Analysis of the impact of payments on e-commerce business in Pakistan

The impact of Pakistan's payments environment on e-commerce business can be analysed across multiple dimensions such as infrastructure, policy support, consumer habits and challenges, with both positive drivers and constraints. The following is a detailed analysis:

I. Improvements in payment infrastructure drive e-commerce development

  1. The rapid spread of mobile payments

    • Mobile phone penetration in Pakistan is over 80%, but bank account holdings are only about 20%. mobile wallets, represented by JazzCash (owned by telecom operator Jazz) and EasyPaisa (Telenor's partnership with the Ant Group), have filled the gap, allowing users to transfer money and make payments through a simple sign-up, significantly lowering the threshold for e-commerce transactions.
    • According to State Bank of Pakistan, the number of mobile wallet users crossed 80 million in 2023, a year-on-year growth of 351 TP3T.

  2. Bank cards and the growth of digital banking

    • Visa and Mastercard issuance in Pakistan has been rising year-on-year (average annual growth of 15%), and the middle class is more inclined to use credit cards to purchase high-priced goods (e.g. electronics) in instalments.
    • Digital banks such as NayaPay and SadaPay are licensed to offer virtual accounts and seamless cross-border payment capabilities.

  3. Government-supported instant payment system

    • Raast (Instant Settlement System launched by the Central Bank of Pakistan) enables free real-time transfers between individuals/businesses and improves the efficiency of B2B e-commerce.

II. The dual impact of the policy and regulatory environment

  1. proactive policy

    • The National E-Commerce Policy Framework calls for simplification of the online payment process; foreign shareholding restrictions are relaxed to 100% (e.g., Alipay enters the market through equity participation in EasyPaisa).
    • Tax incentives: Income tax exemption for the first three years for registered e-commerce enterprises.

  2. Regulatory challenges

    • Strict KYC requirements have made it difficult for some rural users to open e-wallets.
    • Restricted cross-border payments: foreign exchange controls make it difficult to collect payments on international platforms (e.g., Amazon sellers need to settle payments through a third party).

III. Consumer behaviour and trust issues

  1. Cash dependency and cultural inertia
    About 60% of e-commerce orders still use COD (cash on delivery), especially in smaller cities. Reasons include:

    • Fraud concerns about online payments;
    • Logistics companies are highly sophisticated in collecting cash on behalf of their services.

  2. HalalIncreased demand for certification

    Buy Now Pay Later (BNPL) services are subject to interest-free terms under Islamic finance principles. Local platform Daraz boosts conversion rate by 22% after launching IslamiFi BNPL programme.

IV. Key challenges

  1. Low female economic participation:: Only 25% of women have formal financial accounts, limiting the potential for household consumption.
  2. Uneven network coverage: Insufficient 4G coverage in rural areas 50%, affecting the payment experience.
    3.Risk of exchange rate fluctuations: The instability of the dollar against the rupee increases the cost of cross-border e-commerce settlements.

V. Recommendations for future trends

  • Localised Solutions: For example, integrating Urdu speech recognition into a payment app;
  • Logistics + Finance Combination: Additional top-up points at courier outlets to enhance trust;
  • Government Cooperation Pilot: Promote QR code street vendor access in cities such as Karachi.

Pakistan's e-commerce GMV is expected to reach $7bn in 2025 ($4.2bn in 2023), but the last-mile payments challenge needs to be resolved to unlock the full potential.

VI. Synergies between payment innovation and e-commerce growth

1. The rise of buy now pay later (BNPL)

  • BNPL is growing rapidly in Pakistan and is particularly suited to the lower and middle income groups for the purchase of high unit price goods such as home appliances and mobile phones.
    • Daraz's instalment services with banks accounted for 15% of its GMV.
    • Local fintech firm QisstPay focuses on Islamic-compliant instalment payments with monthly user growth of $30%.
  • challenge: Inadequate credit system leads to high default rate (~8%), need to strengthen risk control model.

2. Combination of social e-commerce + micropayments

  • Facebook/WhatsApp e-commerce relies on P2P transfers (e.g. EasyPaisa Instant) but lacks platform-level payment integration.
  • TikTok Shop test phase slowed by payment friction, may need access to local wallets in the future.

3. Breakthrough attempts in cross-border payments

  • Alipay+ access to some local Pakistani merchants to facilitate Chinese tourists' spending; reverse channel (Pakistani sellers receiving RMB) still restricted.
  • PayPal is not directly involved, but Stripe offers limited services through partners, primarily serving freelancers exporting digital services.

VII. References to key success stories

  1. Daraz's (Ali's) "Super Wallet" Strategy
    Integration of JazzCash/EasyPaisa/Bankcard and launch of Platform Balance System to reduce bounce churn - Payment success rate increased from 581 TP3T to 741 TP3T.

  2. Foodpanda's COD optimisation experiment
    Mandatory prepayment for 51 TP3T discount for repeat users has successfully reduced the COD ratio from 801 TP3T to 651 TP3T and reduced the bad debt rate.

VIII. Under-explored points of opportunity

  • Agricultural supply chain finance: Bulk transactions such as cotton and wheat are still cash-based, and efficiency can be improved if blockchain traceability + electronic payment is embedded.
  • Digitalisation of government subsidies: BISP (Poverty Subsidy Scheme) distributes funds through mobile wallets → develops e-payment habits among rural users.
  • Gaming/live streaming bounty economyUGG: UGG and other handheld games rely on rechargeable cards for in-house purchases, and the integration of automatic chargebacks has great potential.

IX. Data insights: prioritising pain points

issues Level of impact (1-5) Addressing urgency
High logistics costs due to COD ⭐⭐⭐⭐⭐ 🔴🔴🔴🔴
KYC hinders rural user registration ⭐⭐⭐⭐ 🔴🔴🔴🔴🔴🔴
High fees for cross-border collections ⭐⭐⭐⭐⭐⭐⭐⭐ 🔴🔴

x. conclusions and strategic recommendations

Pakistan's e-commerce payments ecosystem is on the eve of exploding, theBut it needs to be targeted to break the mould:

  1. short-term:: COD transformation - prepaid incentives (e.g., doubling of points) for loyal customers;
  2. mid-term:: Credit scoring with telecoms providers (using call/bill payment data);
  3. long term:: The Central Bank has promoted a pilot "digital rupee" to reduce dependence on the United States dollar for settlement.

📌 Core contradiction.Ahead-of-the-curve technology tools (e.g. biometric payments) vs. lagging infrastructure (network coverage) -Choose the Hybrid Model, i.e. online prepayment + offline agent outlets recharge is the optimal solution at this stage.