World Bank Sees $36 Billion Potential In Pakistan’s Digital Finance
E-commerce market grew about 94% in size last year.
While being optimistic about Pakistan’s economic potential, the World Bank has estimated Pakistan’s digital finance potential to be at $36 billion, projecting a 7% boost to GDP with retail payments gateway. But, all of this depends solely on the extent of the use of online financial transactions.
“To unlock Pakistan’s $36 billion digital finance potential, it will take high-level commitment, faster payments gateway, lower costs, fast track licensing for fin-tech (financial technology) sector and digitization of all government payments,” – said Illango Patchamuthu, World Bank Country Director for Pakistan, in a tweet.
However, he continued to tell that the significantly increased use of digital payments while promoting a 7% boost of GDP, can create 4 million job opportunities, and assemble more than $250 billion in deposits and formalize a big segment of the economy.
Despite having the fastest-growing internet-savvy population, Pakistan has an irrelevant use of online payments. The cash dependency and lack of literacy are a big obstacle in the growth of digital payments, even if the number of internet-connected devices is increasing drastically.
Patchamuthu visualizes 50% of the population, i.e. 213 million moving to digital payments within a year, and the country outdoing regional economics, like Indonesia and India, if a real-time payment gateway is introduced.
“A real-time retail payment gateway and a booming fin-tech sector can accelerate the use of digital payments in Pakistan to at least 50 percent of the population by 2020,” – he said.
“Only 18 percent of the population uses digital payments in Pakistan now. A Pakistani will make only one digital transaction per year compared to 5 in India, 7 in Indonesia. Pakistan can accelerate digital payments and leapfrog its peers.” – Patchamuthu continued.
While businesses like ‘fin-tech’ continue to come up with technologies like mobile wallets and local gateways, local platforms are incapable of transmitting foreign currency from across the border, hindering the aim of a cashless economy.
E-commerce market grew about 94% in size last year:
Last year, the E-commerce market grew about 94% in size, to more than Rs. 40 billion. But, 90% of payments were cash-on-delivery. The ministry of commerce asked for the need of introducing a card-not-present transaction and look further into the possibility of co badging with an international card payment system.
“International payment gateways like Visa and Mastercard exist in Pakistan that facilitates the merchants for e-commerce transactions, both national as well as international,” – the ministry stated in the e-commerce policy framework.
It further added that international payment gateways would require bilateral agreements with individual countries to route the transactions to Pakistan.
Last week, the first framework was approved by the government, that’ll be a step towards unlocking e-commerce potential by removing regulatory problems.
“MOITT (ministry of information technology) in collaboration with SBP (State Bank of Pakistan), will approach PayPal and other payment gateways to ensure availability of international payment gateways in Pakistan,” – the ministry said in the document.
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