SBP official urges banks to join hands with tech firms for increased adoption of digital mode of payments

KARACHI: State Bank of Pakistan (SBP) has urged upon commercial banks and technology firms to join hands for pacing up adoption of digital mode of payments to cut size of the informal economy, grow tax collections and support economic growth.

“We slogan we are against doing transactions in cash. However, our actions speak otherwise,” said Syed Irfan Ali, Managing Director, Deposit Protection Corporation, State Bank of Pakistan (SBP).

The world is changing. It is going digital. “If we will not accept the change, we will remain there where we are today,” he said while speaking at the 20th annual ‘Future Banking Summit 2022’, organized by Total Communications at a local hotel in Karachi on Thursday.

Economic sanctions on Iran and India’s desire to check corruption and eradicate black economy have transformed them into digital economies. “Pakistan has two options to pace up transformation towards a digital economy; either do what India did (abruptly changed currency, remained in pain and it took it around two years to achieve the success). Or we should pace up the evolution…through collaboration,” he suggested.

He stressed to increase collaboration among stakeholders, including regulator (the central bank), to achieve the goal of transforming Pakistan into a digital economy sooner than later. Financial Action Task Force’s (FATF) grey listing has transformed Pakistan. “Luckily we are not on the blacklist. We have just transformed…We will hopefully soon be removed from the grey list (to white list) pretty soon,” he said.

On the flip side, the introduction of Raast – the fasted mode of digital payment – and Roshan Digital Account (RDA) for overseas Pakistanis are the two world class examples of digitalization of the economy in Pakistan, Ali said.

“The inflows from overseas Pakistanis through RDA have surpassed $5 billion mark last week. Non-resident Pakistanis are remitting on an average $250 million a month through their digital accounts,” he said.

“ATM machines uptime (average time for a machine to remain operational) has increased to 99.6 percent at present compared to 94 percent some 10 years,” he said.

Naveed Ali Baig, CEO, innovative said the use of cash has further gained momentum in Pakistan last year. “The financial transaction done in cash last year were high than the one done (on an average) over the last five years.”

The lack of trained human resource is a major hurdle in the way of fast digitalization around the world, including Pakistan, he said.

M Mudassar Aqil, CEO, Telenor Microfinance Bank, said that cash is hurting the economy. This is happening because “the cash is cheaper than digital (transaction) in Pakistan.”

Abdulkader Abousaleh, Regional Director, Middle East & Africa Cisco AppDynamics, said that the young population is tech savvy. It demands digital financial solutions. “Whatever can be delivered digital…must be delivered digital.”

Ariful Islam, Deputy CEO, Meezan Bank, said that “banks still enjoy the trust. They need to capitalize on that.”

The one-day conference also featured two panel discussions on (1) Digitalization of Commercial Banks vs Commercialization of Digital Banks – What is More Likely? and (2) Digitizing Micro Payments – The Opportunity & the Challenges. Speakers from different countries travelled to share the latest trends and future opportunities for the financial sector of Pakistan.

Copyright Business Recorder, 2022