As the world moves towards extensive incorporation of technology in everyday activities and processes, the frontiers of financial transactions are the ones evolving the most. Thanks to advancements of digital payments and mobile money solutions, we’re close to arriving at a point where the smartphone can erase the need to carry a wallet with any form of currency whatsoever.
According to statistics, the digital payments market worldwide was valued at $3.35 trillion in 2018 based on the value of transactions that were carried out. The industry is expected to expand with an average Compounded Annual Growth Rate (CAGR) of 24.4% between 2020 and 2025 riding on factors like enhanced internet penetration and the growing use of smartphones as well as the sophisticated features that they offer. By the end of the forecast period, analysts estimate the market to be worth almost $20 trillion.
These numbers indicate a growing attraction towards the use of mobile wallets and digital payments services. The GSMA State of Mobile Money Industry Report for 2019 highlighted that globally, a mobile money agent has seven times more reach than a standard ATM and a functional range 20 times greater than a bank branch. This is one of the several reasons why there is a general consensus among individuals opting for the use of these services.
Digital Payments- A Move Towards Cashless Economy
The GSMA report takes into account data from 60 countries in the South Asia region, including Pakistan. The financial landscape here is very different compared to that of other countries in the vicinity. Financial inclusion, for instance, stands at just 21% in Pakistan, whereas, in neighbouring India, 80% of adults have a bank account. Similarly, the percentage of bank account holders in Bangladesh is 50%. However, according to the findings of the study, 78% of Pakistani men own a mobile handset with a functioning SIM that they use. This percentage is higher than that of Bangladesh (73%) and India (26%) indicating that the population in this country are more aware of mobile wallet services and their use as compared to their counterparts in the neighbouring states.
Pakistan is a country where 80% of all transactions today are cash-based.
In fact, this preference for cash along with a lack of awareness and skills to handle digital payments form a large chunk of the reasons why mobile wallet services are not as popular in the country as they should be. Fortunately, though, the ecosystem is evolving thanks to contributions from leading digital financial service providers like Easypaisa, JazzCash, JSwallet, UBL Omni and retail digital banks of conventional banks across the country.
Easypaisa’s share of regional transactions in South Asia is 7.1% and has proven to be one of the most widely used services in the country and has begun expanding internationally with its blockchain-based remittance solution that allows people to transact between Malaysia and Pakistan without the need of a financial intermediary. Moreover, other than Easypaisa, a host of other similar platforms like JazzCash, Upaisa etc. are also enabling users to perform almost all financial transactions from their mobile phones. At present, airtime top-up remains the feature being used the most not just for local players like Easypaisa but for other global and regional services as well. User preferences are changing over time, and a general trend of shifting towards digital payments is being witnessed as this form of currency become widely accepted by major retailers and service providers like ride-sharing apps, restaurants and fuel stations.
The Growing Trend of Digital Payments
The GSMA report also highlighted that in 2019, mobile money began cultivating a formal savings culture and facilitating a shift to digital savings. A substantial 39% increase was observed in customers saving via mobile money platforms from 2018. This is a healthy trend which addresses a growing concern that financial experts have been voicing for several years, i.e. a general lack of planning and saving among individuals in preparation for their post-retirement phase.
As a whole, mobile money players in particular and digital payment service providers, in general, have become major influencers that are driving a shift in consumer behaviour across Pakistan, especially. It demonstrates that people are willing to accept change if they are given the right incentives. Embracing this change is a key factor in contributing to a more robust and transparent economy. The extensive implementation of these factors, though, requires collective efforts from all stakeholders.
As long as innovative developments from digital financial service providers are met with equal acceptance on the consumer side, a comprehensive shift towards mobile payments remains a strong prospect for the future of Pakistan’s economy.