Online retail payments jump 84% due to shifting consumer preferences and increased tech adoption
Pakistan is experiencing a rapid shift towards digital banking, with online retail payments surging to 84% of total transactions in the fiscal year ending June 30, 2024, up from 76% the previous year. The State Bank of Pakistan’s (SBP) Annual Payment Systems Review for FY24 highlights the growing trend toward digital transactions, which has seen a steady increase over the past five years. In FY20, digital payments accounted for 55% of retail payments by volume, a figure that has now skyrocketed to 84%, reflecting the increasing integration of technology into financial transactions and changing consumer preferences.
The SBP emphasized that the sharp rise in digital payments is largely due to the growing use of mobile banking apps and internet banking. Over the past two years, mobile banking has grown at an average annual rate of 70%, while internet banking has seen a 26% rise. These platforms offer customers round-the-clock access to a variety of banking services, making transactions easier and more convenient. In FY24, transactions through these digital channels increased by 62% to 1,345.9 million, while their value soared by 74% to Rs69.8 trillion.
In terms of transaction value, digital payments now account for 17% of total payments, a notable jump from 6% in FY20. However, large payments are still predominantly made via cash or cheques at physical bank branches, indicating that some customers remain cautious about adopting digital technology due to concerns over cybersecurity.
Interestingly, despite the rise in digital banking, the circulation of physical currency also increased by 12% in FY24, reaching Rs9.15 trillion, which accounts for around 30% of total bank deposits of Rs30.78 trillion as of August 2024.
Cross-border payments have also moved towards digital channels, marking a key milestone in FY24. The SBP partnered with the Arab Monetary Fund (AMF) to integrate Pakistan’s instant payment system, Raast, with Buna, a cross-border payment platform operated by the Arab Regional Payments Clearing and Settlement Organisation. This collaboration aims to facilitate instant remittances for overseas Pakistanis, particularly those residing in the Gulf Arab region, who are significant contributors to Pakistan’s remittance inflows.
The SBP’s report also revealed that retail payments in FY24 experienced a remarkable 35% increase, with the number of transactions rising from 4.7 billion to 6.4 billion, and their value growing from Rs403.5 trillion to Rs546.6 trillion. The user base for internet banking grew by 25%, mobile app banking by 16%, and branchless banking mobile apps by 2%. The most notable growth came from e-wallet users, which saw an 85% increase.
Digital wallets, provided by branchless banking institutions and Electronic Money Institutions (EMIs), have played a significant role in expanding the digital payments ecosystem. Customers made 2,697 million payments through branchless banking mobile app wallets and 85.2 million through EMI e-wallets in FY24, up from 1,704.7 million and 33.3 million, respectively, the previous year. The value of transactions made through branchless banking mobile wallets doubled to Rs8.8 trillion, while EMI e-wallet transactions tripled in value to Rs0.23 trillion.
E-commerce is also benefiting from this digital shift. Around 87% of e-commerce payments in FY24 were made through digital wallets or accounts, compared to just 13% via payment cards. A total of 308.9 million e-commerce transactions were recorded, with a total value of Rs405.9 billion.
The expansion of Point-of-Sale (POS) machines, which grew by 8.9% to 125,593, further supports the move toward card-based transactions. As of the end of FY23, there were 85,386 POS-enabled merchants across Pakistan, offering greater convenience for consumers who prefer digital payments at retail outlets.
This surge in digital banking marks a significant transformation in Pakistan’s payment landscape, driven by advancements in technology, growing consumer trust in digital channels, and efforts by the SBP to enhance the country’s payment infrastructure.
