According to a World Bank Report, in 2021, a mere 28.2 per cent of men had access to an account with a bank or financial institution, while only 13.5pc of women did. Thus, in the midst of this severe financial inclusion gap, the rise of QR codes and contactless transactions is not just a technological evolution, it’s a financial revolution with profound implications.
QR codes — those pixelated squares — that we casually scan with our smartphones to make payments hold the power to upscale financial inclusion. By making it more widespread and accessible, they bridge the gap between the formal and informal sectors of the economy.
In a country where a significant portion of transactions occurs in cash, QR codes offer a safe and traceable alternative to track the flow of funds that will bring not only economic benefits but also legal safeguards against illicit activities.
India’s experience with QR transactions provides a compelling case study for Pakistan. A survey by the National Payments Corporation of India (NPCI) discovered that 68pc of Indian consumers favoured payments via QR codes due to their user-friendly nature and security features.
Under the Payment and Settlement Systems Act of 2007, the Reserve Bank of India (RBI) assumed the role of regulating and overseeing payment systems across various platforms, ensuring their secure and efficient operation.
Consistent use of digital payments can help vendors establish a financial history, potentially opening doors for future loans
According to data from the RBI, digital payment transactions in India grew by 30pc in FY21, with a total of 41.6 billion transactions. Through these robust financial inclusion policies, India’s digital economy is said to have grown six-fold, reaching up to $1 trillion by 2030.
The standout success has been the government-backed Unified Payments Interface, which allows users to make instant payments using QR codes, through the PayTM app. PayTM’s ingenious “Soundbox” takes this convenience to the next level. This nifty device allows street vendors and merchants to confirm transactions with remarkable ease, all without the need for intricate technical know-how.
By merely placing it on a table or any convenient surface, merchants and street vendors can ensure that each transaction is seamless and secure, creating a win-win situation for both sellers and consumers.
What is most convenient is that vendors and customers do not need to have bank accounts, as payments can be made via the Adhaar Card, which is a unique 12-digit identification number issued by the Indian government to every citizen and can be used in financial transactions, that too at subsidised rates. The Aadhaar card is linked with the PayTM app and is used to scan the QR codes and make payments.
To break free from the financial stranglehold, Pakistan must expand its financing capabilities, particularly its tax base, a feat impossible without including the unbanked and excluded segments of the financial community.
At first glance, it may appear that a tea vendor at the end of the street, selling a cup of chai for a mere $0.20, couldn’t possibly make a substantial impact on our economy. Yet, when we multiply these modest daily transactions by the millions of cups dispensed by thousands of vendors across Pakistan, the collective effect on our GDP becomes undeniably significant.
Pakistan possesses untapped financial potential waiting to be unlocked, and this demands immediate action. These necessary steps include emulating India’s transformative demonetisation schemes and the financial inclusion of street vendors. With QR codes, they can accept digital payments, reducing their reliance on physical cash, enhancing security, and lowering the risk of theft.
Vendors can attract a broader customer base, as many individuals prefer the convenience and safety of digital transactions. Moreover, they can manage sales and income more efficiently, which assists in budgeting, financial planning, and taxation, even without a formal bank account.
Consistent use of digital payments via QR codes can help these vendors establish a financial history, potentially opening doors to future financial services like loans and credit. The State Bank of Pakistan has taken significant steps to revamp its National Financial Inclusion Strategy, resulting in the establishment of ‘Raast,’ which stands as Pakistan’s inaugural instant payment system. This strategic transition underscores a fundamental shift towards a public-private partnership framework.
However, to utilise its full potential, the spectrum of financial services offered by RAAST can be broadened and expanded to non-banking financial institutions like microfinance banks to ensure that people in rural and remote areas can also access the system.
For the State Bank, there’s a pressing need to follow in the footsteps of India’s ‘Digital India’ program, taking inspiration from their game-changing Aadhaar card scheme. This means not just providing incentives for such initiatives but also launching savvy media campaigns that shout from the rooftops about the perks of going digital and embracing QR-based payments.
Through these concerted efforts, we can make strides toward a more resilient economy. The ideal time to make these changes may have been a decade ago; the second-best time is now.
The writers are students at the Lahore University of Management Sciences
Published in Dawn, The Business and Finance Weekly, November 6th, 2023newspaper bus