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E-Commerce market moving in right direction under covid strain

E-Commerce market moving in right direction under covid strain

According to the State Bank of Pakistan’s (SBP) present Special Section on Covid-19 and the need to boost digital connectivity in the country, Pakistan’s e-commerce market is predicted to have enlarged to Rs 234.6 billion in FY20 during the pandemic. On yearly basis, the sector witnessed growth of up to 55.5 percent. It is recorded that while economies in the world had to adapt to this sudden disruption in the usual business activities because of the Covid-19, the country’s retail and e-commerce sector has also witnessed this shift towards online solutions to meet their customers’ requirements. SBP also recorded that Covid-19 has quickened the pace of this transition towards e-commerce through growing the need for online channels for shopping. Within the digital payments, e-commerce transactions made via branchless banking channels greater than doubled from previous year. However, Cash-on-Delivery is still the prevalent mode of transactions in the e-commerce sector, mainly in the sector due to high level of uncertainty and consumer trust being a main concern. Moreover, there has been a noticeable shift towards digital payments and alternate delivery channels even beyond the e-commerce sector.

SBP has further incentivized the use of digital financial channels through instructing banks to waive all inter-bank and intra-bank charges on digital transactions in Pakistan. No doubt, Covid-19 and the ensuing worldwide lockdown have essentially been a blessing for firms operating in the digital space, mainly those working on e-commerce and digital payments. Indeed, Pakistan is set for massive growth in each of these industries during 2021. For the digital payments industry, international experts identified that Middle Eastern, North African, and Pakistani regions pose a significant growth opportunity. Previously dominated through cash payments, these regions are now going by a phase featuring a rising number of online shoppers preferring payment through digital means rather than by cash on delivery. Statistics showed that greater than 5,000 consumers in September 2020 in the UAE, Saudi Arabia, Egypt, Jordan, Qatar, Kuwait, Bahrain, and Pakistan. Across these countries, a considerable 47 percent of consumers said that they expect to be shopping online more frequently over the course of the next year 2021.

E-Commerce merchants registered with banks in Pakistan
Periods (Actual Numbers)
Quarter-1 FY20 1,410
Quarter-2 FY20 1,481
Quarter-3 FY20 1,559
Quarter-4 FY20 1,707
Quarter-1 FY21p 2,164

International experts also revealed through statistics that a mere 15 percent expect their online shopping activity to fall; while the remaining 38 percent believe it won’t change. As for Pakistan in particular, a resounding 39 percent of surveyors expect to be shopping online and conducting digital transactions more frequently in 2021. SBP urged that the new regulatory framework will facilitate business-to-consumer ecommerce exports from Pakistan. Under the new regulatory framework, the mandatory requirement of export (E) form has been done away with and now an exporter can export goods up to $5,000 per consignment without the requirement of E-Form. It is predicted that this step would facilitate exports in small quantities directly to the consumers. Moreover, this would also assist small entrepreneurs and exporters who typically export varied goods in small quantities and find it cumbersome to complete the detailed requirements of (E) form that is mainly designed for bulk exports. In 2000, the SBP issued regulatory instructions to promote B2C ecommerce, in foreign exchange manual, with mainly focus on opening of internet merchant account to facilitate ecommerce. However, with advancement in technology, these instructions required to cater to the present business dynamics of e-commerce and therefore required to be replaced. SBP also identified that during July-September 2020, the number of e-Commerce Merchants recorded with banks rose to 2,164, accounting for 27 percent raise. These merchants processed valuing Rs.11.9 billion during the quarter under review. According to SBP, banking by digital channels has been gaining increasing popularity in Pakistan presently. On retail payments side, there are various e-Banking channels like real time online branches (RTOBs), ATMs, POS, internet banking, mobile phone banking, call centers/IVR Banking and e-commerce that facilitate retail value payments. During the quarter under review, statistics showed that e-banking channels i.e. RTOBs, ATM, POS, e-commerce, banking through mobile phone, internet and call centers altogether processed 253.7 million transactions of value Rs.19.1 trillion. In total number of e-banking transactions, ATMs have the highest share i.e. 53 percent in volume of transactions.

E-Commerce transactions by cards in Pakistan (Volume in Mn & Value in Bn-Rs)
Transaction Type Quarter-1
Volume Value Volume Value Volume Value Volume Value Volume Value
Debit Cards 1.3 4.4 3.0 9.5 2.7 8.5 2.9 8.4 3.9 11.1
Credit Cards 1.4 9.1 2.3 13.3 2.1 11.7 1.7 8.4 2.2 12.9
Pre-Paid Cards 0.1 0.1 0.1 0.2 0.1 0.1 0.04 0.07 0.04 0.08
Total 2.7 13.5 5.4 23.0 4.9 20.3 4.6 16.9 6.1 24.1

No doubt, our county is being on 5th on the population size holds an e-commerce potential beyond imagination and all we need for now is to move in the proper way, to create innovative solutions that can make the market more competitive, which can consequence in pacing up the growth and can revive the faith of an average consumer. The struggle is real, but the issues and challenges are ahead to come. The future is not what we can correctly forecast, but affirmative determination can lead to better results.

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