What are the common payment methods used by young Pakistanis?

introductory

With the rapid growth of the digital economy, Pakistan's payments ecosystem is undergoing an unprecedented transformation. As one of the countries with the youngest demographics in South Asia, Pakistan has a large youth population that is highly receptive to emerging payment methods. In this paper, we will take an in-depth look at the various types of payment methods most commonly used by young people in Pakistan today, analysing their features, advantages and trends.

Usage of traditional banking services among the younger age groups

Despite the rapid growth of digital payments, traditional banking services remain a basic financial tool for many young Pakistanis. State-owned banks such as HBL (Habib Bank Limited), UBL (United Bank Limited) and MCB (Muslim Commercial Bank) provide extensive branch coverage.

Debit cards are one of the most common non-cash payment tools used by young account holders. Most banks offer low-threshold account services for students and young professionals, which usually come with a Visa or Mastercard-branded debit card. These cards can be used for online purchases, POS purchases, and ATM cash withdrawals.

Cheques still have a place in business transactions and large personal transfers." Pay Orders are also popular as a safer alternative to cheques, especially for education fee payments and property-related transactions.

It is worth noting that "Branchless Banking" models such as UBL Omni and EasyPaisa's agent networks have greatly expanded the reach of financial services, making basic financial services accessible to young people without traditional bank accounts.

Mobile wallets and the rise of e-money services

Mobile wallets are undoubtedly one of the most disruptive innovations in Pakistan's fintech sector in recent years. According to the State Bank of Pakistan (SBP), as of 2023 there are over 80 million registered mobile wallet accounts.

JazzCashOperated by telecoms giant Jazz is the country's leading mobile financial services platform offering a range of services including.

• P2P transfers
• Utility bill payments
• Mobile phone top-up
• A full range of functions such as merchant cash collection, and nationwide cash access through a network of agents working with a large number of small retailers.

EasyPaisa(launched by Telenor) also has a significant market share, with a strong presence especially in rural areas and small and medium-sized cities The platform's innovative "OTC" (Over-the-Counter without registration) service allows users to complete basic transactions even without a smartphone

Emerging players such asNayaPayFocusing on urban millennials and attracting young users through a beautiful UI design and social payment features Its partnerships with fashion brands and restaurant chains further enhance its appeal These new electronic money institutions (EMIs) are redefining the consumer finance experience for young people in Brazil

The unique position of OTC services and their evolution

While the global trend is towards full digitalisation, Over-the-Counter (OTC) services still play a key role in Pakistan, mainly due to.

1. Smartphone penetration limitations:Despite rapid growth smartphone penetration will be around 51% in 2023 feature phone users will still need OTC access
2. confidence factor:: Many users, especially first-time users, prefer to complete transactions through physical agents
3. cash habit:: Society as a whole is highly dependent on cash OTCs provide a bridge between digital and cash

The OTC processes offered by mainstream platforms are typically as follows.

1. Users go to authorised agents (mostly corner shops)
2. Provide recipient's mobile phone number and CNIC (identity card number)
3. Deliver cash and get a transaction code
4. Recipients can redeem the code for cash at any same-branded reseller. It is important to note that as technology advances, the proportion of pure OTC is declining, and the 'semi-digital' model - whereby OTC is used for the first time and subsequently upgraded to a full account system - is becoming the dominant strategy for the transition period. This hybrid approach effectively balances the goals of convenience and inclusivity Biometric authentication, as tested in SBP's latest regulatory sandbox, could be a further game changer in this space, reducing reliance on physical credentials while maintaining ease-of-use features.

Widespread adoption of the IBFT instant money transfer system

Pakistan's unique IBFT (Inter-Bank Fund Transfer) system forms the backbone of the country's retail payment network This infrastructure, operated by 1Link, allows.

24/7 real-time fund transfer
Only the other party's IBAN number is required
Free or very low cost in most cases

For young people IBFT is particularly suitable for the following scenarios.

• Assessed billing:: AA settlement after group activities such as dinners and tours
• Family support:: Regular remittances to children studying abroad
• Freelance income:: Earnings withdrawals from platforms such as Upwork/Fiverr

Commercial banks are actively optimising the relevant user experience such as Meezan Bank's fast IBFT interface or Alfalah Bank's personalised template feature Sharing of IBANs instead of card numbers on social media has become a safe and common practice reflecting the system's deep penetration in everyday life.

Raast - The new clearing system launched by the Central Bank is gradually integrating the old architecture and in the future it may be possible to replace complex account identifiers directly with mobile phone numbers, which will significantly lower the technological threshold and facilitate a wider range of applications, especially in the informal economy.

The rise of the BNPL buy-and-pay model

The Buy Now Pay Later product caters for the local youth's need to overspend in the following ways.

Typical BNPL Process.
1️⃣ Pre-qualification within the App (usually no formal credit history check)
2️⃣Select participating merchants to place your order
3️⃣ down payment 20%-50% Balance amortisation
4️⃣ Defaults will affect future credits and incur late fees

Risk management vendors tend to use alternative data assessments such as.
✔️ social media activity
✔️ device information
✔️ contact repayment performance

The major challenges facing the industry come from the cost of funds pressure in the high interest rate environment and the tendency of some users to over-indebtedness The proposed new regulations by the SBP in early 2024 may require more transparent disclosure of terms This will help the market to grow healthily.

Localised innovation in P2P social payments

Native FinTech has developed a number of culturally appropriate features that incorporate the social attributes of Messenger-type apps.

- Eidi delivery-Digital red packet craze during Eid ul Fitr
- Mehndi Collection-Innovative interface design for pre-wedding fundraising
- Committee Revolving Savings-Digitalisation of the traditional collegial system

For example, FriendliApp allows for the creation of ad hoc groups for common expense management, while Dukan.pk's inbuilt tools allow small merchants to easily generate exclusive payment links for friends and family. These solutions blur the boundaries between social and business, creating a unique barcalounger user experience that is more deeply integrated into local rituals and economic practices than the Venmo-like Western products. The recent approval of WhatsApp Pay is expected to accelerate the pace of competition in this segment and drive the emergence of more context-aware features.

Youth demand for cross-border payments

Remittances sent back by overseas workers form an important part of the GDP, and a service platform has been developed to address the specific needs of young people such as international students and working holiday makers through the following channels.

🌍 Traditional outlets of Western Union/MoneyGram
📱 Wise (formerly TransferWise)/Remitly's low-cost digital programme
🏦 Specialised products from banks such as HBL Konnect

Comparison dimensions include speed, exchange rate transparency and reception flexibility Dubai Malaysia Saudi Arabia route is the busiest Recent cryptocurrency channels are not officially recognised but there is some experimental use amongst tech enthusiasts Technologies such as RippleNet could potentially merge with existing architectures to increase efficiency and reduce costs, which is particularly important for young, highly price-sensitive remittance senders while compliance remains the biggest uncertainty and needs to be closely monitored. Compliance remains the biggest uncertainty, requiring close attention to the direction of policy change.

Summarising the outlook

Taken together the following trends are likely to emerge in the current 5 to 10 year period:

🔹 Biometric authentication replaces most PIN entry steps
🔹 Super App integrates more non-financial lifestyle services
🔹 Central Bank Digital Currency (CBDC Pilot Expansion Impacts Private Sector Innovation Pace
🔹 AI-powered personalised financial advice becomes standard

Future Trends and Challenges in Pakistan's Payments Industry

Exploration of Digital Currency and Blockchain Technology

Pakistani youth have shown a keen interest in emerging technologies, which has fuelled initial attempts at digital currencies and blockchain payment solutions. Although the State Bank of Pakistan (SBP) has not yet recognised cryptocurrency as legal tender, some technology pioneers are already cautiously testing related applications.

Status quo characteristics:

• Small Bitcoin Trading Community Exists in the Metro Tech Scene
• Some cross-border e-commerce companies accept cryptocurrency payments to circumvent foreign exchange restrictions
• Local developers are experimenting with Hyperledger-based enterprise blockchain solutions

Notably, in 2023 SBP initiated a feasibility study on a retail-based central bank digital currency (CBDC). This digital rupee, which is likely to be launched in the next few years, will provide a safer official digital payment option for the youth. The private sector such as Telenor Bank has already started preparing the technical infrastructure accordingly.

Localisation of the "Super App" model

The global success of super-apps such as WeChat and Grab has inspired local Pakistani companies to follow suit. Younger users in particular favour one-stop shop platforms, which has spawned a variety of innovative attempts at aggregated payments.

Typical case:

1. JazzCash+:
   • Integration of Daraz e-commerce portal
   • Built-in Foodpanda ordering
   • Connecting Careem Travel Services
2. NayaPay Ecology:
   • P2P transfers combined with social features
   • Spotify and other entertainment subscription management
   • Zameen Property Platform Fast Payment

These platforms enable seamless jumping between services through a unified KYC (identity authentication) system, which greatly improves the stickiness of young users. Data shows that the monthly activity of users using 3 or more functions is 47% higher than that of single-function users.

The rise of AI-powered personalised financial services

Artificial Intelligence is profoundly changing the payment experience for young Pakistanis:

Intelligent Assistant Apps

• Bank Alfalah's virtual customer service "Alfa" handles 65% common enquiries.
• HBL's AI financial advisor offers savings advice based on spending habits

Evolution of the risk control system

• NIFT cheque imaging system uses machine learning to identify fraud patterns
• SadaPay uses behavioural biometric profiling to prevent skimming

Predictive services