Payments from customers: SBP plans to launch QR Code-based ‘P2M’ system by 2023

KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmed Wednesday announced plans to launch Quick Response or QR Code-based Person-to-Merchant (P2M) system by next year to enable merchants and small businesses to receive instant payments from their customers.

Addressing the “1st Pakistan Fintech Forum 2022” at a local hotel, he also revealed that ahead of potential of Distributed Ledger Technologies, SBP is also researching the Central Bank Digital Currency, commonly known as CBDCs, and is weighing the cost vs benefits of this venture. “We have examined almost all the jurisdictions who are either experimenting or have issued CBDCs in their respective jurisdictions. However, we will tread this path very carefully especially with regards to design choices and use case analysis,” he added.

He said the SBP is also working with the service providers towards improving the overall customer journey and user experience so that citizens of Pakistan have easy, convenient and low-cost access to financial services.

Raast will provide the key building blocks for taking Pakistan’s payments industry to new heights. The SBP will continue to work with all stakeholders to promote the introduction and use of innovative payment methods to promote digital payment acceptance in a cost effective and efficient manner, he said.

Jameel said the SBP realizes the importance of sharing customer data to promote innovation and to make the financial system even more accessible. However, this needs to be done in a safe and secure manner with full consent of the customer.

“The SBP is working on the Open Banking initiative under which banks, with the consent of their customers, would be able to share their selected data with other banks or FinTechs so that they can build and offer better customer-centric products,” he added.

The SBP is also working on the development of a technical sandbox to test and standardize the Application Programmable Interfaces for various use cases. He also assured the industry that SBP will expedite the process so that the applicants to the Sandbox get a chance to test their use cases.

The Governor SBP said that digitalization of financial services, financial inclusion and growth of the financial sector are inter-twined and evolving demographic landscape and convenience centered user preferences can be met by those financial institutions that whole-heartedly embrace digitalization

He urged the FinTechs and the industry to work towards creating customer centric products and services that brings real value for the economy and focus on reducing the transaction cost. In addition, FinTechs need to build partnerships and adopt a collaborative approach

Fourth, focus on customers and on providing them with a stellar and immersive user interface. Work on improving user experience, customer service and developing and harnessing new ideas. While we appreciate the target of building a billion-rupee companies that new tech companies usually aspire for, the focus on serving the customer must not be lost.

He also asked Fintech to ensure regulatory compliance and foster a culture of good market conduct and assured the industry that SBP will not compromise on consumer protection, good market conduct and financial stability.

Jameel said that financial inclusion and high usage of cash is a major problem in Pakistan and even people who have a bank account often find it difficult to access formal financial services relating to credit and saving from their service providers.

“We are witnessing the rapid emergence of mobile technologies, which not only provide easy access to financial services for customers but also enable businesses to rapidly identify customer needs and create value for them,” he added.

The SBP has worked a lot to facilitate the enablement of FinTechs and adoption of new technologies. In Pakistan over 60 percent people are in the age bracket of 16 to 30 years, making it one of the youngest countries in the world.

However, only 82 million out of an estimated 132 million adults have a bank account. This translates into an account penetration rate of 62 percent, which is one of the lowest in the world, he mentioned.

The Governor SBP further said that even more challenging is the glaring gender gap; for every three men with a bank account, there is only one woman with a bank account.

New business models, based on data sharing and advanced predictive computing, are not only enabling these businesses to proactively identify and fulfill their customers’ needs, but also to address their risks in innovative ways.

He informed the SBP is aware of the potential of new technologies and the role of new players in improving financial inclusion in the country.The Governor SBP also briefly described some of the measures that the SBP has taken to facilitate FinTechs and the adoption of technology by the financial sector in Pakistan that included introduction of policies and regulations aimed at enabling new FinTechs offer innovative digital payment services in Pakistan. In addition, earlier this year, the SBP issued a licensing and regulatory framework for the establishment of digital banks in Pakistan.

Jameel said the SBP also worked very closely with Nadra to allow the use of remote biometric verification services using mobile phones, which is a salient feature of the framework. Pakistan’s Instant Payment System Raast processes around 200,000 to 300,000 P2P transactions valuing around Rs. 5 billion per day.

Earlier in his welcome address, Syed Nadeem Hussain, Chairman Pakistan Fintech Network, said this is the time when eventually almost every institution would gravitate to become Fintech. “We can take examples of Facebook, TikTok, foodpanda or Careem that have their own wallets and can act as fintech,” he added.

In this whole development one question is the key: How a company is aiming to change customers’ journey or experience, he said. Easypaisa is an example of successful Fintech that moves 7 percent of Pakistan GDP a year.

Pakistan just needs the right set of regulations to promote the digital finance revolution, he said. “Traditional financial institutions’ lunch is going to be eaten by the Fintechs so they need to change,” he said.

FinTechs are at the forefront of the economic activities in the big Stock Exchange markets, said Farrukh Khan, Chief Executive Officer (CEO) of Pakistan Stock Exchange Limited (PSX). Situation in Pakistan is also changing, and we need to capitalize on opportunities, he added.

Copyright Business Recorder, 2022