Cashless payments estimated to save Rs182 billion a year for Karachi: Visa

KARACHI: Cashless payments could annually save $1.5 billion and yield 3.3 percent of GDP as net impact in the city’s economy valued at $45 billion, a senior official of card scheme Visa said on Monday.

“We don’t think that we can go 100 percent cashless, but we can make 90 percent of the population not using digital payments to use online transaction (even on small scale),” Majeed Hujair, senior director at Visa School of Public Policy said, unveiling the findings of a study, “Cashless Cities: Realizing the Benefits of Digital Payments”.

Hujair said businesses would emerge as the biggest beneficiary of cashless economy. They could recover approximately $1.1 billion in time savings, while processing incoming and outgoing payments and increased sales revenues.

Consumers and government could also save nearly $0.1 billion and $0.3 billion, respectively, due to use of digital payments, said the study globally conducted to estimate the impact of shifting to digital cash on economic growth in 100 cities in 80 countries.

The study estimated direct yearly impacts of $1.5 billion or 3.3 percent to GDP in achievable cashless scenario. Catalytic impacts would be generation of 198,100 additional jobs between 2017 and 2032.

Hujair said it is the first-of-its-kind study on city-level conducted last year. A reason for its delayed release is Visa’s team road shows one-by-one in each country across the world.

The study found four barriers to cashless economy.

“There is a limited access from consumer side. Banking services are not tailored to their needs,” Hujair added. Inadequate infrastructure, lack of financial literacy and personal inhibition linked with traditional means, and trust deficit on security are other key reasons behind cash-centric approach.

Karachi’s selection in the study purview was the city’s importance in the country’s economy. Urban centres usually account for more than half of national GDP.

The Visa official, who holds more than two decades of experience in payments industry, said cultural barrier is a key factor even when there is an advanced infrastructure in a territory.

“Tokyo is advanced, but people’s readiness (to digital payments) is low there,” he said. Muffasar Atta Malik, president of the Karachi Chamber of Commerce and Industry said the biggest irritant is 2.5 percent fee charged by merchants on an online payment.

Kamil Khan, country manager for Visa said the surcharge is not allowed as per visa policy. Analysts underscore need of regulatory framework to plug loopholes. Ecommerce policy framework has been on the anvil for the past couple of years and its delay is holding international payment gateways back.

Khan is, however, optimistic about arrival of global provider of credit card payment processors. “CyberSource is here,” he answered to a question on PayPal’s absence.

CyberSource facilitates payment for online merchants. Comparatively, it is not as ubiquitous as PayPal is. Nearly 3,000 merchants around the world use CyberSource, while PayPal is used by almost a million websites and the number is growing.

Arrival of CyberSource, which is a Visa’s subsidiary, is seen as a catalyst to digitisation in Pakistan where 98 percent of ecommerce transactions are based on delivery on cash.

Khan said digital payments offer an immense, untapped opportunity to boost the country’s economic growth “as the government pushes forward with the digital Pakistan policy-led initiative”.

“With the rising rate of smartphone penetration in Pakistan and ecommerce forecasted to be worth $1 billion by 2020, the use of digital methods is expected to increase significantly, paving the way for the transition to cashless economy,” Visa Country Manager said in a statement.