Regulators have approved licences for five digital banks in Pakistan, one of which is already operational. These banks use virtual processes—including mobile and online banking—to conduct transactions. A typical digital bank operates end-to-end via technology platforms: clients initiate transactions on the front end, the institution handles back-end settlements, and middleware ensures continuous connectivity between all channels.
While economic development must be broad-based, key sectors like tourism and healthcare remain neglected. Our neighbour capitalised on medical tourism, attracting both expatriates and foreigners for high-quality treatment at a fraction of Western costs. Pakistan, with its pool of qualified doctors, could do the same. Is it a lack of will or foresight?
Tourism, too, suffers from poor infrastructure, political instability, and underinvestment. There is a pressing need to reposition our Blue Economy strategy, particularly in light of regional competition, such as Saudi Arabia’s Vision 2030 and Dubai’s forthcoming Al-Maktoum Airport, expected to handle 260 million passengers annually.
The hospitality industry lacks data-driven insights. Peripheral economic benefits of increased hotel occupancy—such as retail and service growth—are overlooked. Globally, travellers favour card payments and expect personalised, seamless, and secure services. We have the human capital to meet these expectations; what’s missing is public–private entrepreneurial commitment.
Globally, cash usage has declined by 50%, a trend accelerated by COVID. Yet in Pakistan, cash circulation is alarmingly high at Rs. 9.4 trillion—around 32% of total bank deposits. Our financial institutions are innovating, but adoption is slow. While OTPs are still used for transaction verification, biometrics are gradually replacing them.
Cybersecurity remains a serious concern, with digital frauds often stemming from public unawareness. Globally, most payments are now contactless—digital is increasingly an attitude, not just a tool.
Digitising the economy is essential. Tax collections consistently fall short, with a Tax-to-GDP ratio of just 9–11%—among the lowest in the region. A key issue is the non-recording of transactions. Millions of retailers exist, but only a fraction are registered with tax authorities.
Incentivising digital transactions through tax credits for retailers could improve compliance. Rebates linked to electronic sales volumes would further boost formalisation. Customs digitisation has shown promise; now, all government payments should be made via financial instruments, not cash. Although cash data is captured, it is underutilised for tax analysis.
On a personal level, a national campaign is needed to promote banking use. Employers should pay household staff via bank accounts and help them access and learn to use ATM cards. Many, despite limited education, are tech-savvy—financial inclusion should not be hindered by illiteracy.
Excessive credit card charges warrant greater financial literacy. Users should be encouraged to pay off balances within the 30–45-day billing cycle to avoid interest. Reviving the “leads and lags” economic concept—delaying payments, accelerating receivables—can optimise cash flow. Ironically, credit card users who avoid interest-bearing rollovers are viewed as “bad customers” by banks because they don’t generate profits.
Cash often fuels corruption, hidden outside the legal framework. Reducing its use ensures transparency, as electronic payments leave an audit trail. Unexplained bank transactions can expose illicit activity, making digital adoption a key tool for accountability.
Nations thrive when citizens trust their governments. If tax revenues are transparently and effectively used, compliance will rise. Achieving an 18–20% Tax-to-GDP ratio is realistic if there is genuine will. Real estate, where official prices rarely match actual values, is a case in point. Auditing bank statements, travel, and accommodation expenses against tax filings can uncover evasion. Fixing the economy isn’t a Himalayan task—it just requires intent. Trust and honesty must become the currency of our collective conduct.
Sirajuddin Aziz
The writer is a Senior Banker & Freelance Columnist.