The State Bank of Pakistan (SBP) has taken a positive step towards promoting digital banking by eliminating the mandatory minimum fee of 1.5% charged by banks to merchants on financial transactions through debit and credit cards.
In fact, the SBP has allowed financial institutions to charge even less than the previous minimum fee to encourage the use of digital banking. The maximum limit of the fee remains at 2.5%.
To further promote digital payments, the SBP has made it mandatory for all e-commerce players and online payment receivers in Pakistan to start accepting payments through cards by June 30, 2023.
The SBP has also set the interchange reimbursement fee (IRF) for cards issued in Pakistan used on domestic POS terminals to a maximum of 0.2% on payments done through debit and prepaid cards and 0.7% maximum on credit cards.
The elimination of the minimum fee is a sound step towards promoting digital banking and reducing cash-based transactions. The decision will also help facilitate the documentation of the economy.
According to known digital banker Sohail Malik, this decision will encourage more merchants to accept card-based payments.
While there are around 45 million debit and credit cards in the country, a majority of cardholders use cards to withdraw cash from ATMs. Only 5-10% use cards at POS. This new policy is expected to change this trend.
The abolition of the minimum fee was a longstanding demand from petroleum product dealers and oil marketing companies, who were paying Rs1.75 per liter to banks on transactions made through debit and credit cards. The elimination of this fee will help to prevent the compromise of their profit margins.
SBP has also set the interchange reimbursement fee (IRF) for cards issued in Pakistan used on domestic POS terminals to a maximum of 0.2% on payments done through debit and prepaid cards and 0.7% maximum on credit cards.
The elimination of the minimum fee is a significant step towards promoting digital banking and reducing cash-based transactions. It is expected to encourage more merchants to accept card-based payments, which in turn will help to reduce the amount of cash in circulation and promote a more transparent, documented economy.
To further promote digital payments, the SBP has made it mandatory for all e-commerce players and online payment receivers in Pakistan to start accepting payments through cards by June 30, 2023. This move is expected to further encourage the use of digital payments in the country and facilitate the growth of e-commerce.
The SBP's Payment System Review for the quarter that ended March 31, 2022, revealed that the number of POS machines in Pakistan had reached 96,975, while the number of payment cards fell slightly to 47.2 million from 48.7 million compared to the previous quarter.
However, during the same period, 38.3 million POS transactions amounting to Rs189.7 billion were processed, showing quarterly growth of 21.9% by volume and 6.5% by value.
In addition, a total of 9.1 million e-commerce transactions amounting to Rs27 billion were processed digitally during the same period, showing quarterly growth of 1.3% in value, though volumes declined by 32.7%.
The number of ATMs in the country also increased by 1.1% as compared to the previous quarter, and the value of ATM transactions stood at Rs 2,437 billion.
Overall, this move by the SBP is a step in the right direction toward promoting digital payments in Pakistan.
