LAHORE: The State Bank of Pakistan (SBP) in its annual report on the state of the economy has said that with the help of digital financial services, the services sector can play a vital role in the development of an economy.
The report highlights how the services sector has globally witnessed a shift toward digitization.
Growing internet penetration is revolutionizing the way consumers and businesses gain and share information, execute transactions, and manage their day-to-day operations, the report stated.
Improved digital connectivity is reshaping consumer behavior, which is increasingly tilted in favor of convenience, cost savings, and customized retail experiences. Businesses are also capitalizing on opportunities emerging from digitization, such as supply chain efficiency, lower transaction costs, and enhanced flexibility in addressing consumer needs.
The State of Digitization in Pakistan
In Pakistan, the services sector has gathered much prominence of late, as domestic commerce has thrived and telecommunications and finance sectors have steadily grown.
Since the last couple of years, the country has seen a staggering turn towards the digitization of complete industries. With major businesses jumping on the financial payments’ bandwagon, the shift is most prominent in domains like e-commerce, fintech, and e-government, where new ventures and approaches to delivery services are picking up.
Specifically, the market size of e-commerce has grown significantly in Pakistan over the last few years, transforming the way consumers interact with, and especially pay businesses.
At the government level, new possibilities to deliver services to citizens more efficiently are being explored by harnessing the power of technology, with e-government initiatives promising more convenience for the masses while simultaneously cutting the costs and leakages incurred by implementing authorities.
According to a McKinsey Global Institute (MGI) report, Pakistan can experience an increase in its GDP by a cumulative 7 percentage points (roughly US$ 36 billion) and create around 4 million new jobs during 2016- 2025 via an increase in the use of digital financial services (DFS) alone.
The impact of DFS through increased investment may occur via increased credit to SMEs and households, and through a shift in savings from informal vehicles to formal digital accounts. Bearing in mind that bank lending to SMEs in the country is particularly low at present, the investment channel may represent the biggest untapped opportunity from which DFS gains can be realized in the next couple of years.
According to the report, the impact on employment generation and entrepreneurship is quite evident.
As the overall digital connectivity has improved, new services and industries have emerged and along with it, self-employment opportunities and entrepreneurial space for startups.
Commerce, transport and information sectors have benefited the most. The surge of mobile money has created a network of agents providing direct and indirect livelihood to thousands of people.
Finally, in the domestic Information Communication and Technology (ICT) sector, the presence of domestic freelancers and outsourcing firms is also growing exponentially.