In the coming two months, Pakistan’s central bank is ready to launch the much-anticipated micropayment gateway (MPG) that will pave the way for fast digital payments to be made by government and private sector entities, banks, merchants, and consumers.
Various milestones have been accomplished by the State Bank of Pakistan (SBP) in partnership with foreign partners, experts, vendors, and the financial industry. A significant achievement of the project is making certain that only state-of-the-art technology is implemented to build and run the gateway.
As reported by The Express Tribune, the SBP described via a report issued this week, “The SBP is now in final stages of going live with the first use case, i.e. bulk transfers including government-to-person (G2P) transfers, tentatively by the end of (December) 2020.”
After the completion of the program, the SBP looks forward to fast-paced digitization of public and private sector collections and payments, especially of the wages and pensions. The MPG is a tool for immediate payment. The report further described how the central bank adopted the initiative of attaining the strategic objective of improving the country’s new and robust payment systems.
The report further added, “MPG is a state-of-the-art, interoperable and secure payment platform that would enable consumers, merchants and government entities to exchange funds in a seamless, instant and cost-effective manner. It has advanced functionalities to process instant/ near real-time and alias-based payments, bulk transfers and request to pay and capability to (take) onboard participants including banks, merchants, electronic money institutions (EMIs), etc through Application Programming Interfaces (APIs).”
As part of the Financial Inclusion Infrastructure Project (FIIP) of the World Bank, the SBP agreed to exchange the existing RTGS (the country’s only large-value payment system) with the Automated Transfer System (ATS+) in hopes of adding efficiency to the country’s large-value settlement system allowing the central bank to promote the settlement of securities and micropayment transactions.
It was learned that the central bank began working on the MPG in cooperation with the Bill and Melinda Gates Foundation. In addition to creating the MPG, the SBP also laid the groundwork for developing the country’s high-value payment system.
The evaluation of the payment cards market led to SBP’s discovery that the distortions were primarily because of asymmetry in the market. This was reported as, “whereby issuers (institutions issuing payment cards to their customers) were the most profitable, leaving fewer margins for acquirers (institutions in the business of deploying POS machines) as they were operating at a loss.”
In addition, the payment acceptance infrastructure in Pakistan has not gained traction, according to the central bank, and the number of access points, especially Point of Sales (POS) terminals, has remained unchanged for several years.
The SBP further went on to say, “One of the alternative ways to address this situation is to promote acceptance of payments through QR codes”. It described the unfeasible mechanism for numerous small scale merchants working on limited margins to deploy expensive POS machines.
As the issues to the POS acquiring business such as rationalizing the card issuers’ share, undercutting, and increasing the acceptance of POS card infrastructure were getting too much to handle, the SBP introduced policy interventions. These interventions included mandating a floor on the merchant discount rate (MDR) for the acquisition of POS, the capping of the interchange reimbursement fee (IRF) for debit and prepaid cards, and mandating banks/card issuers.
Despite QR codes being deployed in significant numbers in the region, “the amount of transactions, mainly due to their lack of interoperability, did not reach the optimum levels.”
The SBP has thus recommended all QR code issuing and/or acquiring entities to abide by the QR code specifications of EMVCo as a first step towards achieving interoperability. The central bank is reported to have said, “This is expected to enable financial institutions to innovate and expand their acquiring business without creating proprietary systems/ schemes and provide a foundation to achieve inter-scheme interoperability.”
Reference links: tribune.com.pk
