Study finds increase in digital payments could be worth $1.5 billion to Karachi every year

This file photo shows Pakistan Stock Exchange (PSE) in Karachi on Jan. 11, 2016. (RIZWAN TABASSUM/AFP)

• The research, by payments-technology company Visa, found 90 percent of people in Karachi rely solely on cash
• Cashless payments could also increase the employment rate by 4.7 percent in Karachi by 2032, Visa said

KARACHI: Increased use of digital payments, such as credit cards and mobile payments, could yield a net benefit of PKR 181.5 billion ($1.5 billion) a year to consumers, businesses and the government in the port city of Karachi, according to a study commissioned by payments-technology company Visa.
“Only 10 percent people in Karachi use any kind of digital payment system while the remaining 90 percent rely on cash, providing ample opportunities for the promotion of cashless culture in the city,” said Majeed Hujair, senior director of the Visa School of Public Policy for Central and Eastern Europe, Middle East and Africa.
Sharing the findings of the study, titled “Cashless Cities: Realizing the Benefits of Digital Payments,” Hujair said that consumers could enjoy nearly PKR 12.1 billion in time savings by using digital banking, retail and transit transactions, with the added benefit of reducing cash-related frauds.
“Businesses can recover about $1.1 billion, or PKR 133.1 billion, in time saving while processing incoming and outgoing savings and increase their sales revenues,” he added. “The government can save up to $0.3 billion, or PKR 36.3 billion, from increased tax revenues, economic growth and cost savings from administrative efficiencies.”
The study also suggests that by 2032, cashless payments could increase employment by 4.7 percent in Karachi and enhance gross domestic product (GDP) growth rates by 14.3 basis points.
The international study, covering 100 cities in 80 countries, estimates that increasing digital payments in all of them could result in total direct net benefits of $470 billion a year. On average, this would represent a little more than 3 percent of current GDP in the cities.
Greater economic activity spurred by digital payments also supports higher employment as well as improvements in wages and productivity. The study found that on average across the 100 cities, increased use of digital payments could add 19 basis points to a city’s GDP and support more than 45,000 additional jobs a year in each city, with worker productivity and wages increasing by 14 and 16 basis points a year, respectively.
To put the GDP growth in perspective, an increase of 19 basis points a year across the 100 cities translates to nearly $12 trillion of additional economic activity over the next 15 years — an amount exceeding China’s 2016 GDP, according to the study.
“The study does not look at eliminating cash; rather it evaluates the benefits that can be derived when a city transitions to an achievable level of cashlessness,” said Hujair.
Kamil Khan, country manager for Visa in Pakistan, said: “With the rising rate of smartphone penetration in Pakistan and e-commerce predicted to reach $1 billion by 2020, the use of digital payment methods is expected to increase significantly, paving the way for transition to a cashless economy.
“As the government of Pakistan pushes forward with the Digital Pakistan policy-led initiative, digital payments offer immense, untapped opportunities to boost the country’s economic growth.”
While addressing a ceremony to mark the publication of the study, Muffasar Atta Malik, president of the Karachi Chambers of Commerce and Industry, described the research as unique and said it would prove to be of great interest to industry experts, thinkers and decision makers in the country.
“The use of cash is not only time consuming but is inefficient and often risky,” he said. “This study underpins that view by highlighting the significant and tangible benefits people, businesses and government in Karachi can realize by going cashless.”
More than half of the world’s population now lives in cities and more than 80 percent of global economic activity takes place there. Experts believe that a major portion of future economic growth will come originate in urban centers around the world.