Since its inception in January 2021, RAAST, the national digital payment system launched by the State Bank of Pakistan (SBP) has been a game-changer for financial inclusion in the country.
It offers a fast, secure and cost-effective way to carry out peer-to-peer digital payments and enables interoperability among different payment platforms and service providers, such as banks, mobile money operators, fintechs, merchants, government entities, and individuals. RAAST’s P2P module has processed over 132 million transactions worth Rs2.6 trillion, registering over 31 million unique RAAST IDs.
The Karandaaz Financial Inclusion Survey 2022 (KFIS 2022), which tracks multiple aspects of financial inclusion, such as access, usage, awareness, literacy, and barriers to formal and informal financial services; had a section focused on RAAST segment. The data in the KFIS 2022 is a timely and valuable resource that allows us to chart its progress, chart its future prospects and has suggestions for stakeholders to consider and implement.
According to the KFIS data, RAAST users are more likely to be male, urban, educated, employed, and banked than non-users. While there are users amongst the other segments including women, people living in rural areas, or are unbanked but much work needs to be done for RAAST to fulfill its ppotential to reach and benefit diverse segments of society. RAAST users reported that usage of RAAST has increased access to formal financial services, improved financial management, enhanced financial literacy, and reduced reliance on cash.
The main challenges to RAAST adoption among non-users were cited as lack of awareness and trust, lack of access to digital devices or even internet connectivity. The respondents also felt that using RAAST didn’t give them any benefit nor did they have the need to use RAAST to conduct payments.
The data gathered by KFIS also provides valuable insights as the SBP is looking to launch the peer-to-merchant (P2M) module, which will allow consumers to make instant payments via their mobile phones to merchants. It is currently going under a test-use case but once rolled out it will work the same way as the P2P module and allow people to pay for goods and services using their RAAST ID or their International Bank Account Number (IBAN).
The P2M module will have a huge impact on the current digital payment landscape in the country. It will be convenient for consumers, allowing them to pay instantly and securely via their mobile phones and offer affordability, with the consumers not being charged any fees on transactions. This will further make it more accessible and affordable for low-income segments of the population. It will be beneficial for merchants as it will allow them to receive payments instantaneously and directly into their bank accounts, improving their cash flow. This will have an added impact of reducing their dependency on cash, and cutting down on the currency in circulation.
The module will be able to cut down on cash management related operational costs including security, transportation, storage, reconciliation, etc. Furthermore, they will be able to avoid the high fees associated with card payments and other payment service providers for accepting digital payments. Eventually, the government can utilize the module’s traceability and transparency to broaden the tax net and even enforce its other regulations such as anti-money laundering (AML), and counterterrorism financing (CTF).
The P2M module will be able to help the merchants provide better customer service as they will be able to provide faster and more convenient payment options. More and more consumers could be potentially attracted and retained by offering them incentives and rewards for using RAAST P2M services. By using RAAST’s open API platform, the merchants will be able to leverage new business opportunities and services offered by banks and fintechs.
Since its inception, RAAST has left its mark on the digital payment landscape in the country and has performed tremendously. The introduction of the P2M module for RAAST will allow it to leverage the telecommunications network and its reach in the country to help not just increase the financial inclusion in Pakistan but also be beneficial to both the consumers and merchants. The module will provide the SBP and RAAST more data points that can be used to strengthen the digital payment landscape in the country.
The writer is an analyst at Karandaaz Pakistan.
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