Pakistan’s digital revolution is taking shape; in just three years, the number of online bank accounts has tripled.

The last couple of years has seen a massive increase in the national digital payments ecosystem and the number of digital accounts have tripled over the last 3 years, according to the State Bank of Pakistan’s (SBP) Annual Payment Systems Review. The report says that mobile phone banking increased by 148.4% to 387.5 million, while internet banking grew by 51.7% to 141.7 million during the previous year.

The launch of SBP-backed Roast gained traction and the popularity of electronic money institutions (EMIs) among consumers, which contributed to the sharp rise in the numbers. These developments indicate that money will soon transition to digital. Contrarily, with expanding ATM networks and double-digit growth in cash withdrawals from ATMs over the previous year, cash transactions have also become more common.

Similar trends were seen in e-commerce transactions, which saw their volume increase by 107.4% to 45.5 million and their value increase by 74.9% to Rs106 billion.

A total of 32,958 Point of Sales (POS) devices were installed in the nation during the fiscal year 2022, which caused its network to grow by 45.8% to 104,865. The overall number of POS transactions, 137.5 million, increased by 54.5% over the previous fiscal year, and the value of those transactions, which totaled Rs0.7 trillion, increased by 56.1%.

The four fully regulated EMIs (electronic money institutions), Sadapay, Nayapay, Finja, and CMPECC, together have 262,558 total active accounts and 514,961 payment cards issued to their consumers, according to the State Bank’s annual report. It was not possible to compare the EMI data from last year to see how much they had increased.

In FY21–22, there were 4,887 registered e-commerce merchants with the banks, up from 3,003 in the prior year. SBP established Raast Person-to-Person (P2P) as part of its ongoing initiatives to advance and improve the nation’s digital payment infrastructure, allowing payments between people, organizations, and other entities to be settled in real-time. The report states that as of June 22, there were 15 million P2P Raast users registered, and they had completed 7.9 million transactions worth a total of Rs 102.1 billion. Roast debuted in November of the previous year.

By FY22, there were 4.37 million high-value transactions made using Pakistan’s Real-Time Gross Settlement (RTGS) system, totaling Rs 681.6 trillion, an increase in value of 53.3% annually. Paper-based transactions decreased in volume by 1.0% in FY22, but their value increased to Rs 190.4 trillion, over 25.6% more than in the previous year.

The number of people with traditional bank accounts climbed by 4.5 million, from 63 million in 2021 to 67.5 million in 2022, according to the State Bank’s Annual Payment Systems Review. Branchless banking accounts, on the other hand, saw a surge of 18.6% from 74.6 million to 88.5 million.

In FY22, there were 42.4 million payment cards in use, of which 71.1%, or 30.16 million, were debit cards; 24.3%, or 10.3 million, were social welfare cards; 4.2%, or 1.79 million, were credit cards; and the remaining percentage was made up of pre-paid and ATM-only cards.

The SBP has frequently emphasized the role that fintech may play in advancing digital payments and financial inclusion in the past.

Jameel Ahmad, Governor SBP, stressed the need for banks to review their conventional approach to service delivery and adapt quickly as digitalization shifts the balance of power from banks to tech-savvy entities, teasing the growing trend in fintech, during his speech at the Institute of Banking Pakistan Annual Award Ceremony.

In Ahmed’s opinion, leveraging digital technology is crucial for both promoting financial inclusion and ensuring that the sector stays up with changing global trends.

Ahmad uses the Kenyan fintech M-Pesa as an example while discussing the value of technology.

“M-success Pesa’s in Kenya, where it single-handedly increased access to financial services and accelerated the availability of mobile financial services, is an often cited success story.

Ahmad emphasized that a number of elements already exist in Pakistan that might encourage the development of a tech-based financial ecosystem and digital financial innovation. He emphasized that the country has a fully functional digital ID system, widespread mobile device use, widespread use of mobile and broadband services, access to faster payment rails, a process for opening accounts remotely, and a regulatory environment that is accommodating of non-bank entities’ entry into the financial sector.

The Central Banker also emphasizes that while fintech has increased competition, it has also given the industry a chance to forge collaborations and synergies that will benefit both parties.

“Banks and Fintechs can collaborate to provide clients cutting-edge solutions that would otherwise be unprofitable on their own. Such partnerships can help banks break into underserved markets like retail and Micro and Small and Medium Enterprises, producing positive results for all parties involved.

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