A SIGNIFICANT number of Pakistanis have shifted to internet and mobile banking to transfer money, pay bills and shop online. Digital transactions are posting strong growth as reflected by new State Bank data for the period between October and December. The data shows online transactions spiking by 24pc in volume to 296.7m and 22pc in value to Rs21.4tr as more people switch to internet and mobile banking for convenience. Three major factors have played a crucial role in the online uptick. First, Covid-19 forced people to use online banking services. Second, the waiver of transactional fees on all online interbank and intra-bank fund transfer encouraged many to start accessing internet and mobile banking services, where the most uptake is seen in the last one year. Third, the incentives offered by the provinces to taxpayers using mobile banking for payment of government taxes or restaurant bills also contributed to an uptake in digital transactions.

The number of point-of-sale machines also recorded growth of 18pc to 62,480, with digital payments being made through debit or credit cards. According to the bank, 23m transactions totalling Rs115bn during the three-month period to December were processed. Meanwhile, e-commerce merchants saw 5.6m transactions through card payment that climbed to Rs15bn compared to 3.9m transactions valuing at Rs11.9bn in the previous quarter. The expansion in online payments indeed marks a welcome shift in the customers’ approach to payments and will go a long way in documenting the economy. The expansion in the digital payment infrastructure as well as the emergence of new payment aggregators have played a role in the growth. Nevertheless, it will be misleading at this point to assume that the increased online transactions show the expansion of financial inclusion. The existing number of POS machines, the limited number of people, especially women, with access to bank accounts or in possession of payment cards, and even fewer of

them with access to the internet, means we have a long way to go before a larger section of the population can use internet and mobile banking services.

Published in Dawn, March 20th, 2021