Before the pandemic, the number of point-of-sale (POS) machines in the country was pretty much stagnant. A POS machine uses a credit card or a debit card to process a payment instead of cash, according to data from the State Bank of Pakistan’s latest Payment Systems Quarterly Review.

Covid-19 turbo-fueled the country’s drive towards digital adoption. The pandemic and the Russia-Ukraine war led the economy to a state where digitisation to increase the tax net was the only feasible path forward. The results of these efforts can be seen in the steep increase in the number of POS machines.

Card-based transactions at POS terminals reached 83 million (5pc of digital payments) in the first quarter of FY25, amounting to Rs429bn. Combined, the POS machines process some 900,000 in-store purchases a day, as per the Payment System Review 1QFY25.

Payments through QR codes have been introduced at certain places, but there is no separate section in the report, most likely due to its negligible contribution as of yet. For digital consumer-to-merchant payments, mostly mobile wallets like JazzCash and Easypaisa are used or credit and debit via POS machines.

In terms of value and volume, however, POS machines make up a very small share of the pie. In terms of value, transactions worth Rs136tr were made in 1QFY25, of which POS comprises a measly 0.3pc. Their share in the volume of nearly 2bn transactions was a little better at 4.3pc.

The lion’s share of money moving through formal channels is through funds’ transfer, be it through cheques, pay orders or demand drafts, which accounted for about 54pc of the value or Rs73tr of payments.

So yes, digitisation is taking place, but the growth numbers are more because of the base effect rather than a fundamental shift in how payments are made.

Published in Dawn, The Business and Finance Weekly, December 23rd, 2024