Is Pakistan's cashless society on its way?

Is Pakistan's cashless society on its way?

introductory

With the rapid development of digital payments globally, more and more countries are moving towards a cashless society. Pakistan, a major economy in South Asia, has made significant progress in the field of fintech and mobile payments in recent years. So, is Pakistan ushering in a wave of cashless society? This article looks at the current state of digital payments in the country, the enablers, the challenges it faces, and future trends.

1. Status of digital payments in Pakistan

(1) The Rise of Mobile Payments

The mobile payments market in Pakistan has been growing rapidly in recent years. According to the State Bank of Pakistan (SBP), the country's e-transaction volume grew by more than 50% year-on-year in 2023.Among them, homegrown mobile wallet platforms such as Easypaisa, JazzCash, and others have been the key drivers. These platforms offer features such as money transfers, bill payments, online shopping, etc., which greatly facilitates users' daily transactions.

(2) Accelerated digitisation of banks

Traditional banks are also actively embracing digital transformation. Many banks have launched mobile banking applications and online banking services that support services such as QR code payments and cardless cash withdrawals. In addition, the launch of the "Raast" instant payment system has further facilitated real-time fund transfers.

(3) Integration of e-commerce and digital payments

The rise of e-commerce has fuelled the popularity of digital payments. the popularity of e-commerce platforms such as Daraz (owned by Alibaba) and Foodpanda has made more consumers accustomed to using online payment methods.

2. Key factors for a cashless society

(1) Government policy support

  • Financial Inclusion Initiatives (FIIP):: SBP encourages financial institutions to promote low-cost account services to reach the unaccounted-for population.
  • tax incentive:: Government tax incentives for merchants using electronic transactions.
  • Raast system rollout:: SBP has introduced an instant settlement system that reduces transaction costs and improves efficiency.

(2) Increased smartphone penetration

As of 2023, Pakistan's smartphone users have exceeded 100 million, and the Internet penetration rate has reached more than 45%, which lays the technological foundation for mobile payments.

(3) Impact of the COVID-19 epidemic

Social distance limitations during the epidemic prompted more people to turn to contactless payment methods, such as code-sweeping or NFC-enabled near-field communication (NFC).

3. Major current challenges

Despite this rapid development, many obstacles remain:

(i). Low card ownership

Currently only about 20% adults have bank cards leading to a continued prevalence of cash dependency;

(ii). Network security issues

The risk of cyber fraud and data breaches may affect public trust;

(iii). Inadequate infrastructure in rural areas

Poor network coverage and lack of POS terminals in remote areas hindered the rollout process;

(iv). Cultural habits are difficult to change

(a) Some segments of the population, especially the elderly, prefer to use banknotes rather than electronic money for their daily consumption activities.

4 . Forecast of future development trends

Although it will take some time before "zero cash" is fully achieved, the following are indications that the country is making steady progress.

  • Nationwide contactless/QR code scanning is expected to be mainstream by 2030; the
  • Blockchain technology may be introduced to improve the security of cross-border remittances;
  • More businesses are accepting cryptocurrencies as one of the alternative asset classes;

In addition, SBP plans to continue to expand the functionality of the RAST system and interface it with other international clearing systems to enhance its overall competitiveness.

5 . Conclusion

Taken together.Despite all the difficulties"But driven by technological advances + policy support + young demographic dividends.It is foreseeable that the next few years will see a more pronounced shift towards 'less current money'. However, it will take a long time before a seamless, highly developed digital economy like that of China or Sweden can be realised.

If you want to learn more about how countries around the world are moving forward with their own versions of "de-paperisation", keep checking back with us for updates!

6. Key enablers of a cashless society in Pakistan

(1) The rise of fintech companies

In recent years, Pakistan has seen the emergence of a number of homegrown financial technology (FinTech) companies such as Easypaisa, JazzCash and UBL Omni. These platforms not only provide basic money transfer and payment functions, but also gradually expand to microfinance, insurance and investment services. Example:

  • Easypaisa(operated by Telenor Bank) has become one of the largest mobile wallets in the country, allowing users to pay their utility bills, top up their phone bills and even send international remittances via their mobile phones.
  • JazzCash(backed by Jazz Telecom), on the other hand, further reduces cash dependency by partnering with merchants to promote QR code payments.

(2) Digital transformation of banks

Traditional banks are also accelerating their digital presence:

  • HBL (Habib Bank) has launched 'Konnect' digital account, which allows users to open accounts and conduct transactions with just their mobile phone number.
  • UBL's "Omni" service focuses on the rural market, making financial services accessible to people in remote areas through a network of agents.

In addition, the launch of the "Raast" instant payment system has made interbank transfers more convenient and efficient.

7. Analysis of changes in consumer behaviour and acceptance

Despite a strong push by governments and businesses to promote cashless payments, it will take time for consumer habits to change:

(i). Younger generations are more receptive to digital payments

The 18-35 age group is the main user group as they are familiar with smartphone operation and seek convenience;

(ii). Gradual adaptation of SMEs to e-collection

Some small merchants have started to use POS or code payment to attract younger customers and reduce cash management costs;

However:

  • Many low-income people still rely on cash transactions;
  • Some are concerned about high handling fees or technical glitches affecting the safety of their funds;

Therefore, in the future, there is a need to strengthen educational campaigns to enhance public trust.

8 . Implications of international experience for the State of Palestine ......................

Success stories from other emerging markets such as India (UPI system), Kenya (M-Pesa) show that.

  • Government-business collaboration is key - for example, the Unified Payment Interface (UPI) in India was developed under the leadership of the central bank.
  • Inclusive finance should prioritise coverage of rural and low-income populations.
  • Simple and easy-to-use product design can accelerate the process of popularisation.

These are lessons that Pakistan should learn to optimise its own development path.

9 . Potential Risks and Recommendations for Response

The following problems may be encountered in moving towards a cashless society.

(i). Systemic cybersecurity threats

The need to establish stricter data protection regulations and to improve anti-fraud technical capabilities.

(ii). Digital divide exacerbates inequality

It is vital to ensure that vulnerable groups are not excluded - this can be remedied by, for example, setting up additional offline agency points; and

In response to the above challenges, we recommend that.
✅ Strengthening the regulatory framework;
✅ Encourage public-private sector collaboration on innovative solutions.
✅ Ongoing investment in infrastructure development, especially network coverage expansion.

10 . Outlook: possible scenarios for the next 5 years

Based on current trends it is predicted that between 2025 and 2030 there may be.

1️⃣ QR code/NFC near field communication will become the mainstream retail settlement method; the
2️⃣ The rise of new consumer credit models such as "buy now, pay later" (BNPL); and
3️⃣ CBDC (Central Bank Digital Currency) Pilot Project Launched to Explore Possibilities for Legal Tender Digital Currency Applications.

If the measures are put in place, the share of electronic trading is expected to grow from the current 15% to 30%~40%, significantly narrowing the gap with other developing economies.

concluding remarks

While the complete elimination of banknotes is not yet realistic, there is no doubt that.Pakistan is in the early stages of a profound payments revolution. With the combined forces of technological advances + policy support + market demand, a future of "less cash" or even "no cash" is becoming increasingly visible. The key is to balance the speed of innovation with social inclusion to ensure that all segments of the population benefit from this wave of change!