cards transactionsTechnology-based transactions 

By S. M. Hali 

Till recently, in Pakistan’s rural sector, the mode of transfer of funds was limited to the traditional method of money order via Pakistan Post. Smaller towns, where bank branches existed, provided an option but the illiterate and below poverty line strata of society were in awe of banks perceiving them to be the domain of the affluent. Efforts by the underprivileged class to operate through banks at times led to be cheated through touts and agents.

In this scenario, when the Government of Pakistan, with the support of the World Bank and other donor agencies, introduced the Benazir Income Support Program (BISP) for impoverished masses in 2008, it too initially relied on the Pakistan Post for the disbursement of payment to beneficiaries. Initial feedback surveys highlighted the limitations of the archaic system: payment delays; system’s susceptibility to fraud; late reconciliation of unutilized funds, which kept lying with Pakistan Post for long periods; and postmen demanding gratification from the recipients of the payment. The alternative of getting the payment directly from the post office entailed making numerous trips since exact date of arrival of payment could seldom be ascertained.

The launch of Citizens Damage Compensation Program (CDCP) in 2010 in the aftermath of widespread floods and damage from unprecedented torrential rains for the provision of relief to affected families compounded the problem of relief funds’ payment.

Technology came to the rescue albeit with caveats. Pakistan’s low literacy rate and lack of acceptance of state-of-the-art cutting age mode of payment via Smart cards and debit cards usable at Automated Teller Machines (ATMs) and Point of Sale (POS) terminals, as well as mobile phone payments was initially an uphill task. Two specific cash transfer instruments were introduced; the BISP using a Smart Card: Benazir Debit Card and transfer of payment via mobile phones. The CDCP employs the “Watan” Card with a magnetic stripe that could be operated by using both POS terminals and ATM machines. The National Database and Registration Authority (NADRA) was engaged for the identification and verification of the beneficiaries within the affected areas and payments are being made through three commercial banks.

It makes an interesting case study, since despite initial reservations, the introduction of technology-based payments in an underdeveloped country like Pakistan is on the way to become a success story for providing a solution for promoting financial inclusion and building transparency and accountability in cash transfers to the poor and needy, besides overcoming the handicap of difficulties in monitoring of the payment process and access for program beneficiaries.

A gradual transformation of the lower strata is in progress to enable it to accept technology rather than being averse to it, coming out of the cocoon of isolation, initially felt when it was unable to benefit from the advantages of modern tools of financial transaction.

The costs incurred by implementing agencies for making payments under CDCP and BISP were calculated and compared with other programmes being managed internationally. The comparison with some countries in South America and South Africa to the two payment modalities in Pakistan indicate that the weighted average of the cost is the lowest in Pakistan for CDCP but the highest for BISP; principally because BISP grant per recipient is the lowest compared to the other countries while cost incurred for CDCP is much lower because of the economy of scale of delivering larger payments.

With the introduction of technology-based payment modalities like ATMs and POS machines, the issues of low transparency and accountability have diminished to a great extentbesides allowing for faster and wider outreach to more poor people, often in times of emergencies. Simultaneously, monitoring and evaluation of each stage of the payments disbursement process by the Programs is now possible.

The number of banking service points in rural points has increased exponentially and will continue to increase as partnerships for these programs become more long term. By March 2013, the number of retail agents had already reached 64,716. The impact of technology can be gauged from the fact that out of 4.7 million BISP beneficiaries, more than 70% are paid through technology based mechanisms.

From March 2012 till October 2012 (within a period of 7 months), 3 million families received debit cards and payments through electronic means expanded from 7% to 73% of the BISP beneficiaries. Real time electronic reconciliations show that more than 92% of the BISP beneficiaries are receiving payments through debit cards within 72 hours of disbursement (90% received cash on their first visit). This effort merits appreciation.

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