Digital Financial Services in Pakistan: Opportunities, Challenges and Suggestions

Abstract

This study examines how the financial services accessed and delivered through digitalization in Pakistan. Digital infrastructure refers to Internet, mobile phones, ATMs, tablets, chips, biometric devices and any other existing digital communication system. Currently, financial markets have become more reliant on digitalization as digital integrated financial markets are playing an important role in the development of financial sector, increase market competitions, performance of intermediaries and the efficiency in their daily operations. Based on secondary data and stakeholders' interviews, the study provides an overview of digital financial inclusion, explores the possible opportunities and key challenges to digital financial services in Pakistan. Over time, Pakistan has made efforts to develop and integrate several digital financial services systems. It identifies that lack of coping mechanisms for systemic risks, weak infrastructure, underdeveloped technology ecosystem, low income and financial literacy rate, inadequate banking facilities and low level of formal institutions. It concludes that a greater understanding of digital financial services in economies, promotion of investors' confidence and long-term interests, greater competition and trade in IT and ICT products and corporate governance can help to promote digital financial services. Digital technology is not enough to increase the financial inclusion, well developed payments system, consumer protection safeguards, good physical infrastructure and appropriate regulations are required to foster the digital financial services.