KARACHI: The foray of new technology players into the country’s financial sector will help accelerate digital payments adoption as well as financial inclusion, State Bank of Pakistan (SBP) said on Thursday.
Pakistan is the world's fifth-most populous nation but 70 percent of its adults don’t have a bank account.
According to SBP’s third quarterly report on payment systems for FY 2021-22A, a new Electronic Money Institution (EMI), China Mobile Pakistan Electronic Commerce Company (CMPECC), was granted the commercial license in the third quarter of this fiscal year, which will drive the digital payment landscape further, while the existing two EMIs, namely Finja and Nayapay, have also continued to strengthen their presence.
“As more such players enter the market, the objective of improving financial inclusion will also increasingly materialize,” it said.
The SBP issued EMI regulations in 2019 to promote financial inclusion and shift the economy towards digitization.
“The innovative digital payment solutions offered by such non-traditional fintechs are expected to drive the admission of the unbanked population to the formal economy, thus increasing digital adoption in the country.”
The EMIs are entities that offer innovative, user-friendly, and cost effective low value digital payment instruments like wallets, prepaid cards, and contactless payment instruments. Emoney has played a crucial role in digitising different types of payments in various countries.
“The EMIs in Pakistan are expected to offer interoperable and secure digital payment products and services to end-users,” the SBP said in the report.
Under the regulations, prospective EMI applicants are granted EMI licence in three stages viz in-principle approval, approval for commencement of pilot operations and the final approval i.e. the licence.
Out of total 10, three EMIs got the commercial licence, three got pilot approval and four have received in-principle approval by the SBP to commence operations in January-March of FY2022.
“Concerted efforts by the SBP to push the digital payments adaption have been driving the growth in e-banking as its value rose 6.5 percent to Rs35.4 trillion in January-March FY2022 from Rs33.2 trillion three months before,” the SBP’s report said.
The bifurcation shows that a major portion of this growth was driven by continued widening in internet banking and mobile banking transactions. Number of registered internet banking users reached 7.6 million, showing a growth of 10.6 percent, resulting in a double digit-growth of 13.5 percent and 19.9 percent in volume and value of transactions respectively on a quarter-on-quarter (QoQ) basis.
Through this channel a total 38.3 million transactions worth Rs2.906 trillion were processed. Mobile banking transactions volume was 101.5 million with value of Rs3.085 trillion, which amounted to a growth of 8.1 percent and 5.4 percent respectively on QoQ basis.
Under the retail sector, point of sale (POS) transactions continued to show an upward trend. During this period, the number of POS terminals installed reached 96,975 as compared to 92,153 in the previous quarter, an increase of 5.2 percent. Through these POS terminals, a total of 38.3 million transactions were processed that amounted to Rs189.7 billion in value. This resulted in a quarterly growth of 21.9 percent in volume and 6.5 percent in value of transactions.
Number of ATMs reached 16,897 with transaction volume and value of 171.3 million and Rs2.437 trillion respectively. Similarly, the number of e-commerce merchants on boarded with banks also showed a double-digit growth of 12.0 percent reaching to 4,445. A total of 9.1 million e-commerce transactions amounting to Rs27 billion were conducted during the quarter. Both volume and value exhibited an impressive growth of 62.8 percent and 77.1 percent respectively, on a year-on-year basis, in case of e-commerce transactions.
Paper-based transactions declined by 2.9 percent in volume though their value remained almost at the same level posting only 0.6 percent growth over the previous quarter. In the case of RTGS (PRISM), the real-time gross settlement system of Pakistan, a total of 1.08 million transactions amounting to Rs155.7 trillion were processed.
A total of 47.2 million payment cards were in circulation at the quarter end of Q3FY2022. Those payment cards mostly comprised debit cards (62.3 percent), social welfare cards (23.3 percent), ATM only cards (10.3 percent), credit cards (3.7 percent) and lastly prepaid cards (0.3 percent).