P2P payment system launched to boost financial inclusion


KARACHI: Customers at some select banks will now be able to make P2P (person-to-person) transactions instantaneously through their mobile phones as central bank has started rolling out the second phase of Pakistan’s first instant payment system, Raast.

The first phase—bulk payments, which enables government-to-person transfers instantly, was rolled out in January, 2021. Now, 21 banks and one mobile money services provider have kick-started the launch of the second phase of the system, allowing individuals to transfer funds to each other by creating their unique Raast ID, which is their mobile number, for receiving funds.

“A customer can login to his/her account via internet banking, mobile app and can create a Raast ID by linking his/her phone number with his/her account number,” Abid Qamar, chief spokesman SBP told The News in an email.

“This mobile phone number can then be used by a sender in place of a bank account number in the transfer of money through Raast. This will bring ease to the customers as typically people find it difficult to memorise or to have quick access to find the bank account number,” Qamar said.

In comparison, he said, remembering mobile number was easier and people had instant access to phone numbers on their mobile phones as well.

“However, it may be mentioned that even if receiving customers do not have a Raast ID, they can still receive funds in their accounts using the conventional interbank account number (IBAN) through Raast,” he explained.

“Few select banks, permitted by SBP, have already started to offer the facility of creating Raast ID and making payments using the Raast Service through their mobile apps or Internet Banking.” Qamar said.

The third phase would be focused on person-to-merchant payments (P2M).

Pakistan has had low electronic transactions for a number of reasons including low banking penetration, lack of trust and awareness of digital payment methods, limited interoperability, difficult accessibility, and high cost of transactions, according to the information posted by the SBP on its website about the payment system.

The real time gross settlement system of Pakistan provides instant payment settlements for large value and corporate transactions only. Raast would facilitate retail payment settlements, the central bank said.

Bankers and analysts, who closely track the payment system, say the addition of Raast to the existing payment gateways is a good development. They are watching whether it will pose a threat to the dominance of 1Link and National Institutional Facilitation Technologies—a platform for clearing, processing, routing and switching of electronic transactions.

The SBP has installed its own system and switch for this facility, while the Inter Bank Funds Transfers (IBFTs) use 1Link switch.

Pakistan is a country where a major chunk of the population is unbanked and relies heavily on cash-based transactions.

“Digital banking/payment in Pakistan is still a relatively new concept and the masses are not too keen to adopt – mostly due to an underlying fear of a lack of security with regards to digital payments as well as the reliability and dependency on cash,” said Khurram Mumtaz, digital and data analytics head at Standard Chartered Bank Pakistan.

“However, we see Raast as a gateway to make payments more seamless and connected, with a hassle-free experience between people, businesses, and organisations to disburse day-to-day low-ticket transactions and payments with a universal infrastructure,” he said.

P2P payments were made available to the clients for a while now via the IBFT. “The barrier to entry for new and upcoming payment systems providers and government entities would be much lower due to its low-cost nature,” Mumtaz added.

Many countries, for example China with Alipay, has moved swiftly towards using digital payments for everyday usability and convenience and once the population builds confidence in the mode of digital payments, conversion towards the same would be easier and more secure than operating with cash.

“Standard Chartered Bank already had a P2P service available through the IBFT service. However, this service will supplement existing capabilities and will be available on Internet and mobile banking,” he replied to a query on whether his bank is providing this service (P2P payments) to the customers.

Apart from real-time settlement, the opportunity at hand is the convenience, speed, and ease-of-use. Transferring funds from one person to another can be accomplished through the click of a button. Another perk is the cost involved. Unlike many other payment solutions that involve several middlemen, P2P payments are between two parties. However, many platforms are beginning to use additional security features like biometrics and most send automatic notifications for every single transaction.

“One of the biggest challenges everyone will face is adoption of the service. People already using digital services will be more receptive to its usage; however, the real benefit will only come if people actually shift from cash. A concerted effort will be required from both the baking industry and the government to help educate people on the benefits and impacts,” Mumtaz said.

“Raast is expected to have API-based connectivity that will enable banks, fintech players, e-commerce platforms and utility companies to leverage this payment rail,” the Standard Chartered official added. Nameer Khan, Chairman MENA Fintech Association, said being a P2P system, it was an ideal facilitator for fintech players who were themselves working on enhancing the financial inclusion ratios across the country. With Raast, Khan said, the ecosystem for digital financial service providers was becoming extremely conducive, displaying a capacity for significant growth.

“Recently established EMIs, existing fintechs and upcoming fintechs are key enablers of a seamlessly connected payments ecosystem and P2P has been one of the strongest use cases of their platforms. All fintech players, local or global, will welcome this progressive step and upcoming future forward initiatives by the SBP,” MENA Fintech Association chairman said.

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