Only 20% of account holders use mobile banking in Pakistan versus 80% in India and Thailand

Despite the increasing popularity of mobile banking in Pakistan, only 20% of individual account holders have registered for the service, indicating significant untapped potential, according to PwC Pakistan’s Banking Publication 2024.

In comparison, approximately 80% of account holders in India and Thailand use mobile banking.

The report suggests that incentivizing digital payments through measures such as waived merchant discount rates (MDR), subsidized point-of-sale (POS) devices, and customer discounts or cash-backs could drive adoption.

“Banks need to articulate business strategies well-suited for today’s information age and a tech-enabled world,” PwC report quoted Sharjeel Shahid, Group Executive – Digital Banking, United Bank Limited.

While mobile and internet banking transactions are rising, engagement remains low, with users averaging 39 transactions per year (about three per month).

In contrast, users in Singapore and Thailand conduct over 100 transactions annually.

PwC notes retail payments in Pakistan are increasing with financial inclusion, but cash remains the dominant method, accounting for 43% of the total volume of retail transactions.

The cash-in-circulation ratio has decreased from 39% to 35% over the past year, yet it remains higher than in other countries.

“Pakistan’s cash-in-circulation, as high as PKR 9.5 trillion, can be effectively channeled into the banking system, with digital as a lever,” according to Saleem Ullah, Deputy Governor, State Bank of Pakistan.

Despite advancements in digital banking, the preference for cash continues to drive high branch and ATM transaction volumes.

According to PwC Pakistan’s Consumer Banking Experience Survey 2024, 43% of shops lack POS machines, 36% charge extra for card use, and 40% prefer cash. As a result, only 30% of retailers encourage POS usage.

Digital Payments

Digital payments for online purchases have grown, but they still represent only about 20% of transactions, with cash-on-delivery remaining prevalent.

More than 80% of online shoppers in Pakistan opt for cash-on-delivery, compared to less than 20% in Thailand and Indonesia, and under 5% in Singapore.

“One possible reason for high cash-in-circulation ratio in Pakistan is a general preference to deal in cash to avoid documentation. Use of technology provides a significant opportunity for banks to reduce cash in circulation, by attracting customers through convenient customer centric digital channels,” PwC report quoted Muhammad Jawaid Iqbal, President & CEO, United Bank Limited, as saying.

The e-commerce sector in Pakistan is expanding rapidly, making it the 46th largest market globally.

As of June 2024, over 7,800 bank-registered e-commerce merchants reported significant growth in transactions.

However, many small shops operating through social media still rely on cash-on-delivery, although some accept online transfers.

The report highlights the need for a collaborative effort to promote digital payments through loyalty and engagement programs. Government and regulatory support are crucial to creating an ecosystem that favors digital transactions over cash.

“Centralized, big picture thinking by regulators and government is essential to drive adoption of digital payments and promote cashless economy in Pakistan,” Najeeb Agrawalla, Chief Executive Officer, 1LINK (Pvt) Limited said.

The PwC report suggests banks in Pakistan should develop data-driven strategies to attract and retain customers, diversify their product offerings, and form key partnerships to enhance customer experience. With five digital banks and new digital wallet solutions set to launch, and initiatives like a blockchain-enabled shared KYC platform and Open Banking on the horizon, Pakistan’s digital banking ecosystem is poised for significant growth.