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Pakistan's digital payment system, RAAST, is transforming financial services with real-time payments and financial inclusion.
Pakistan's on the cusp of a digital payment revolution, changing the way we view and use financial services. Under the influence of cutting-edge technology and government backing, the landscape's rapidly evolving. Let's explore the ups and downs of this transformation, focusing on significant developments, challenges, and what lies ahead. Could initiatives like RAAST lead to increased financial inclusion and economic growth? Could they mirror India's success with UPI? Let's find out.
The nation’s payment landscape is shifting dramatically, fueled by advancements in technology and an increasing demand for digital financial services. With digital payments surging to 84% of overall financial transactions, according to the State Bank of Pakistan, we're seeing the uptake of channels like mobile banking, internet banking, and branchless banking.
The SBP's strategic rollouts have been central to this digital payment system in Pakistan. Launched in 2019, National Payment Systems Strategy aims for financial stability and accessibility. The introduction of RAAST, the country's fully interoperable fast payment system, marks a major milestone, allowing for end-to-end digital payments between individuals, businesses, and government entities securely and cheaply.
Our nation has been expanding its digital tools, encompassing secure bank transfers, mobile wallets, and QR Code Payments, and those without bank accounts are being empowered further.
Sure, we've made strides, but hurdles are still there. The banking system isn't as accessible as it could be. Trust? Trust is still shaky, and of course, transaction costs can sting. But these roadblocks could also be gateways for innovation. Government initiatives promoting digital payments should be a game changer.
RAAST was launched to develop the payment infrastructure, promote financial inclusion, and remove reliance on cash. Though, it's evident we still lack volume and value in comparison to peers. We're also struggling with things like low banking penetration and high transaction costs.
India's Unified Payments Interface (UPI) has thrived, particularly after India eliminated the Merchant Discount Rate (MDR) on QR code payments in 2019. The appeal to merchants made digital payments take off! And it's worth noting that non-bank platforms like PhonePe, Google Pay, and Paytm are leading this charge. They've got venture backing and innovative services.
Right now, digital payments in Pakistan are only 0.2% of the 100 billion transactions a year. Far lower compared to countries like India, China, Thailand, and South Korea. The State Bank hopes to boost Pakistan's GDP by 7% through digital payments, but adoption is slow due to high MDR and lack of financial literacy.
For India, it looks like 75% of UPI payments will be P2M payments by 2025. The abolition of MDR and fintech involvement have made this possible. UPI's success has led to a massive surge in digital transactions. Pakistan, with RAAST, is hoping to replicate that success.
Differences? We've got the MDR policy, for starters. In India, no MDR has driven UPI's success, while in Pakistan, high MDR rates are a hurdle. Other factors hindering our payments financial services include limited financial literacy and a preference for cash.
The future of digital payments in Pakistan seems bright. With continued government and SBP support, the ecosystem will get more robust. Adoption of technologies like blockchain could further change the game.
Pakistan's payment system is heading toward a digital future, thanks to technology and government backing. Understanding what's happening now and what’s coming next can help navigate this new landscape, and embracing digital payments could open doors for financial growth.
