The role of biometric mobile banking in improving financial inclusion in Pakistan

Pakistan has experienced an extraordinary shift in its digital payments landscape in recent years, with mobile banking being the major contributor to financial inclusion. The State Bank of Pakistan (SBP) report indicates that biometric mobile banking users in Pakistan reached 16 million by the end of 2023, up more than a million from the previous quarter, and internet banking users reached 11 million. This increase demonstrates a clear inclination toward digital transactions that is reshaping the country’s financial landscape. The huge rise in e-wallet registrations by 15 percent to 2.7 million further indicates a significant shift towards digital finance.

The report highlights that mobile banking transaction volume has increased dramatically by over 450 percent from 3 billion rupees (US$29 million) in the financial year 2012-13 to 15 billion rupees ($143m) in 2022-23. Digital payment services are taking off as evidenced by the fact that mobile wallet accounts now surpassed 107 million. The RAAST and Roshan digital accounts are among other projects initiated by the government of former Prime Minister Imran Khan to make Pakistan a cashless economy. By releasing the Exposure Draft of the Digital Bank Regulatory Framework, the State Bank of Pakistan embarks on a new epoch of digital banking guaranteeing improved access to finance and innovation.

Research insights

Many changes have happened in the banking industry from 2006 to 2021 as emphasized by a research study on the development of online banking services in Pakistan published by the South Asian Journal of Management Sciences. This study highlights the fact that banks are increasingly relying on technology, notably internet-based services, to be able to provide quality digital banking services. The study has utilized SWOT analysis as a way of indicating that there are more opportunities for growth than threats to online banking service provision in Pakistan.

Research published by Science Direct in 2021 analyzes the digital divides in Pakistan specifically related to access and usage of the internet and information and communication technology (ICT) tools. It gives an account of various issues including urban-rural inequalities, gender imbalances, and policy challenges impeding comprehensive digitization schemes.

Banking for all: The Asaan mobile account initiative

The underserved communities in Pakistan are benefiting from the Asaan Mobile Account (AMA). Recent data reveals that only 30 percent of the total adult population in Pakistan has access to financial services, and the gap between men and women is wide. Nonetheless, AMA had opened more than 7 million accounts in 2023 alone with 35 percent held by women. In line with this, Pakistan has committed to the EDISON Alliance as it works towards digital inclusion.

There are people in remote areas and marginalized communities across Pakistan that find AMA helpful for overcoming their reliance on traditional banking systems. With the help of partnered multinational banks, the AMA provides a digital ID platform for programs like the Benazir Income Support Program, (BISP) easing the way to offer financial support to low-income individuals and families can safely store their income or transact on simple handsets after enrolling for an account using a biometric digital ID. This broad-based initiative encourages economic growth by enabling poor people to access formal banking services hitherto unavailable to them.

Raast: empowering digital transactions

Raast, an instant payment system, has brought in a new era of ease for the masses spread across Pakistan as it pertains to digital financial services. Raast is now a central facilitator with its seamless features that last quarter enabled 107 million fund transfer transactions during the second quarter of the financial year 2023-24, demonstrating its huge contribution towards enhanced convenience and efficiency in the digital payments space. Additionally, mobile devices are leveraged by Raast to foster financial inclusion. Likewise, Raast also ensures safe transactions for all users with a requirement of a digital ID such as biometrics affirmed ID thus enhancing trust and confidence in the digital economy as well as increasing participation. According to research published by Innovation for Poverty Action 2024, the financially excluded users have limited awareness and usage of Raast, also indicating weaknesses in outreach and accessibility, while financially included users have higher accessibility to get benefits from Raast.

Mobile banking: JazzCash and EasyPaisa leading the way in Pakistan

Among the growth in Pakistan’s fintech payment gateways, JazzCash and EasyPaisa, are prominently placed as providers of business solutions as well as individual users. JazzCash is a fintech arm of the telecoms company Jazz with close to 16 million active monthly users offering secure online payments through QR codes. Telenor-owned EasyPaisa had surpassed 25 million registered wallets and 8 million active users as of 2021 for immediate access to digital financial services. In addition, both platforms are designed around easy-to-use features that allow account creation in minutes using mobile numbers and CNIC numbers, enabling remote access to digital identity means.

An Express Tribune report from 2022 highlights how in rural parts of Pakistan, lives have been transformed by mobile wallets such as EasyPaisa and JazzCash. People moving between states for work can now use financial services just by providing their mobile number without having a traditional bank account. Through the accessibility of mini-branchless mobile banking accounts, formerly excluded people such as house helps and digital entrepreneurs gain autonomy in financial matters within marginalized communities.

The Daily Times reports that JazzCash and EasyPaisa are facing challenges. Regulatory limitations hinder JazzCash and EasyPaisa from supporting international remittance solutions thereby restricting growth opportunities for freelancers and ecommerce merchants. The absence of a link between internal fintech markets and overseas ones confines development; thus dollar flows inward remain constrained while the economy is not expanding.

Pakistan is embracing biometric mobile digital banking, led by platforms like JazzCash and EasyPaisa, which has enhanced financial inclusion, with millions of new accounts and higher transaction volumes. Underserved populations have been empowered through initiatives like the Asaan Mobile Account (AMA) and the Raast instant payment system. However, legislative limits restrict international remittance alternatives, stifling freelancing and ecommerce growth. Bridging local and international fintech markets is critical for long-term economic growth and equitable financial development.

Article Topics

banking  |  biometrics  |  digital ID  |  digital wallets  |  financial inclusion  |  fintech  |  mobile banking application  |  Pakistan