Digitisation gets a push amid Covid-19

EVER since the coronavirus outbreak forced people to distance, there’s been a lot of talk in financial and tech circles of the accelerating behavioural shift that will push digitisation.

But so far, little evidence has surfaced at a broad level to substantiate the claims. To get a better sense of the underlying trends, let’s take a look at the data that Dawn acquired from 1LINK — a payment service operator/provider and switch system.

It shows that compared with the pre-lockdown period (up to March 23), inter-bank funds transfer (IBFT) witnessed a massive jump of 90.4 per cent in volume post-lockdown.

While the number of daily IBFT transactions was averaging around 188,000 during the pre-lockdown period, it jumped to around 357,000 and hit the peak of almost 700,000 towards the end of May.

On the other hand, ATM cash withdrawals (interbank through 1LINK) dipped 20.4pc in volume and 14.8pc in value as the number of work hours was often reduced and people avoided outdoors.

Meanwhile, bill payments through 1LINK (across all modes) saw a mixed trend. Their volume fell 11pc while value grew 9.7pc.

However, the number of billers integrated on the 1LINK Bill Payment Service rose exponentially in the past few months — from 75 until December 2019 to more than 420 as of now — suggesting a rapidly growing shift towards online channels from the supply side.

Easypaisa registered a 17pc increase in the number of daily transactions through its app while Daraz witnessed an increase of 8.2 times in the use of e-wallets

Another interesting bit was the average ticket size of mobile top-ups. It increased 36pc from Rs143 pre-lockdown to Rs195 now.

The most significant spike came in the number of transactions of Punjab government payments. Its volume surged a whopping 3,014pc and value 57pc in June from March.

This was accompanied by an overall rise in person-to-government payments — to the Federal Board of Revenue, Securities and Exchange Commission of Pakistan, Sindh Revenue Board and Punjab government — processed through 1LINK. Its volume grew 34pc and value 64pc in June from March.

However, it must be pointed out that 1LINK data includes neither ATM transactions at the card-issuing bank’s own branch nor the intrabank funds transfer given that the company is limited to interoperability.

According to 1LINK Chief Disruption Officer Syed Ahsan Aslam, around 50pc of the total ATM transactions go through the company while the remaining are done at the issuing bank itself. A similar trend is at play in funds transfers. So based on these shares, we still get a good idea — albeit incomplete — about underlying digital payment trends.

It’s also worthwhile to look at the SBP Payment Systems Review for the third quarter of 2019-20 even though it covers the period before the lockdown. According to the document, paper-based transactions were already showing a downward trend as they fell 10pc in volume and 7.1pc by value. Unfortunately, that decrease wasn’t compensated by a corresponding increase in digital payments. The quantum of e-banking dealings also edged lower by 1.3pc while large funds transfer through the Prism system inched up only 2.9pc in terms of volume. This shouldn’t be too surprising though given how much the economy has slowed down since the pandemic.

Easypaisa has also claimed that there has been a 17pc increase in the number of daily transactions through the app after the Covid-19 outbreak (as of April 28) while Daraz witnessed an increase of 8.2 times in the use of e-wallets by consumers on average.

While Covid-19 surely has been the trigger button, the State Bank of Pakistan (SBP) for its part has also tried to push for online payments. It has taken measures like mandating banks to waive all charges for customers using IBFT services or advising them to enable digital collection of all challans/invoice-based payments such as tuition fees.

There’s only one question now: how sustainable is this change? According to 1LINK CEO Najeeb Agrawalla, “Things have changed forever in some areas. All modern companies are adjusting to that reality, like work from home. As far as the digital payments infrastructure is concerned, relaxations by the SBP have helped make the push and attract new customers. I believe they will continue with most of them even after the pandemic is over. Now it’s up to banks to take advantage of the environment.”