RAAST: A Game Changer for Financial Services in Pakistan

Disruptive technological industries, the sharing economy, the digital economy; these terms are all synonymous with the transformational changes occurring in the way businesses and individuals produce, deliver and consume goods and services in an increasingly digitalized world. Enabled by technology and social trends, the digitalization of the economy is changing how economic agents behave. How digital products are consumed and distributed is creating significant challenges for statistical organizations around the globe. As the prevalence of digital goods and services increases and new digital intermediary platforms emerge, statistical organizations must address these issues. Otherwise, there could be a deterioration in the quality of many key economic indicators throughout the world.

In 2016, the board of directors of the State Bank of Pakistan received a concept of a micropayment gateway. The concept was quickly approved with enthusiasm, and the idea for RAAST was born. RAAST comes from the Urdu word “RAASTA” which means ‘Direction or way’. Now Pakistan is also entering the age of the digital economy. According to the State Bank of Pakistan (SBP), the moving force behind RAAST, the new digital system will be rolled out in three phases, RAAST would allow merchants, businesses, individuals, fin-techs and government entities in Pakistan to send and receive near real-time payments through the internet, mobile phones and agents. Developed through a multi-year collaboration between the State Bank of Pakistan and the Bill & Melinda Gates Foundation, with support from the World Bank, the United Kingdom and the United Nations and Karandaaz Foundation, RAAST also has a goal of boosting the involvement of women in the formal economy. In January 2022 President Imran khan launched RAAST, a new instant payment system in collaboration with the State Bank of Pakistan. RAAST, however, is well-positioned to bridge that gap and it is precisely its low-cost business model that will make digital payments more affordable and attractive to consumers of various social-economic backgrounds. The payment system is considered to be an integral part of Pakistan’s National Payment Systems Strategy as well as the National Financial Inclusion Strategy that is seeking to both enable the delivery of financial services digitally and also widen financial inclusion to 50% of the adult population.

The salient features of RAAST include instantaneous payments: near-real-time digital payments across individuals, merchants, businesses, and government entities; low-to-no transaction costs for end-users. RAAST is designed to operate at a cost-recovery model to make digital payments affordable to end-users of all economics full sector-wide interoperability, RAAST will allow all financial institutions to seamlessly connect via a single link to the central infrastructure, making digital payments accessible across any channel to customers of any financial institution; customer-centric innovative products, services, RAAST will be built on cutting-edge technological standards, allowing financial institutions to develop innovative and user-friendly digital payment environment and services like payment through phone number or email, and reliability and enhanced security. RAAST will introduce more secure payment types, ensure that each transaction is authorized by the payer, and offer enhanced data protection and fraud detection services. RAAST is completely managed by the State bank of Pakistan and it’s free of cost, while this will make life much easier for the consumers, it will also leave other players in the financial industry teetering on the edges and not quite sure of their position any longer, But Private Banks are unhappy with this because the losses the transfer fees which they charge from their customers on transferring money and assets to next accounts RAAST is free of cost services to their customers on one click. As per a recent survey of the World Bank Global Index, an estimated 100 million Pakistani have no bank accounts due to low-income households either lacking access to financial services or choosing not an engagement in the formal economy, But RAAST provides an easy way to low-income people to open accounts on banks. It also envisaged that social funding and aid programs will be run through RAAST with public sector employees also potentially receiving salaries and pensions.

The prime minister addressed in the launching ceremony of “RAAST”. He said,

Pakistan’s instant digital payment system, an initiative of the State Bank of Pakistan. This will enable person-to-person transactions and facilitate free digital banking. He Added That I observed that unless they utilized the modern technological revolution to bring the whole population into the loop of formal economy, this huge asset would, otherwise, become a burden. Appreciating the efforts of the SBP to facilitate people over the banking system, he said a common man often hesitated in visiting banks, stressing that steps at ‘bottom up’ would bring the commoners into the formal economy by easing their modes of payments and transactions through opening of accounts via RAAST

This state-of-the-art payment system will be used to settle small-value retail payments in real-time while it would help include the low-income groups and make them part of the mainstream economy.

As Aqeel Karim Dhedhi (AKD), Chairman of AKD Group, points out, “In the coming years, a switch like RAAST will add a lot of value to every organization and start-up in the country because payments will be opened up and be frictionless across all bank accounts and mobile wallets. Disbursements, collections, merchant payments, even peer to peer payments will all have a completely new customer journey and be incredibly convenient to execute”. RAAST will expect to pave the direction for a better Digital Pakistan in the coming future.

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