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October 14, 2018

Embarking on a cashless journey


October 14, 2018


By Kamil Khan

A local vendor in Zainab market is having a busy day. There’s a group of tourists who have picked up a handful of items from the shop and is waiting in line to make their payments. While some customers are reaching for their pockets and wallets to dig up the exact amount, the others who have made the payments are told by the vendor that the store has run out of change.

It’s easy to imagine what happens next. The vendor skips over to the next store hoping to get some cash. Meanwhile, customers are getting impatient. Some customers are just about annoyed waiting, while the others drop the handpicked items and walk away. At the end of the day, a considerable amount of time and sales was lost. The limitation in this case is apparent, it was the over reliance on cash which caused inconvenience for both the vendor and his customers.

Transition to cashless economy: There are many reasons for the modern and more developing economy to move away from a heavy reliance on cash. A unique study commissioned by Visa and conducted by Roubini ThoughtLab tells us why: the use of cash is time-consuming, inefficient, and sometimes risky.

The research explains why cities around the world should consider moving toward increasing their adoption of digital payments, and demonstrates the potential benefits of this increase to consumers, businesses, and governments across 100 cities worldwide.

The study found that in Karachi, which it classifies as a cash centric city, increased usage of digital payments, such as cards and mobile payments, could yield a net benefit of Rs181.5 billion annually to consumers, businesses, and government.

Despite a relatively slower adoption of digital banking and payment services, the Pakistani market is on the right track. The latest report released by State Bank of Pakistan shows optimistic indicators.

Pakistani consumers carried out 0.8 million online ecommerce transactions worth Rs4.8 billion through registered ecommerce merchants in the first quarter of 2018. This is a significant quarterly growth of 100.6 percent in volume and 50.5 percent in value of transactions respectively.

This shows that the country and people are ready to embrace digital technologies and new payment driven systems as they are convinced of the positive impact it can have to enable cross-sector socio-economic development.

This view is further validated by Visa’s Cashless Cities study which found that over the next 15 years, Karachi could benefit from a 4.7 percent growth in employment and a 14.3 basis point increase in GDP by moving forward to an achievable level of cashlessness.

Unlocking true potential: Cash is costly to business. According to the Visa-commissioned report, businesses, on average, spend an equivalent of two percent of their monthly revenue accepting non-digital payments and 68 hours per week managing cash.

Labour cost savings and a strengthened bottom line are just two of the ways in which firms may stand to benefit from the increased digital payments. Roubini ThoughtLab’s research reveals that business in Karachi can gain Rs133.1 billion yearly in net benefits by going cashless. The consumers in Karachi will also greatly benefit from the shift to digital payments, achieving approximately Rs12.1 billion in time savings while conducting banking, retail and transit transactions.

Ultimately, education is the key. Consumers need to be educated of the personal benefits that digital payments bring to their lifestyles, while merchants and the government must be informed on the quantitative benefits that electronic transactions add to their businesses and the country’s economic measures.

As the leading digital payments technology company in Pakistan, Visa is actively working with retailers and merchants to raise awareness levels on the advantages that digital payments bring, both on a qualitative and economic level. Our recently published study is just one of the several initiatives in our efforts to promote the usage of digital payments in Pakistan.

From mobile payments using scanned codes, to credit card transactions using biometric authentication, digital payments are now everywhere around us. With billions of connected devices such as watches, cars and fitness trackers now a part of our everyday lives, connectivity is only going to become more ubiquitous.

As communities and cities become less reliant on cash and better equipped to offer fully digital payment experiences, local vendors like the one in Zainab market, and the shoppers who frequent them, may not only become more efficient, they could also strengthen their contribution to the global economy. This is the true power of digital payments.

The writer is a Visa country manager for Pakistan

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