Online banking gains momentum

A silent digital payment revolution is on its way in Pakistan as the number of mobile and internet banking users and e-commerce transactions showed a strong growth trend in the quarter ended March 31, 2021.

Surprisingly, the number of financial transactions in cash and other forms of paper-based transactions (in terms of volume), as well as the number of physical bank branches, recorded a downtick during the quarter under review, confirming the online payment system is gaining traction and will change the banking landscape in the country, according to

Pakistan's central bank.

"Commercial banks in Pakistan are expanding their digital infrastructure for supporting electronic payments, which are complemented by State Bank of Pakistan's (SBP) enabling policies," the central bank said in its Quarterly Payment System Review (QPSR) for the third quarter (Jan-Mar) of current fiscal year 2020-21.

The number of internet and mobile banking users has increased considerably over the last few quarters. Internet banking users increased by 10% to 4.98 million in the quarter under review compared to the previous quarter and grew 30% when compared with the same quarter of last year.

Similarly, mobile banking users increased by 5% on a quarter-onquarter basis to 9.86 million and grew 20% compared with the same quarter of previous year.

E-commerce merchants have also been on the rise for the last few quarters. The e-commerce merchants increased by 5% to 2,523 in the JanMar 2021 quarter compared to the previous quarter while they grew a staggering 62% against the same quarter of last year.

"The numbers can lead us to believe that the consumers are realising the benefits that digital payment channels have in our daily lives. This complements the increase in the trust of the consumers in the usage of digital channels," the SBP said.

There are 16,223 bank branches reported by banks/ microfinance banks (MFBs), out of which 107 are overseas branches. All branches, except for 35, are providing online banking services to their customers.

"We have observed a decline in the number of branches, showing that the industry is slowly realising the benefits of digital payment infrastructure that the digital channels bring to the overall consumer experience and its impact on the bottom line," the central bank said.

The number of financial transactions through e-banking (including mobile, internet and e-commerce) increased 4% to 309.5 million in the quarter under review compared to 296.7 million in the previous quarter ended December 2020.

The value of e-banking transactions rose 5% to Rs22.48 trillion in the Jan-Mar 2021 quarter compared to Rs21.47 trillion in the previous quarter. Other e-banking modes of payments include Real-Time Online Branches (RTOBs), ATM (automated teller machines), POS (point of sales) and call centres. "ATMs processed a majority of the chunk with 49% transactions (volume in e-banking)."

The merchants processed approximately 5.6 million transactions valuing at Rs15.3 billion during the quarter under review. The number of paper-based financial transactions dropped 4% to 100.2 million in the

Jan-Mar 2021 quarter compared to 104.8 million in the previous quarter.

However, the value of paper currency-based transactions inched up 1% to Rs37.7 trillion in the Jan-Mar quarter compared to Rs37.2 trillion in the previous quarter ended December 31, 2020.

Despite the availability of other banking facilities on ATMs, the machines still are mostly used for cash withdrawal in the country. "In total, the cash withdrawal through ATMs has the highest share of 96% by volume (among other ATM services like paying utility bills and fund transfer through the machines)." As of the end of the quarter, the industry had deployed 16,175 ATMs in the country, exhibiting an increase of 134 ATMs.