Daily Times

KARACHI: With low debit and credit card penetration, the transaction under banks’ Point-of Sale (POS) in Pakistan were still limited reaching 7.6 million in volume and Rs 40 billion ($400 million) in values, said GSMA study quoting data of State Bank of Pakistan.

The banking system has mainly served the needs of a market segment that makes high-value payments as there are around 40 active commercial and microfinance banks operating in Pakistan through 11,785 bank branches, 9,312 ATMs, 37,286 POS terminals and 27 million cards (ATM, credit and debit). The primary mode for accessing banking services remains the branch network of these banks, which largely focuses on urban and suburban markets, and mainly targets the employed male population.

The study has highlighted target of the central bank to increase the number of female adults with a formal account from three percent in 2014 to 25 percent by 2020. Besides, achieving the percentage of adults living within 5 km of an access point by 2020 including increase the percentage of savers that have used a formal financial service to save during the past 12 months from one percent to 10 percent by 2020.

Earlier, the State Bank of Pakistan (SBP) launched the National Financial Inclusion Strategy (NFIS). The main objectives for 2020 are to increase the number of adults with a formal account from 10 percent now to 50 percent by 2020. The central bank set a target to increase lending to SMEs as a proportion of total bank credit to the private sector from seven percent to 15 percent by 2020.

It is no surprise that, according to the World Bank, the number of unique digital accounts lies at only 16 million, covering just 13 percent of the adult population. This is much lower than the average in South Asia of 46 percent and is one of the lowest in the world. For digital payments, alternatives to traditional financial institutions have emerged, such as branchless banking. These have been led by partnerships between banks and mobile operators. Branchless banking has extended the reach of financial services to several underserved people.

Pakistan has the foundations in place for digital commerce to take off, but for providers to take advantage of the opportunity, key barriers still need to be overcome, including an informal and cash based financial system and lack of availability of a localised online platform that accepts all payment solutions. The e-commerce industry is also at an early stage, with 70 percent of e-commerce activity based in urban areas – Lahore accounts for 21 percent of total e-commerce traffic each year, followed by Karachi with 20 percent and Islamabad and Rawalpindi with 15 percent.

According to an estimate with industry stakeholder, the size of the country’s e-commerce market has the potential to reach several hundred million dollars in the next five years, from its current size of $30 million as the government in Pakistan is promoting financial inclusion.

Pakistan remains a largely underserved market in terms of digital access and digital payment. With a unique mobile subscriber penetration of 31 percent mobile broadband penetration of five percent, and bank/mobile money account penetration among adults of 13 percent, Pakistan still has a lot of room for growth. The award of 3G licences and growth of branchless banking services are signs of improvement. To harness the full potential of digital commerce in Pakistan, mobile operators have a crucial role to play across digital commerce, digital access and digital payments, GSMA study said.