By Faiza Tehseen ISLAMABAD, Nov 09 (INP-WealthPK): Digital payments are gaining traction in Pakistan as transactions processed through the central bank’s large value segment, Real-Time Inter-Bank Settlement Mechanism (PRISM), recorded a year-on-year growth of 60% by number and 12.8% by value in the fiscal year 2020-21. According to the State Bank of Pakistan’s annual Payment System Review (PSR) for fiscal 2020-21, overall e-banking transactions registered YoY growth of 31.1%, showing a substantial increase in retail transactions. The government’s landmark Roshan Digital Account has proved a great success registering a 300% growth as 597,000 overseas Pakistanis from 91 countries sent their remittances through it. The central bank has taken some initiatives to promote a fully-digitalised system of payments, particularly of salaries and pensions in both the public and private sectors. The bank has approved fintech (financial technology) apps e.g., mobile payments, automated investment apps as Robo-advisers (an online investment management service to provide financial advice by mathematical algorithms with minimal human intervention), cryptocurrency, online lending etc. SBP has also launched the ‘SBP FX’ Regulatory Approval System (RAST), which is cost-effective and efficient with end-to-end encryption. A micro payment gateway (MPG) named ‘Karandaaz’ is another step for swift digital payments. Modernising the country’s payment system and infrastructure is a key priority of the central bank as it continues to work on providing, enabling and regulating monetary digitalisation system. Pakistan’s core payments infrastructure remains operationally resilient at all channels of payment systems, showing substantial growth. SBP hopes the momentum of growth across all key areas of the digital payments’ ecosystem will continue to strengthen. A well-developed infrastructure is a must for economic growth. Pakistan can successfully generate smart revenues, increase GDP and accumulate a lot of foreign exchange by exploiting a huge freelancing base through a smooth digitalised system of payments as e-payments are an integral part of international business. Though Pakistan has taken a number of initiatives to adopt and promote a digitalised system of payments, a lot still needs to be done. A proper infrastructure needs to be put in place to get the expected results. In the absence of enough digital wallets freelancers in Pakistan are forced to accept poor conversion rates by banks with the 2.5-3% ratio in the name of Merchant Discount Rate (MDR). High MDR rate causes people to adopt other ways to withdraw money, thus depriving the state wallets of great value generation in revenue, foreign exchange etc.   The government should make its cyber wing strong enough to prevent account hacking and to increase the operational e-wallets from the current 30 million mark. Expensive information and communication technology ICT equipment is causing the slow promotion of digitalisation in Pakistan. A cut in taxes on the ICT products will result in speedy adoption of digitisation both in the private and public sector entities. Pakistan needs to enhance optical fibre satiety, which is comparatively low, and bring more and more areas under the 4G coverage. Ensuring full spectrum availability for mobile operators, expanding fibre optic networks, and adopting the Fifth Generation (5G) systems is a must to speed up digitisation. It is to mention here that a record 15.7 billion real-time digital transactions took place in China in 2020, followed by South Korea with 6.0 billion, Thailand 5.2 billion and UK 2.8 billion. Shakeel Munir, President of Islamabad Chamber of Commerce and Industry, says that the Federal Board of Revenue should install the point-of-sale devices at retail units as well and make it mandatory for the corporate sector to make digital payments of their expenditures. He also emphasises that the government properly frame the digital payments infrastructure for swift business development. To promote the trend of digital payments, the central bank should ask the banks to keep MDR zero for a short span of time and afterward increase it with an acceptable minimal ratio.