Shaping Pakistan’s first-ever eCommerce policy
Shaping Pakistan’s first-ever eCommerce policy. To drive the economy’s digital transformation and further its eCommerce potential, active involvement from the government and the private sector is integral, said Kamil Khan, Visa’s Country Manager for Pakistan, in an exclusive Q&A session with Money Matters.
Q: Pakistan’s first-ever eCommerce policy is in place. What other steps would you suggest the government take to boost the sector’s growth further?
A: Improved internet accessibility and effective government efforts to promote financial inclusion in most parts of the country have helped Pakistan’s eCommerce sector see significant growth.
According to SBP (State Bank of Pakistan) data, the number of local eCommerce merchants has increased 2.6 times and eCommerce payments 2.3 times in just 12 months. The data also shows sales of local and international eCommerce merchants were Rs20.7 billion in 2017, growing by 93.7 percent in 2018 to reach Rs40.1 billion.
Pakistan’s continued eCommerce growth will have a catalytic effect in empowering the digitally-savvy youth, encouraging women entrepreneurship, creating more jobs in the market and boosting the prospects of the country’s SME (small and medium enterprise) sector.
The approval of the first-ever eCommerce policy framework is therefore a significant step towards realising Pakistan’s digital commerce ambitions and, in turn, driving economic growth in the country.
To capitalise on Pakistan’s massive eCommerce potential, we believe the following areas be prioritised.
- Educating both merchants and consumers on the benefits of eCommerce
- Adopting best practices that protect and safeguard consumer interests, while delivering frictionless, secure, and online shopping experiences for them
- Building consumer trust and encouraging adoption of digital payments and pre-payment across merchants
- Expanding access to digital payment channels, especially among key sectors such as government and SMEs
- Fostering public and private sector partnerships to drive investment into the ecosystem
That said, Visa is continuing to provide support on all these fronts and working closely with government and bank partners to accelerate the adoption of digital payments.
Q: One of the key aims of the new policy is to drive the shift from cash-on-delivery to digital payments. Is it achievable?
A: Findings from our ‘Stay Secure’ survey shows more than half of the respondents found cards to be more secure than cash overall with consumers specifically preferring card payments when shopping online because (i) they feel card is safer than cash (53 percent), (ii) they perceive cards to be safe and secure way to pay (50 percent), and (iii) they see digital payments as the only mode of payment accepted by online merchants (45 percent). So, these findings indicate that Pakistani consumers are increasingly becoming comfortable transacting online and offline using cards. That said, even though cards are the preferred payment method as some consumers still prefer to pay cash on delivery (COD) when shopping online. To convert COD customers, merchants/eCommerce players should prioritise on facilitating easier return and refund policies, providing more realistic product descriptions, ensuring easier payment/checkout process, providing POS (point of sale) terminal on delivery, offering discounts and rewards on spends.
Furthermore, to accelerate the adoption of digital payments both merchants and consumers need to be incentivized. Our experience has shown that some of the ways to drive activation are leading customers to the “usage tipping-point” through incentive-based campaigns to promote the first few transactions.
I believe a combination of factors including consumer’s growing preference for digital payments, encouraging more merchants to accept digital payments by incentivising them, and the government’s ongoing digitisation efforts will accelerate the adoption of digital payments.
Q: Security and trust (owing to data and information privacy) are key areas of concern for Pakistani online shoppers. How do you think these concerns can be addressed?
A: Based on our findings we know consumers would be more open to making online payments using their card if they had the guarantee their data was secure, and they had the guarantee of a quick refund in case they wanted to return an item or had not received it. In this context, it is more important than ever to raise awareness among consumers about adopting safe online practices.
Some of Visa’s key recommendations for consumers to engage in safe online shopping practices include: (i) shop at well-known eCommerce sites, (ii) avoid using public WiFi connection for transactions, (iii) look for the ‘s’ after ‘http’ in website addresses to confirm a site offers (SSL) protection, (iv) activate Verified by Visa with your bank to secure online payments, log out whenever you leave a website, especially if using a public computer, and (v) never share your personal account information on social media, over email, phone, or chat.
That said, security must remain at the forefront especially at a time when Pakistan is seeking to digitise its economy. Pakistan has the potential to become one of the largest eCommerce markets in the world given the sector’s substantial growth in recent years.
And for the eCommerce market to expand further consumers need to feel secure about using online platforms. One of the ways Visa is supporting on this front is through educating consumers on digital payments and making them aware of the multi-layered security that is in place to protect their card data.
Q: What are the new forms of digital payments Pakistani consumers are inclined/prefer to use?
A: As per our Stay Secure findings, the most common type of cards used by online shoppers is debit cards (64 percent), followed by credit cards (55 percent), and prepaid cards (6 percent).
Visa findings also show the QR (quick response) payments are quite popular with Pakistani consumers with 87 percent of respondents considering it secure, and 79 percent intending to use the payment method in the near future. Globally, the QR codes are rapidly emerging and gaining acceptance as a universal form of payment. In Pakistan, Visa is working with our partners to bring the QR payment solution to more consumers. Recently, Visa collaborated with Habib Bank Limited to launch Visa on mobile, our QR-based mobile payments service that allows consumers to access their funds directly from their bank accounts via their mobile banking app to pay merchants or send money to individuals. The QR codes click with consumers because of factors such as security (transactions using QR codes are digitally encrypted and require authentication and approval to be completed), speed and convenience.
Also, since there are about 144 million mobile phone users in Pakistan from a population of 200 million, there’s a huge potential to increase the adoption of mobile wallets.
In fact, our survey reveals that consumers find smartphones (60 percent) to be the most secure device for online payments. Therefore, increased use of digital and mobile wallets is also one of the many ways that Pakistani consumers can move away from a cash-only existence.
Q: How is Visa supporting the eCommerce industry and players in other markets and how it can be replicated in Pakistan?
A: Similar to our modus operandi in other global economies, we are working closely with the government and our bank partners in Pakistan to lead efforts in driving growth of digital payment through raising awareness of all stakeholders on the value, convenience, and security of cashless payments, including eCommerce and mobile payments.
Our recent ‘Stay Secure’ campaign is the latest in our efforts to share knowledge with all our stakeholders in Pakistan. We are committed to accelerate the adoption of digital payments across all areas, reduce the dependency on cash and open up new avenues for the further development of Pakistan’s eCommerce sector and digital economy.
Developing a constructive, inclusive and balanced eCommerce regulatory framework is the first step towards digital transformation of Pakistan. Such a regulatory framework will help protect the legal rights and interests of all parties involved in eCommerce transactions, while maintaining market order. It would also ensure new technologies and innovations are well-protected and supported.
The government has already taken important steps in the right direction for which they should be lauded -for example, the SBP’s recent efforts to standardise QR specifications and to mandate security and fraud prevention tools for all banks to ensure the digital payments ecosystem is effectively protected. Despite QR codes having been deployed in substantial numbers in the country, the volume of transactions has not achieved desired levels primarily due to their lack of interoperability. This standardisation, which is based on EMVCo’s EMV QR Code, is seen as critical to scaling QR payments in Pakistan.
There is an opportunity in Pakistan to invest more in the eCommerce sector.
Through concerted efforts from both government and private sector players, Pakistan can fully realise its eCommerce potential, while also shaping the course of its digital commerce ambitions.