The role of digital wallets in Pakistan’s digital public infrastructure

Pakistan’s speedy digital transformation has resulted in digital wallets becoming an important component of the country’s financial environment. Platforms such as JazzCash, EasyPaisa, and newly founded digital banks are not only modernizing financial transactions but also contributing significantly to financial inclusion, particularly in underserved areas.

Despite these developments, Pakistan’s transition to a cashless economy confronts considerable difficulties, including cultural preferences for cash, limited internet connectivity in rural regions, and ongoing worries about cybersecurity and data privacy. These challenges emphasize the need for a stronger regulatory framework to support the continued expansion of digital wallets.

While existing legislation has provided the basis, there is a growing desire for greater legal and technological advances to assure digital wallet security, accessibility, and scalability, paving the way for Pakistan’s digital economy to become more inclusive and robust.

International digital payment options in Pakistan

In the evolving landscape of digital payment systems in Pakistan, platforms like Sadapay and Nayapay have become key players, offering unique benefits for different user needs. Both facilitate international payments, making them ideal for freelancers and small businesses. Sadapay’s MasterCard support connects users to over 30 million merchants worldwide, while Nayapay offers a Visa Debit Card usable at global merchants and ATMs across Pakistan. With user-friendly features and secure transaction methods, both platforms are contributing to the country’s shift towards a cashless economy.

Digital ID expert’s perspective

Tariq Malik, former chairman of NADRA, said in an email interview with Biometric Update that the critical significance of digital wallets in Pakistan’s Digital Public Infrastructure (DPI) policy, saying, “Digital wallets are poised to be a cornerstone in Pakistan’s DPI strategy.”

Since joining NADRA in 2008, Malik has advocated for digital wallets as a way to democratize financial access across the country. When designing the BISP Program in 2009, one of his priorities was to ensure that emergency cash transfers reached the intended recipients without the intervention of third parties. This led to a collaboration with Telenor, which resulted in the October 2009 introduction of EasyPaisa, Pakistan’s first digital wallet. EasyPaisa began as a mobile money transfer service and has grown into a full-fledged digital wallet that allows users to send and receive money, pay bills, and buy airtime, among other things. Easy Paisa’s success was due to NADRA’s straightforward KYC connection on the back end.

Malik tells Biometric Update that spreading digital banking and wallet services to rural and underserved communities in Pakistan presents considerable challenges. The digital gap is a significant hurdle, as many rural communities lack reliable internet connectivity and mobile network coverage. Furthermore, rural communities have limited digital literacy, making it difficult for them to understand and trust digital financial products. Cultural and societal standards may also deter women and underprivileged groups from seeking these services. Furthermore, the limited presence of agents and cash-out locations in remote areas is a barrier for users who still rely on cash. To overcome these challenges, a robust civic education campaign should be developed, as well as a collaborative effort between the government and the private sector to improve infrastructure and encourage digital literacy.

Malik emphasizes the potential for combining Pakistan’s digital identity system with financial services to increase inclusion, saying that “Pakistan’s digital identity system, managed by NADRA, is a critical asset in boosting financial inclusion.” By connecting NADRA’s database to digital financial services, the process of validating identities and onboarding new users can be expedited, making it easier for unbanked people to use digital wallets and banking services. For example, integrating NADRA’s biometric authentication with digital wallets can help to reduce fraud and increase system confidence. This connectivity can help streamline the Know Your Customer (KYC) procedure, allowing more customers, particularly those in distant locations, to open accounts with less paperwork.

He also emphasizes the importance of international cooperation in enhancing Pakistan’s DPI, stressing that it is critical in the context of digital wallets and financial services. Partnerships with foreign financial institutions, technology businesses, and development organizations can provide the required experience, technology, and financing to expand digital financial services. Collaborations with global tech giants can help accelerate the implementation of modern cybersecurity measures, ensuring the safety and reliability of digital transactions. Furthermore, learning from other nations’ successful implementations of digital financial services might provide useful insights and best practices for Pakistan.

In terms of establishing regulatory frameworks, Malik notes the key role of the State Bank of Pakistan (SBP). The State Bank of Pakistan (SBP) has been proactive in developing regulatory frameworks for digital banks and wallets. However, as the digital financial ecosystem evolves, these frameworks must be regularly reinforced to ensure the security and integrity of digital financial services. Enhancing cybersecurity rules is one approach, ensuring that digital wallets and banks are prepared to prevent and respond to cyber threats. Regular audits and compliance checks are also important to ensure the integrity of these services. Furthermore, the SBP should enact more stringent consumer protection rules, ensuring that customers understand the terms and conditions of digital financial products and have access to dispute resolution mechanisms.

Finally, Malik underscored NADRA’s key role in promoting digital financial services, “NADRA plays a vital role in the broader digital ecosystem by providing a robust digital identity infrastructure. This infrastructure is fundamental in supporting digital wallets, banks, and overall financial inclusion in Pakistan.

“By offering reliable identity verification services, NADRA ensures that digital financial transactions are secure and trustworthy. The integration of NADRA biometric data with digital financial services can significantly reduce the risk of identity theft and fraud.” Furthermore, he says, NADRA’s extensive database can be leveraged to develop targeted financial products that meet the demands of various demographic groups, thereby promoting wider financial inclusion.

Digital banking expert’s perspective

Digital wallets have played a critical role in boosting financial inclusion in Pakistan, particularly among the unbanked population in rural areas, says Anwaar Ahmed, a digital banking expert. They provide cheaper and easier transactions than traditional banking techniques, closing the gender gap and giving women more power over their finances. Platforms such as EasyPaisa, with its huge agent network and numerous service offerings, have transformed access to financial services, greatly increasing economic participation.

Anwaar Ahmed told Biometric Update that the State Bank of Pakistan (SBP) is important in promoting this expansion. The SBP has built a comprehensive regulatory framework with stringent security standards to ensure that digital wallet providers implement robust risk management and consumer protection. This has created a secure and trusted environment for the nationwide adoption of digital wallets. He added.

Pakistan’s plan for creating a strong DPI is centered on digital wallets and banking services. However, infrastructure issues must be resolved, legal frameworks must be improved, and global cooperation must be promoted to reach its full potential. Pakistan may accelerate its digital transformation by ensuring that these services are inclusive, safe, and accessible by utilizing its digital identification system through NADRA.

Article Topics

biometrics  |  digital economy  |  digital identity  |  digital public infrastructure  |  digital wallets  |  financial inclusion  |  fraud prevention  |  NADRA  |  Pakistan  |  Tariq Malik