World Bank assures support for Pakistan to promote cashless society

KARACHI: The World Bank on Friday vowed support to Pakistan towards its efforts to ramp up digital financial inclusion as the central bank unveiled the country’s first national payment systems strategy to promote cashless society through facilitating businesses.

“We have the resources and the drive, the energy to help implement [the strategy and], provide assistance as you implement the national payment systems strategy,” World Bank President David Malpass said. “This movement by the central bank is coming at a good time because there has been time to stabilise [the economy] after the start of the new administration. And that stabilisation will I think facilitate growth going forward.”

World Bank president said the rupee is stable and becomes a flexible currency and has operated pretty well during the stabilisation phase.

“The payment system can be easy to use and affordable, and create solutions for individuals and for businesses,” he added. “This is a real-time kind of launch. And we've also looked at and encouraged the National Database Registration Authority (NADRA) to make verification costs minimal and open. … [to] facilitate this process. And also the Pakistan Telecommunications Authority can allow for interoperability through the USSD (unstructured supplementary service data) channels.”

Malpass said the regulatory framework can be open, allow for interoperability and foster innovation. Banks, telecommunications companies and fintech businesses should collaborate to increase the number of formal individuals and businesses using the system, he said.

“As the cost of transactions goes down, it levels the playing field between genders, so women and men are both able to access the system,” he added.

Malpass said financial inclusion in Pakistan has been gradual. In Pakistan, the digital transactions are less than one transaction per person per year, compared with Indonesia’s 7.6. “There is great potential to be unlocked in Pakistan.”

State Bank of Pakistan (SBP) Governor Reza Baqir said the central bank has been increasingly shifting its focus to structural areas in the financial sector where the reforms are overdue.

“This strategy that we are launching today will make it easier for the companies to enter the markets and ultimately make it easier for people to access the financial system which means for the people it will be easier to make payments and to receive payments,” Baqir said. “It will be easier to save and it will be easier to plan for your financial future. Giving people a greater return on their savings is a particular important area which we hope will be addressed by further digitisation and further financial access.”

SBP governor said digital inclusion is very much the part of the SBP’s strategy to encourage savings, which ultimately will provide the pool of massive resources for financing investment. Resultantly, Pakistan would rely less on external inflows for financing investment, he added.

“This payment systems strategy and its implementation will give more financial power in the hands of the people. In many areas it will give competition to banks as well,” he added. “This strategy will help reduce gender gap in financial inclusion.”

Baqir said Pakistan currently ranks low in terms of financial inclusion and on the gender balance in financial inclusion.

“A greater reliance on digital means we have greater documentation of the economy and we have a less cash,” he added. “Pakistan is one of the countries that stand up for having a very large ratio of cash to deposits.”

The SBP is mulling a micro payment gateway for faster processing and settlement of retail transactions originated by banks, branchless banking agents, electronic money institutions, payment system operators and other non-banking payment players. The gateway is expected to be launched within six months.