Analysis & opinion

Common payment interface; an absolute imperative for e-commerce in Pakistan.


E-commerce landscape in Pakistan is profoundly thwarted by a lack of a common payment interface. The local solutions provided by Telcos and Banks are not that ubiquitous and transparent. While Paypal, the international payments system pioneer has no plans to start operating in Pakistan any time soon, the local financial sector is also not much interested in developing a payment scheme. India, our next door neighbor has made inspirational progress and its eCommerce community has been reaping the rewards for quite some time now, freelancers and online merchants in Pakistan are desperately waiting for a common integrated payment system.

Digital payment scenario in Pakistan lacks interoperability. Although there are numerous digital banking applications and platforms launched by conventional banks and branch-less banking service providers, the back ends of these applications are not integrated with each other. One service provider’s wallet cannot transfer money to another’s wallet. This results in silos of digital interactions. This friction in making digital payments costs both the users and the merchants as they have to incur high fees and multiple steps in making transactions.

In India, this problem has been handled to a reasonable degree under the Unified Payments Interface (UPI) launched in 2016. More than 150 public and private banks, numerous mobile wallet companies, and various Fintech firms have integrated their back-ends and developed mobile applications with a similar interface that is both simple and easy to use. A user doesn’t need to top up on UPI platform to make a payment, as the UPI is directly linked with the user’s bank account or m-wallet. Also, it is easier to use compared to an m-wallet or Internet banking. A user just needs to enter the other person’s mobile number or a UPI ID and then make a payment or request a payment. UPI is secure as it is linked to a mobile number and needs 2FA or two-factor authentication. As a result UPI is now averaging over 700 million monthly transactions, with a value above $22 billion. 

It is imperative for the local e-commerce landscape to grow and expand. We can learn from UPI’s success in leveling the playing field and pushing the financial and telecom institutions to integrate their networks. It is time to make it easier and faster for users regardless of bank account or cell number they use, to do transactions with each other over mobile. Without opening up these walled gardens, the e-commerce landscape in Pakistan cannot be optimized.