerce Integration Solutions

These innovations are changing consumer perceptions and habits of digital payments.

Part III: Evolution of Government Policies and Regulatory Frameworks

SBP National Payment System Strategy (NPSS)

The core elements of Vision 2025 launched by the Central Bank (SBP) include:

✅ Establishment of a real-time grossing system (RTGS)
✅Replication of e-KYC process
✅ Developing open API standards

The goal is to increase the share of digital transactions from the current 0.71 TP3T to 101 TP3T.

Table:Timeline of key regulatory measures in recent years

Year Name of policy Scope of impact
2019 Electronic Money Institutions Regulations Regulating the Licensing of NBFIs
2021 Raast Instant Settlement System Launched to Reduce Interbank Transaction Costs
2022 QR Standards Harmonisation Guidelines Promoting Interoperability

These initiatives have significantly improved the business environment.

Part IV:The unique landscape of cross-border payments

Pillars of the remittance economy
Overseas workers repatriate about $$30 billion annually.
🔹 Traditional channels (Western Union, etc.) charge 8%-12% handling fee
🔹 Emerging blockchain solutions down to 3%-5%

New opportunities under the China-Pakistan Economic Corridor
The CPEC project spawned.
Renminbi clearing mechanism
bilateral local currency swap agreement
Pilot policy on special economic zones

Part V: Predictions of Future Trends and Technological Breakthroughs

📈 Analysis of growth drivers.

-Young population structure (64% < 30 years)
-4G coverage has reached 75%
-Persistence of no-contact preference after new crowns

Part V: Predictions of future trends and technological breakthroughs (continued)

Technology-driven payments innovation

The Pakistani payments market is undergoing the following technological changes:

1. The popularity of biometric payments

   • The National Database and Registration Authority (NADRA) has established one of the largest biometric databases in the world
   • Fingerprint/Iris verification gradually replaces traditional PIN code
   • Biometric transactions expected to account for 35% in 2025

2. The application of blockchain technology on the ground

   • Alipay partners with local banks to test cross-border blockchain remittances
   • SBP explores Central Bank Digital Currency (CBDC) feasibility study
   • Pilot Smart Contract Application in Supply Chain Finance

3. The Rise of Embedded Finance
   Main manifestations:

   graph LR
   
   E-commerce platform --> | Built-in instalment | Consumer finance
   
   Taxi Software-->|Real Time Settlement|Driver's Wallet
   
   Takeaway APP-->|Credit Payment|Pay Before You Earn BNPL 
   
   

Growth opportunities in niche markets

B2B Payments Blue Ocean Sector

• Digitalisation pain points for SMEs::
  ▸70% still relies on cash transactions
  ▸ Supply chain lead times averaging up to 90 days

• Solution Innovation Direction::

+ Automated electronic invoice reconciliation system 

+ Dynamic credit modelling based on trade data 

Special scenarios for agricultural payments

Unique needs exist in the agricultural sector covering 45% labour force in the country:
✓ Concentrated financial flows during the harvest season
✓ Offline transaction function in remote areas
✓ Crop price index-linked insurance payments

Case Studies: UBL Omni has launched the Kisan Card, which serves 2 million farmers.

Part VI: Analysis of challenges and risk factors

Infrastructure bottlenecks

▌Inconstant power supply affects terminal equipment uptime
▌3G/4G Network Coverage Significant Rural-Urban Disparity (Urban 98% vs Rural 63%)
▌Illiteracy 38% leads to low acceptance of complex interfaces

Trends in security threat escalation

2022 Key Data:
-Financial cyberattacks up 217% year-on-year
-Average loss per digital fraud $482
-SIM exchange fraud cases averaged 300 per month

Evolutionary routes for protective measures:
1️⃣ Behavioural biometric profiling technology introduced
2️⃣AI-driven abnormal transaction monitoring system
3️⃣ Industry-wide shared blacklist database

Part VII: Suggestions on Entry Strategies for International Enterprises

Localised co-operation model options

Ranking of critical success factors (results of expert research):
1. Regulatory Compliance Capability (Weight 35%)
2. Quality of Local Partners (30%)
3. Product design adapted to local culture (25%)
4. Long-term capital patience (10%)

Part VIII:Consumer Behavioural Insights and the Education Gap

Survey of intergenerational differences in usage habits

Age group Preferred payment method Main reasons for rejecting digitisation
18-28 years old Mobile Wallet (62%) Worried about the complexity of the account freezing process
29-40 years old Bankcard Sweep Payment (34%) Distrust of System Security
Cash Transfer Agent Locations Over 40 78%) Operational interface is difficult to understand

Interesting findings:: E-donation (zakat) traffic surged by 300% during Ramadan, showing the potential of the religious scene.

Measuring return on investment in literacy education

Comparative experimental data show that.
devote1 Available in user education: -4.7 annualised growth in turnover
-23x increase in customer lifecycle value
Best practice example: NIFT's "Digital Pakistan" campaign through.
☑ Television sitcoms implanted in teaching
☑Mosque radio campaign
☑ Specialised courses for girls' schools

Conclusion: a strategic window to seize the turning point

综合评估显示，巴基斯坦正处于从现金社会向数字支付的临界点。尽管面临基础设施、安全性和用户认知等多重挑战，但在以下因素的共同推动下，未来5年将保持27%CAGR的高速增长:

★Policy dividends continue to be released (SBP is clearly target orientated)
★Demographic Advantages Emerge (Generation Z Becomes the Main Consumer)
★Dual export of technology and capital from China (E-payment complete package solution is mature)

For those interested in setting up a presence, now is the best time to conduct in-depth research, build local networks and conduct small-scale pilots. It is recommended to prioritise the asset-light entry path of the correspondent banking model, while focusing on the gaps in the development of Islamic-compliant financial products.

This article is compiled based on public data and industry interviews. For more detailed segment reports or customised consulting services, please follow our subsequent series of studies. Please retain full copyright information and content integrity.