Pakistan: The Era of Digitalization


For many in Pakistan the word “Fintech” may be new, however, the digital markets and businesses are tirelessly working towards the growth of this industry, which has seen rapid growth across the world.

Fintechs are the combination of financial services and digital technology and provide innovative solutions to consumers and businesses. They have a significant impact on helping traditionally underserved groups by improving customer experiences and inventing novel products to make financial services more accessible. Major beneficiaries of technology-driven financial services are customers and, small and medium-sized organizations (SMEs).

There are six Fintech models operating in Pakistan: insurance services, crowdfunding, payment, lending, wealth management, and capital markets, while more than 160 Fintech firms are operational in Pakistan, a PIDE research publication said.

Pakistan’s digital financial services have witness growth in recent years as many switched over to 3G/4G services and adopted easy paisa, and online banking. The years 2020 and 2021 were pivotal years for Pakistan’s expanding Fintech sector. Fintechs in Pakistan that provide e-wallets and peer-to-peer (P2P) gateways, that are powerful determinants of financial inclusion.

Fintech nevertheless faces challenges due to the reliability of customers over the digital financial services, and most of the e-commerce transactions in Pakistan continue to be Cash-On-Delivery (COD).

However, the Covid19 pandemic and the current economic situation have not only resulted in a decline in growth, but also raised unemployment, inflation, and interest rates. In these times of uncertainty options such as P2P, Peer-to-Peer lending, have risen to help individuals and businesses.

Borrowers are matched with investors who are willing to fund their loans using P2P lending platforms. Borrowers may find this to be a more appealing option than traditional banks because P2P networks often provide cheaper interest rates. P2P lending allows investors to earn better returns than they would from a traditional savings account.

State bank of Pakistan, in January 2021, launched a new initiative “Raast” – a government effort to achieve a milestone in the world of digitalized money transfers. Raast is Pakistan’s first-ever instant payment service that connects customers and all the financial institutes across Pakistan.

Raast is Person-to-Person transfers. Some attractive features of raast include: connecting governmental bodies to the platform to make social programs more accessible and transparent. It is the single infrastructure that allows all parties to communicate with one another. Raast is a digital and card-based payment system that is struggling to gain popularity because consumers still prefer cash. It is extremely convenient and user friendly as it allows users to link their bank account to their cellphone number, which is referred to as their Raast ID. The service is available on bank mobile apps and internet banking portals.

The State Bank said objective of this initiative was to promote digitization and financial inclusion in the country. In the first phase of Raast, launched in January 2021, transactions from organizations to persons, generally referred to as Bulk Payments, were enabled. The second phase was designed to facilitate Person-to-Person (P2P) transactions under Raast.”

The SBP created a digital bank license framework in January, with flexible rules for establishing digital banks in Pakistan. Only five licenses for digital banks will be awarded for the time being, and interested parties can apply until March 31. While praising the technology’s advantages, the former Prime Minister Imran Khan, stated that it is a means to boost saving rates and the tax-to-GDP ratio in order to propel the country forward. He also stated that the government will use technology in the Federal Board of Revenue’s (FBR) operations to track down tax evaders. This is the Fintech progress at local level, let’s look into a more broader perspective.

PayPal is a globally recognized micro-Fintech company, it is an online transacting and money transferring forum. PayPal has made money transfers, payments, and billings of all sorts accessible and easy for everyone around the globe. However its access in Pakistan has long been awaited as the platform promises digital as well as in-person transactions and offers businesses a variety of operations, which include online and in-person transactions, credits and financing. PayPal is available in over 200 counties and regions and supports more than 25 currencies.

Pakistanis have a tense relationship with digital marketing and online commerce owing to a number of scams. This is why most online websites and retailers offer cash-on-delivery services in the country. However the people need something as trustworthy, efficient, and secure as PayPal.

The government and State bank of Pakistan continue to introduce the Era of Digitalization. State Bank of Pakistan has launched initiative Raast, an online infrastructure for digital marketers. While the Ministry of Finance and Ministry of Information Technology are currently working to introduce better and new services for a better e commerce service.

There is a ray of hope that not in the distant future freelancers and retailers who deal internationally will not have to use risky and illegal means just because they don’t have access to any globally recognized transactional platform. Lastly, the large number of people in Pakistan can benefit from the services of the company; Freelancers, online businesses, students, and many others.

In coming days the world around us is moving forward to a more digitalized environment. Countries are ensuring that they are evolving and advancing their technologies with every step. From online food delivery apps to those that allow you to make online doctor’s appointments, from electric cars to finding signs of life on Mars.

Pakistan is trying to catch up in the race of technology with the rest of the world and measures need to be put in place a more futuristic environment for the citizens by making favorable economic and social conditions for companies like PayPal and Amazon to invest in the country. Other than that it is a great opportunity to bring transparency into the country’s funds. This in return will help us rid the country of corruption and register a lot of non-registered online retailers generating government revenue at every transaction. Hopefully, we will get to benefit from these and many other advantageous consumer and producer friendly companies in our country, in the near future.

Contributed by: Muntaha Aqeel, Fatima Amir, and Sana Bashir, NDU, for The APP Blog