Written by: Haroon Shuaib
Posted on: January 16, 2024 | 
| 中文
Pakistani youth is fast adopting to the digital world
In today’s global zeitgeist, digital is the new frontier. The world is divided between those who are on-grid and digitally enabled, and those off-grid. The latter are not connected with the rest of the world through the world wide web. Pakistan, despite its many challenges such as a lingering literacy gap, where almost half of its population is unable to both read and write a simple sentence1, an energy gap between 5000 and 8000 megawatts (MW) with a 6–8% yearly growth predicted2 and poverty estimated to be at 37% by the end of 20233, has still shown remarkable potential for growth as far as digitalization is concerned. There were 87.35 million internet users in Pakistan at the start of 2023, when internet penetration stood at 36.7 percent. Pakistan had 71.70 million social media users in January 2023, equivalent to 30.1 percent of the total population. A total of 191.8 million cellular mobile connections were active in Pakistan in early 2023, with this figure equal to 80.5 percent of the total population4.
According to Albert Einstein, "In the middle of every difficulty lies opportunity". Not taking away from the fact that the pandemic was an unimaginable catastrophe for mankind, it played a catalyst’s role for rapid uptake and adoption of digital technology across various facets of Pakistan’s social and economic landscape. The country witnessed a burgeoning e-commerce sector and a marked shift in consumer behavior. The journey of e-commerce in Pakistan can be traced back to the early 2000s, when a few pioneering digital platforms began offering rudimentary banking, commerce and online shopping services. Limited internet accessibility and concerns related to online transactions, initially hampered widespread adoption. The landscape underwent a significant transformation with improved regulatory environment and internet infrastructure.
E-commerce is fast growing in Pakistan
As financial technology or fintech sector in the country gained momentum, companies like JazzCash, Easypaisa and SimSim became household names, revolutionizing the payments landscape in Pakistan. These digital wallets offer a range of services, including bill payments, peer-to-peer transfers, and mobile top-ups. Startups like Finja and CreditFix pioneered peer-to-peer lending platforms, connecting borrowers with lenders in a streamlined, digital process. These platforms aimed to address the credit gap for small businesses and individuals.
Emergence of digital banks, such as Telenor Microfinance Bank's Easypaisa and Mobilink Microfinance Bank's JazzCash, rapidly reshaped traditional banking models. These digital banks leveraged technology to provide convenient, low-cost financial services to a broader audience. While all traditional banks also introduced digital banking as a business stream, with every bank worth its salt now offering its own digital app to account holders for ease of transactions. According to the State Bank of Pakistan, overall mobile and internet banking transactions witnessed an annual growth of 57% in volume, and 81% by value5 by September 2023. Innovations in the insurance sector, often referred to as insurtech, also gained traction. Platforms like Tez Financial Services are leveraging technology to make insurance products more accessible and tailored to the needs of underserved populations.
With the introduction of secure and convenient payment gateways, consumer confidence in online transactions has increased, mitigating concerns related to fraud. The level of mobile wallet adoption in Pakistan has increased from 4% in 2017 to 19% in 20226.
In January 2022, the State Bank of Pakistan introduced the country’s first Licensing and Regulatory Framework for Digital Banks, in line with international best practices. This framework is the first step towards introducing full-fledged digital banks in Pakistan. The digital banks licensed under this new framework are expected to provide all the banking services through digital means, without any need for their customers to visit the bank branches physically. This is also proving to be a gamechanger for those who are currently unbanked into the folds of formal economy.
Computer-based jobs have risen in recent years
Pakistan has the third largest unbanked adult population globally, with about 100 million adults without a bank account7. Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs: transactions, payments, savings, credit and insurance, delivered in a responsible and sustainable way. Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals8. Access to financial services facilitates day-to-day living and helps families and businesses plan for everything, from long-term goals to unexpected emergencies. As accountholders, people are more likely to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or health, manage risk and weather financial shocks, which can improve the overall quality of their lives.
With digital banking gaining traction, the obvious outcome is consumer’s reliance on e-commerce. Today, the Pakistani e-commerce scene boasts a variety of players, with notable platforms such as Daraz, Telemart and Yayvo dominating the market. These platforms play a pivotal role in shaping consumer expectations and fostering trust in online transactions. The e-commerce landscape in Pakistan caters to a diverse range of consumer needs, from electronics and fashion to groceries and services. The convenience of browsing and purchasing products from the comfort of one's home has fueled growth of various categories. E-commerce platforms are investing in more user-friendly mobile apps and responsive websites to capture new consumers, retain customers for repeat visits and improve user experience.
Digitalization of the economy and improved Fintech solutions are also empowering micro, small and medium-sized enterprises to expand their consumer base, while offering such businesses efficient payment systems, working capital solutions and credit facilities. The Standard and Poor's Ratings Services Global Financial Literacy Survey shows that only 26 per cent of adults are financially literate in Pakistan9. Fintech firms are not only providing financial services but also contributing to financial education. Mobile apps, interactive platforms and user-friendly interfaces are enhancing financial literacy, empowering individuals to make informed decisions.
Components of Fintech
Another revolutionary outcome of the digitalization boom in recent years has been the opening of avenues for the gig-economy and its exponential growth. Websites like Upwork, Fiverr and local platforms, such as Rozee.pk, have become hubs for gig work, allowing individuals to offer services ranging from graphic design to digital marketing. Gig economy in Pakistan encompasses a wide array of services, including ride-sharing with platforms like Careem and the recently launched Yango, food delivery with Foodpanda and Cheetay, hospitality and tourism services such as globally known Airbnb and TripAdvisor entering the Pakistani market, and even domestic services through apps like Mauqa Online. One of the primary attractions of the gig economy for Pakistani workers is the flexibility it offers. Individuals can choose when and where to work, allowing them to balance professional commitments with personal responsibilities. Online freelancing platforms enable Pakistani workers to tap into global markets. Skilled professionals can offer their services to clients worldwide, breaking down geographical barriers and opening up opportunities for cross-border collaboration. The gig economy allows workers to diversify their skill sets and engage in multiple projects simultaneously. This is not only enhancing their expertise but also providing a safety net against economic uncertainties.
Youth are increasingly doing freelancing and online jobs
Digitalization of economy in Pakistan is at a crucial juncture, offering both opportunities and challenges for workers and businesses alike. While the flexibility and access to global markets are empowering for many, addressing issues such as income inconsistency, lack of social security and regulatory ambiguity is imperative for a sustainable growth of the economy in this direction. As Pakistan continues to navigate evolving landscape of digitalization, strategic interventions, including targeted policies, skill development initiatives, and collaborative efforts between the government and private sector will play a vital role in shaping a resilient and inclusive digital economy for the future. On the other hand, building consumers’ capacity and trust also remains a challenge. Many potential customers are still wary of sharing sensitive information online and concerns about the security of personal data persist. Innovations such as human centered designs for digital platforms, augmented reality (AR), and virtual reality (VR) have the potential for an enhanced user experience, even capturing those who are uninitiated in the digital realm. Pakistan’s young innovators must start imagining ways in which they can get more people onboard, who are still tentative and need that extra push to start riding this growing tide of digitalization.
1. https://www.macrotrends.net/countries/PAK/pakistan/literacy-rate#:~:text=Adult%20literacy%20rate%20is%20the,a%200.99%25%20increase%20from%202018.
2. https://www.mdpi.com/2071-1050/14/23/16123#:~:text=Pakistan's%20energy%20gap%20is%20between,sustainable%20and%20renewable%20energy%20sources.
3. https://databankfiles.worldbank.org/public/ddpext_download/poverty/987B9C90-CB9F-4D93-AE8C-750588BF00QA/current/Global_POVEQ_PAK.pdf
4. https://datareportal.com/reports/digital-2023-pakistan
5. https://www.sbp.org.pk/press/2023/Pr-27-Sep-2023.pdf
6. https://karandaaz.com.pk/blog/pakistans-gender-gap-adoption-usage-mobile-money-wallets/#:~:text=This%20increase%20in%20financial%20inclusion,2017%20to%2019%25%20in%202022.
7. https://tribune.com.pk/story/2408685/digital-banks-eye-pakistans-unbanked-population
8. https://www.worldbank.org/en/topic/financialinclusion/overview
9. https://www.pakistantoday.com.pk/2022/12/12/making-our-children-financially-literate/
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