New GSMA Study Emphasises Importance of Digital Commerce, Access and Payments for Growth in Pakistan
Tuesday, November 24, 2015
A new research report produced by the GSMA, ‘Building digital societies in Asia: Making commerce smarter’, indicates that for Pakistan to harness the full potential of digital commerce, strong collaboration is required among mobile operators, financial and payments companies and governmental agencies. Each of these stakeholders have a crucial role to play in enabling digital commerce, digital access and digital payments.
“Mobile operators have been investing heavily to ensure access to the internet in Pakistan and will continue to do so. By 2020, 3G coverage is expected to reach 90 per cent of the country’s population, and mobile broadband is expected to reach 40 per cent,” said Alasdair Grant, the GSMA’s Head of Asia. “With connectivity becoming less of an issue, the challenge now lies in increasing the number of digital commerce accounts and promoting digital payments in order to realise the full potential of digital commerce in Pakistan.”
With half of the adult population in Pakistan (approximately 60 million people) having access to a mobile phone but not having a bank account, mobile money, or branchless banking as it is known in Pakistan, plays an important role. Mobile operators have already started to invest to increase branchless banking account adoption and usage, fostering the development of a digital ecosystem.
Areas of Opportunity for Pakistan’s Digital Growth
Government payments is one area where the potential for digitisation of payments is substantial. In Pakistan, providers and stakeholders are evaluating the feasibility of digitising this use case both to reduce costs of delivery and drive use of branchless banking accounts. There is also an opportunity to increase the value of account ownership by providing support for remote and proximity merchant payments. For this to happen, technology-based solution providers in the financial and payment industries (fintech companies) should partner with branchless banking operators to create payment products for different market segments.
Branchless banking in Pakistan has grown at a faster rate than the traditional banking system and has extended the reach of financial services to the unbanked and those on low incomes. Recent market dynamics along with an increasing number of branchless banking accounts indicate that the foundations for digital commerce are in place in Pakistan and it is set to grow even more rapidly in the coming years. Growth of digital commerce will lead to further uptake of digital accounts as people start to see the value of using digital accounts to pay for goods and services in their daily lives.
According to the GSMA Intelligence report, Pakistan’s development as a digital economy still faces many challenges. These include socio-political barriers such as weak legal and regulatory frameworks, digital illiteracy, and a lack of awareness of what digital commerce is and how to access it. Success going forward requires collaboration between all stakeholders involved including government and regulators, mobile operators, financial institutions and fintech companies.