The first half of October 2024, saw the ushering of waves of optimism as Pakistan achieved key growth milestones, which I believe will have positive ripple effects in our journey towards building a sustainably growing economy. The State Bank of Pakistan (SBP) released its Annual Payment Systems Review FY24 last week, that captured the growth leaps in the national payment ecosystem over the last few years. Highlighting a few noteworthy developments: Digital retail payments volume expanded from 76% in FY23 to 84% in FY24. Payments through mobile banking apps and internet banking portals collectively increased by 62% by volume, and 74% by value. These numbers indicate a healthy growth trajectory for our nation. Once synonymous with an informal, cash-heavy economy, Pakistan is excitingly transitioning into a formal, digital economy; an economy that is embracing the power of digitization to unlock prosperity and wider financial inclusion. These are critical milestones; and we must stop and reflect on them – even celebrate – as our country steadily progresses in its digital payments’transformation journey. While we celebrate these milestones, we must remain steadfast in our commitment to making Pakistan a truly digitally empowered economy – let’s look at why. Bringing financial stability at the micro level The growing share of digital payments directly translates into greater financial stability at the micro–level – enabling individuals and communities, including the unbanked or underbanked, to manage their finances more effectively. They empower even the remote, low-income households, transforming them into assets for national growth as they become active participants in the formal financial system. Last week, the SBP also announced data on workers’ remittances inflows. The cumulative remittances figure stood at US$8.8 billion in Q1-FY25, a 38.8% increase compared to the same period in fiscal year 2024. The hard-earned money sent back home by expats remains a vital lifeline for millions of Pakistanis, particularly for women and vulnerable populations. It also holds the potential to propel the nation into a virtuous cycle of sustainable growth through financial inclusion. Digitalising remittance channels come with tremendous incentives such as reduced costs, faster transactions, enhanced security and tracking of payments. They help broaden access to financial services like credit, savings, insurance – promoting financial resilience for remittance-dependent families that form a large population of Pakistan. At Mashreq, we are committed to bridge borders and ensuring that funds sent by expatriates reach their families promptly, to help boost the financial stability and inclusion of recipients. We are energized by the fact that out of the USD 6 Billion that comes from the UAE to Pakistan, Mashreq facilitates a sizeable amount, leveraging its state-of-the-art remittance platform. Transforming how businesses operate While the Small and Medium Enterprises (SMEs) are said to be the backbone of Pakistan’s economy, millions have historically found it difficult to access basic financial transactions, access microloans and build financial identities. Digital enablement not only can catalyze their growth but also bolster GDP growth. Digital financial services can conveniently and affordably connect entrepreneurs with the whole ecosystem – banks, suppliers, employees and international markets and clients. They provide them with credit history that can further improve credit scores. They can also significantly lower the cost of tax compliance and encourage greater SME formalization towards widening the tax base for the government. Women entrepreneurs are especially bound to benefit as it enables them with greater control over their incomes, in turn benefitting entire households and children. To ensure widespread adoption and maximization of the benefits of digital payments, it is critical to invest in a strong digital financial infrastructure and financial education initiatives. Bringing the undocumented economy into the formal fold Digital payment systems offer a definitive solution to combat challenges arising from Pakistan’s vast undocumented economy. Finance Minister, Muhammad Aurangzeb, revealed in April 2024, that while the country generates Rs 9.4 trillion in annual revenues, half its economy remains undocumented. This encompasses street vendors, domestic workers, small enterprises — all operating beyond formal oversight. A recent study of 101 economies over 2014-19 by the Bank for International Settlements shows that higher levels of digital payments are associated with greater financial inclusion: a 1 percentage point increase in share of population using digital payments leads to an increase of 0.07 percentage point in share of population with financial accounts and 0.05 percentage point in borrowing from formal financial institutions. By embracing digital payments, and by replicatingsuccessful initiatives of various nations that have enabledformalization of economies and subsequent surge in tax revenues, Pakistan’s economy could reach new heights. Calling for joint collaboration among key stakeholders We believe the ultimate success of this journey towards these larger goals, hinges on a partnership approach. Banks, government, fintech players, regulators andtelecom operators and technology companies need to work hand in hand. Let’s rise together to build a holistic digital banking and payment ecosystem that fosters trust, innovation and accessibility.