For an economy of its size the prevalence of cash in Pakistan is particularly striking, as it dominates both retail and business transactions. With banks slow to promote payment cards and merchants reluctant to accept them, is there any immediate hope for issuers? Timetric’s researchers found some answers
Pakistan’s payment system is dominated by cash, which is used both for small retail payments and large business transactions. Cash accounted for 98.9% of the overall payment transaction volume in 2015, primarily because most banks have been slow to promote electronic payments. Merchants are also reluctant, and often discourage card payments by imposing surcharges.
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Frequency of payment card use in Pakistan was 12 in 2015 – lower than peers including Indonesia (27.6), Cambodia (27.4), the Philippines (23.4) and India (13.6).
Government and banks push for inclusion
A low level of financial inclusion is a challenge for the wider adoption of payment cards in Pakistan. Penetration was just 0.151 cards per individual in 2015 – lower than in China (3.841), Malaysia (1.770) and Indonesia (0.509).
According to the World Bank, the number of adults in Pakistan with no access to formal financial services reached 100m in 2015, accounting for 5% of the world’s unbanked population.
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By GlobalDataThe share of the population aged 15 or above with a bank account was just 8.7% in 2014, according to the World Bank’s Global Findex survey. The government launched the National Financial Inclusion Strategy in May 2015, which aims to expand financial access to at least 50% of the adult population by 2020.
Pakistan has also received support from the World Bank Group through the Country Partnership Strategy (2015–2019), which aims to improve financial inclusion.
To support financial inclusion and serve the unbanked population, banks offer alternative channels such as branchless and agent banking. HBL offers HBL Express, a branchless service that allows users to make fund transfers in more than 183 cities, pay utility bills and recharge mobile phones. HBL Express services can be accessed through more than 10,200 agents, and users are not required to have an account.
UBL offers the Omni branchless banking service in more than 650 locations in Pakistan, allowing consumers to open a basic bank account and receive a debit card. Omni can also be used to send and receive money, deposit and withdraw cash, make utility bill payments and donations, and recharge mobile phones.
Rising financial inclusion gives consumers access to services such as current and savings accounts and payment cards.
MNOs complement government programmes
Mobile network operators (MNOs) in Pakistan play a key role in providing financial access to those not served by the conventional banking system. Telenor Pakistan and Tameer Microfinance Bank’s joint venture, Easypaisa, introduced Easypay to facilitate multiple payment options for merchants and customers.
Customers can make online and in-store payments using Easypaisa mobile accounts.Users can make online payments by selecting Easypay at an online checkout, while in-store payments can be made via agents at more than 70,000 Easypaisa shops. Users can also deposit money at these locations.
UK-based Centili offers direct carrier billing services in Pakistan in collaboration with MNOs such as Mobilink, Telenor, Zong, Ufone and Warid. Centili can be accessed by 136m subscribers in Pakistan and is used to pay for digital content by directly charging it to the bill of a mobile device.
Fortumo linked with MNO Zong in April 2016 to launch a direct carrier billing service in Pakistan, allowing 26m Zong customers to pay for digital content and apps.
