From paper money to digital: five years of evolution in Pakistan's payments revolution

Pakistan's payments ecosystem has undergone a remarkable transformation over the past five years, moving from a highly cash-dependent economy to a digital future. This evolution has been challenging but also holds great opportunities, and the following is an in-depth analysis from a professional perspective:

  1. Infrastructure breakthrough phase (2018-2020)
    - Launch of Raast Instant Payment System (pilot in 2021, full roll-out in 2022) as key infrastructure
    - Bank account penetration increased from 211 TP3T to 351 TP3T (World Bank data)
    - 3G/4G subscribers cross 100 million threshold (PTA data)

  2. Period of improvement of the regulatory framework
    - SBP promulgates the Electronic Money Institutions Regulation (2020)
    - Launch of financial inclusion policy requires banks to lower KYC thresholds
    - QR standards harmonisation process accelerates merchant acceptance environment

  3. Market Explosive Growth Phase (2021-2023)
    - Mobile wallet registrations grew at a CAGR of 871 TP3T (Karandaaz report)
    - JazzCash and EasyPaisa form a duopoly with a combined market share of more than 801 TP3T
    - COVID becomes a catalyst: contact payment transaction volume grows by 400%

  4. Current Challenges Matrix:
    → Trust Deficit: 701 TP3T Users Still Concerned About Security of Funds (Gallup Research)
    → Interconnect: the success rate of transferring money between different wallets is only 65%
    → Merchant incentives: small merchants sensitive to digital payment commissions up to 92%

  5. Frontier Innovation Directions:
    √ BNPL service penetration in e-commerce scenarios reaches 18%
    √ Asaan Mobile Account Streamlines Account Opening Process to 3 Minutes
    √ CBDC study enters sandbox testing phase

  6. SWOT strategy analysis:
    Strengths (S) Large youth population (64% < 30 years)
    Weaknesses (W) Literacy deficit 60% affects interface interaction
    Opportunity (O) CPEC-related technology transfer from China
    Threat (T) Underground Hawala System Still Processing 40% Diaspora

The next five years will depend on three factors: (1) whether the density of the agent network can reach 5 service points per 10,000 people; (2) whether the digitisation ratio of government social security payments can exceed 50%; and (3) the progress of the construction of cross-border payment corridors. We recommend paying attention to SBP's "Payments Vision 2028" roadmap, which will be launched soon.

Note: All data are from the State Bank of Pakistan (SBP), Pakistan Telecommunication Authority (PTA), and the latest available World Bank report.

Future Outlook of the Payments Revolution in Pakistan (2024-2028)

Pakistan's payments ecosystem is entering a phase of deep digitisation with the maturity of the Raast system, the popularity of mobile payments, and the continued push of government policies. The following are the likely key trends and challenges for the next five years:

1. Accelerating financial inclusion: from "bank account" to "real use"

Despite the increase in bank account penetration, active utilisation remains low (only around 25%). The focus will shift in the future:

  • Asaan Mobile Account (AMA) 2.0 - Further simplify the KYC process by allowing basic accounts to be opened based on mobile phone number + biometrics only
  • Expansion of correspondent banking network - SBP aims to achieve 10 agency sites per 10,000 people by 2025 (currently around 6)
  • Digitalisation of social security & payroll - Benefit payments such as BISP (Benazir Income Support Programme) move to Raast Direct across the board

📌 Key indicators: By 2028, active digital payment users are expected to top 50 million (currently around 30 million).

2. The cross-border payments revolution: remittances, CPEC and CBDC trials

(1) Digitisation of remittances challenges the traditional hawala system

  • Overseas labour remittances are still largely dependent on informal channels (accounting for more than 40%) and SBP plans to launch:
    • Blockchain Diaspora Corridor Pilot(in co-operation with UAE, Saudi Arabia)
    • Raast international version, support GCC countries real-time remittance
    • Incentive policy: 0.5%-1% tax credit for remittances from digital channels

(2) CPEC promotes fintech cooperation between China and Pakistan

  • Alipay+ / WeChat Pay may be integrated in Pak local wallets
  • PKR-CNY direct settlement ratio increased to 20% (currently <5%)

(3) CBDC exploration enters second phase

SBP has initiated research on wholesale digital currencies, possible application scenarios:
✔️ Intergovernmental Settlements (B2G)
✔️ Supply Chain Finance for Large Enterprises
❌ Retail CBDC not prioritised for now (to avoid impacting existing e-money institutions)

3. Open Banking & the Rise of the API Economy

Drawing on the successful experience of India's UPI, Pakistan may take the following path:
| Phases | Objectives |
|——|——|
| Phase I (2024-26)| Raast opens API for third party calls |
| Phase II (2027-28)| SBP to develop regulatory framework for open banking |
| Phase III (post-2030) | "Super App" aggregated financial services |

⚠️ Main obstacles:
➔ Data privacy bill not yet complete
➔ More resistance from traditional banks

4. BNPL & Embedded Finance explode in growth

Driven by e-commerce and social commerce, Buy Now Pay Later (BNPL) will become a mainstream trend:
✅ Daraz Mall has joined hands with JazzCash to launch instalment services
✅ Telenor Bank to launch embedded credit product
🚨 risk point:
- SBP has yet to issue clear regulatory guidance on BNPL
- Excessive borrowing may lead to a rise in bad debts

5. AI-driven fraud prevention and control and user experience optimisation

AI to play a key role in risk control due to surge in fraud cases (+300% YoY) :...
🔹 Biometric + Liveness Detection Reduces Fraudulent Account Opening
🔸 NLP Customer Service Bot Reduces Operational Costs 30%+
🔻 Deepfake voice scams become a new threat

[Conclusion] Possible three pillars of Pakistan Payments Vision 2030.

1️⃣ Universal Digital Identity - Deep Integration of NADRA Biometric Database with Financial Systems
2️⃣ real-time economy - Raast covers P2P/P2M transactions above 90%
3️⃣ regional hub - GCC/China Cross-Border Payment Channel Takes 30% Market Share

If these goals are realised, Pakistan is expected to become the leading market for digital payments in the Islamic world after Indonesia by 2030.