State Bank of Pakistan (SBP) has issued new regulations for digitizing the payment systems of retailers countrywide. This will promote the digital collection of payments from the sale of legitimate goods and services.
The rules and regulations for “Digital onboarding of Merchants” will help increase digital payments in Pakistan. It will enable smaller merchants to accept payments digitally by using a variety of low-cost, tech-enabled payment instruments, for example, QR codes through mobile applications.
Commercial banks, microfinance banks (MBFs) and Electronic Money Institutions (EMIs) shall provide digital payment acceptance channels to these merchants. It may include but will not be limited to Point of Sales (POS) machines, m-POS, QR code, mobile payment applications, direct credit transfers, e-commerce gateways, etc.
The merchants shall include small businesses or individuals providing legitimate goods and services like transport, home deliveries, small grocery, and kiryana stores, etc. Institutions are encouraged to facilitate the digital on-boarding of women providing services from their home like cooked food, drapery services, handicrafts, tuition services, etc.
SBP has drafted these rules after extensive industry consultations, aiming to provide a risk-based framework for commercial banks, microfinance banks (MBFs) and Electronic Money Institutions (EMIs), for digital onboarding of merchants in a standardized manner.
The maximum transaction limits set by financial institutions on merchant accounts are Rs. 50,000 per month without biometric verification and Rs. 500,000 per month with biometric verification.
These transaction limits will be separately applied to debit and credit transactions.
Banks and MFBs may place lower transaction limits, keeping in view their institutional risk assessment and high-risk geographical locations of merchants.
Banks and MFBs shall ensure that merchants maintain their accounts balance of no more than Rs. 50,000 without biometric verification and Rs. 500,000 with biometric verification.
Presently, the process of merchant onboarding requires a long list of documentation and an even longer process of due diligence by the banks.
Hopefully, the issuance of these merchant onboarding regulations will enable banks, MFBs or EMIs to quickly onboard a large segment of retail merchants. This will enable the banks to accept their payments digitally, which will give a new payment option to the general public, as this will broaden the base of financial inclusion in the country.