Pakistan is a cash-dominated society. Use of cash for day-to-day transactions remains prevalent among Pakistani consumers, due primarily to factors such as a high unbanked population, limited financial awareness and a largely inadequate payment infrastructure.
Financial inclusion remains a top priority, with the government and other commercial banks introducing initiatives to improve banking penetration.The government launched the National Financial Inclusion Strategy in May 2015, which aims to bring 50% of the adult population into the formal banking system by 2020.
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Adoption of basic bank accounts, increasing the number of bank branches, offering banking services via banking agents, expanding ATM and POS terminal networks, and promoting financial awareness are the key objectives.
Branchless banking is among the main drivers of financial inclusion in the country. The number of accounts opened via branchless channels rose from 37.3 million in 2017 to 47.2 million in 2018.
Low-cost accounts
Debit cards account for 96.3% of total payment card transaction value in 2019, including ATM withdrawals. The introduction of low-cost Asaan accounts and an expanded agent banking network have driven debit card adoption.
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By GlobalDataBanks are increasingly using banking agents to reach the unbanked populations in rural areas. There were 425,199 agents operating in Pakistan as of December 2018. United Bank offers Omni branchless banking services through its network of 42,000 agents, branded as Omni Dukan, located in 900 cities and towns in the country.
Credit cards
Credit cards are not popular among Pakistani consumers, accounting for only 3.7% of the total payment card transaction value in 2019. This is because banks tend to follow stringent application procedures, and also for religious reasons, as Islam forbids interest.
With the growing popularity of Islamic banking, many banks are offering Shariacompliant credit cards. Standard Chartered offers the Saadiq Visa credit card for a fixed monthly fee, with no interest charged on outstanding amounts. To encourage adoption, banks are also offering interest free balance transfers and installment facilities on credit card purchases.
E-commerce growth
E-commerce grew significantly from PKR6.3bn ($45.1m) in 2015 to $206.6m in 2019 at a CAGR of 46.3%. This growth was mainly supported by the expansion of internet access, and rising smartphone penetration.
New e-commerce merchants and government initiatives have supported growth. Online retailers conduct various events to boost online sales. Meanwhile, the availability of alternative solutions such as Easypaisa, JazzCash, MCB Lite and FonePay also benefits e-commerce.
Prepaid card market
The number of prepaid cards in circulation declined at a CAGR of 5.8% between 2015 and 2019. This is due to the introduction in May 2016 of regulations on prepaid cards.
The regulations were developed in compliance with the Financial Action Task Force to address risks related to money laundering and terrorism financing, and should ultimately promote the growth of prepaid cards by enabling financial institutions to offer prepaid cards through third-party authorised agents.
The large unbanked population remains the key focus for banks looking to increase prepaid card uptake. Allied Bank offers a PayPak-branded domestic prepaid card called EZCash, targeted at the unbanked population.
Card acceptance
The country’s card acceptance infrastructure is underdeveloped, with only one POS terminal for every 4,062 individuals. However, the number of terminals will record a CAGR of 3.4% over the four-year period to 2023.
To encourage acceptance among smaller merchants, HBL and Bank Alfalah offer
low-cost mobile POS solutions. Banks are also introducing POS terminals. Allied Bank has installed terminals at its 22 branches, allowing customers to make utility bill payments, balance enquiries and cash withdrawals.
