Much has been said, in these pages and elsewhere, about how Covid-19 was the watershed moment for Pakistan’s digital journey and would usher in a new economy with an ever-faster adoption of tech-enabled solutions.

Be it telehealth, Zoom schooling or the shift towards online payments, the pandemic has brought fringe areas into the mainstream. But whether that change goes beyond hype and rhetoric or actually translates into practice is the question.

For that, the State Bank of Pakistan’s (SBP) State of the Economy report offers some valuable insights under a special section titled “Covid-19 and the Need to Boost Digital Connectivity in Pakistan”. To begin with, e-commerce had a great year with total sales surging by 55.3 per cent to Rs234.6 billion in 2019-20 from Rs150.8bn. Unsurprisingly, cash-on-delivery made up the bulk of that, but digital payments still accounted for almost 40pc of the value.

But dig in a little deeper and we find out there was virtually no change in the share of digital payments out of total sales. The only sensible explanation for this flat figure over the past four fiscal years is that the SBP has assumed, likely based on market opinion, a 40pc digital proportion out of the total sales.

The volume of interbank fund transfers reached 70.77m in July-October, soaring by a staggering 309.6pc from just 17m a year ago

Within digital payments, there is a growing share of branchless banking, which jumped to 21.4pc in 2019-20 from 14.9pc a year ago. This was accompanied by a number of fintech players — including Nayapay, TAG, Sadapay, Wemsol and Finja — getting in-principle approvals from the regulator over the last year or so. However, to get a better sense of any shift towards digital caused as a result of Covid-19, it’s almost essential to look at quarterly data that the SBP hasn’t provided.

To get a better sense of any noticeable change in digital payments because of Covid-19 and whether that has sustained, let’s turn to another metric: online fund transfer. According to 1LINK data shared exclusively with Dawn, the volume of interbank fund transfers (1IBFT) reached 70.77 million in July-October, soaring by a staggering 309.6pc over just 17m in the same period of last year. Against 40.43m recorded in the preceding four-month period of 2020 (March-June), the growth rate was 75pc.

Likewise, the value of 1IBFT transactions surged by 160pc to Rs1.95 trillion in July-October from Rs750.2bn in the corresponding months of last year and 45.63pc over Rs1.34tr in March-June 2020. Based on these, it’s safe to say that not only was there a spike in digital payments post–Covid-19, the trend has well sustained so far. The trickier part would be to increase monthly active users for mobile wallets, something the local startups haven’t had great luck at so far.

Similar is the story for PayPak, a domestic payment scheme that the SBP has been very bullish on. As per the 1LINK data, the total number of PayPak cards in the market more than doubled to reach over 5m as of September-end, up from just 2.41m in the same month of last year.

This is just the payments bit: digital connectivity obviously takes more than that and an enabling tech ecosystem with a healthy flow of investments even more. It also talks at length about infrastructural issues, including that of connectivity and finds the country to be the worst regional performer in terms of internet inclusiveness. Most worrying part is the gender gap with respect to internet access: Pakistan has the highest difference in the proportion of males and females having access to mobile phones and the internet.

The central bank has suggested a number of measures, most of them naturally centred around payments given its area of expertise, including expanding telecom infrastructure, undertaking awareness programmes and even recommending the government to waive off duties for the import of point-of-sale machines to help the industry grow.

Needless to say, it’s unlikely to make any of that happen while alienating the biggest names in the world. This isn’t to argue that in State versus Big Tech, the former should give in to the latter, but rather be smart enough to know your strengths and limitations.

Published in Dawn, The Business and Finance Weekly, November 23rd, 2020

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