Digital Distribution – The Case for Digitizing Pension Payments in Pakistan


Pension payments in Pakistan constitute one of the largest payouts at an institutional level in cash. With modern technology bringing a wave of change with itself, it is also introducing solutions to digitizing transfers. For pension payments in particular, digitization has the potential to revolutionize the payout and enable financial inclusion in a manner that will lead to use of accounts, and not just opening one.
At a policy level, digitizing the payments for nearly 1.6 million pensioners in the country is a massive assignment that will have to be organized across different departments, financial institutions and ministries of the country. A collaborative effort will not only lead to bringing efficiency into the systems, but will also add clarity as those designing the payment channels work in conjunction with those who are designing policies for financial inclusion. Absence of a joint effort would render no visible impact on financial inclusion.
Undoubtedly the road to digitizing pension payments in Pakistan is fraught with challenges as nearly 70% of the country’s population resides in rural areas, while several others lack infrastructure and connectivity. This, coupled with a lack of awareness and limited financial literacy makes the endeavor even more challenging in the Pakistani landscape.

Now the obvious benefit for digitizing pension payments in a country like Pakistan is that the plumbing for digital payments already exists in the form of robust branchless banking services and the agent network associated with it. At an institutional level, the government can leverage this constantly expanding network for disbursing pension payments in Pakistan.  A few successful transformations have taken place such as the electronic transfers of EOBI pensions into Bank Alfalah branchless banking wallets in Pakistan. Each wallet is opened at any Bank Alfalah branch and has a UnionPay International Debit card tagged to it.

Once a pensioner is registered with Bank Alfalah, his or her pension is automatically credited into the mobile wallet at the beginning of each month, which can subsequently be withdrawn from any ATM across the country, eliminating the painstaking process of visiting designated bank branches and spending hours to receive their claims. However, while this may be a step in digitizing payments, the financial product delivered as per EOBI’s requirements is a closed-loop one; hence restricting the impact of financial inclusion.
The process is, albeit slowly, gaining momentum as renewed efforts are being made by the national government to introduce convenience for pensioners into the equation of pension withdrawals. In an announcement this year, the government is making efforts to introduce a new pension system that will facilitate receiving of pensions into bank accounts, which will have ATM cards and cheque books issued against them. To encourage sign up onto this system, the government is promoting the account opening process without any service charges.

At the governmental level, there is room for centralizing the supervision of payments and building a mechanism that various institutions can utilize for pension payments to citizens.

The journey that will have to be undertaken to build a robust digital system to reach every remote area in Pakistan, while being transparent, eliminate leakages and corruption will undeniably be arduous. Rather than working in silos, it is crucial that policy makers and financial solution providers engage in regular dialogue and leverage their resources to make a digital channels for pension disbursement more viable. Despite the hurdles that may be faced, there are always stakeholders who are committed to achieving the end goal, especially since it is a journey that is worth struggling for.


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