THE introduction of free person-to-person payment and settlement service by the State Bank under its instant payment system, Raast, will help the digitisation of financial services and documentation of the economy — just as similar solutions have worked elsewhere. The launch of Raast will enable people to send funds from and receive funds in their accounts in real time via their bank mobile applications, internet banking or over-the-counter services (through cheques, etc). Raast offers a convenient digital payment mechanism for account holders by linking their accounts to their mobile phone numbers, thus eliminating the need for details like bank name and account number needed for interbank funds. It tackles two fundamental issues: one, it takes care of the lack of interoperability of the systems being used for online payments and fund transfers by commercial banks, microfinance banks and digital wallets owned by telecom companies; two, it allows real-time transactions at near-zero cost — a major impediment to adoption of digital payments through interbank transfers has been the fees on the latter. Therefore, many expect its services to trigger a big digital transformation of the financial services in Pakistan by providing an efficient infrastructure for fund transfers.

Ever since the start of the Covid-19 pandemic, the State Bank has taken several measures to encourage digitisation of payments and financial inclusion of the unbanked population, particularly women. The launch last year of Raast, connecting banks and digital wallets, has put Pakistan on the list of over 50 countries that have developed instant real-time payment infrastructure and solutions. So far, it has been used for the payment of cash dividends to bulk shareholders of listed companies. After introduction of the P2P payment system, it is expected to be used for paying pension and salaries to government and private sector employees, as well as for Ehsaas disbursements. In the near future, we may see people using the services for grocery shopping without the need for cash or debit/credit cards. Apart from that, the State Bank has also announced a licensing framework for digital banks and measures for digital on-boarding of bank customers with remote biometrics. These are all steps in the right direction and will push the agenda of financial inclusion and documentation of the economy for tax purposes. But digitisation of payments or opening of bank accounts will help only so much in achieving financial inclusion unless more people are given access to credit for their businesses and housing needs.

Published in Dawn, February 5th, 2022