Comparing Modern Payment Gateways and Traditional Banking in Pakistan

Even in 2024, there is a huge fiasco over payment gateways in Pakistan. Over the last couple of decades Pakistan in particular has seen a tremendous shift even in the financial sector due largely to the effects of technology and innovation. Despite the fact that conventional banking which was the major medium for such transactions is now being threatened by well-advanced, ease of access, fast, and smooth payment gateway services. This article aims to compare and contrast the conventional banking technique with the modern payment gateways in Pakistan with respect to the benefits and disadvantages of both and its impact on Pakistan’s economy.

Conventional Banking:

Conventional banking has been the dominant mode of financing in Pakistan for many years now constituting an assortment of services which include current account and savings accounts, fixed deposit, loans, and money transfer services. The banks offer legal and controlled monetary services in the country with compliance to the state bank operating in Pakistan, SBP. However, traditional banking has certain limitations, such as:

• Physical Accessibility: Physical branch networks are still particularly underdeveloped in many rural regions.
• Lengthy Processes: Selling, buying, or ordering products/services, receiving or sending money, opening accounts or applying for loans come with many hassles, protracted approval processes, and much paperwork.
• Limited Operational Hours: Current formal banks work within certain standard business hours thereby limiting flexibility concerning transactions.

Modern Payment Gateway Systems in Pakistan:

Online payment platform have brought a dramatic change in the future of money management for Pakistani people. These payment gateways, provide conductive online tools for completion of numerous transactions without having to access a conventional bank. These services are also growing in popularity since internet and smartphone usage keeps on rising including among those who do not use bank facilities.

Key features of modern payment gateways:

• Instant Transactions: Cash can be transferred within the day, at any time of the day, and at any place they want.
• Lower Fees: Compared with more conventional forms of banking such as branch banking, transaction costs are relatively lower making it even more suitable for micro and small businesses.
• Greater Accessibility: These gateways are available on Smartphones and are therefore easy to access for rural clients.
• Integration with E-commerce: Every successful online store today comes with a payment gateway that enhances checkouts and helps the business to grow online.

Comparison of Services and Features

Let’s take a closer look at some of the major differences between traditional banking and modern payment gateways in Pakistan:

Accessibility

Traditional Banking: Although the basic structure is there regarding the physical establishment of branches and ATMs of the banks, the major constraints are still there including rural area scenarios.

Modern Payment Gateways: Mobile-first solutions are offered by payment gateways which can operate under any regional connectivity since they include the unbanked population.

 Transaction Speed

Traditional Banking: Transfer and settlements, particularly those affected between borders and interbank, may take a day or more to complete.

Modern Payment Gateways: Transactions are processed on the same day, hence undertaking real time transactions within the domestic and the global market.

Security

Traditional Banking: Being accredited by authorities, traditional banks form a safe context of operations with deposits protected within certain amount.

Modern Payment Gateways: Although these platforms ensure their customers’ secure transactions and data encryption, they are far more vulnerable to cybercriminals such as hackers and data thefts.

User Experience

Traditional Banking: The use process is slow and mostly involves physical cash transactions, which means that customers with complex products such as loans or business accounts must frequent the bank.

Modern Payment Gateways: These platforms are mainly developed with simple interfaces where customers can use mobile applications that help to pay the bills, transfer money and even invest.

Financial Inclusion

Traditional Banking: For instance, conventional banks have been known to serve their end users needs without prejudice and this means that they will target end users who have all the necessary documentation in order to be allowed to open an account with the bank, such as those living in rural settings.

Modern Payment Gateways: On the other hand, payment gateway empower anyone with a simple mobile phone to be financially included, supplementing the tremendous gains of exclusivity, particularly for the suppressed groups.

 Regulatory Framework

Traditional Banking: The entire conventional banking procedures and policies are under the supervision of the State Bank of Pakistan which brings transparency, and stability and shields the customers from severe risks.

Modern Payment Gateways: These gateways are operated under the regulation of the SBP but they are not governed under the same, in fact stricter, rules. However, with its recent efforts like the Raast system, the SBP seems to be working on enhancing control and supervision of digital transactions.

In Traditional banking, there are serious obstacles that cannot be overlooked.

• Digital Transformation: Most of the banks are yet to automate several of their working processes, and this could take time.
• Customer Experience: This has locked traditional banks with a spirit of legacy systems, which has imbalanced efficiency and innovativeness in catering and pleasing customers.
• High Operational Costs: Having physical branches, as well as ATM networks, are very costly.

The Future: Payment Gateways?

The future of financial services in Pakistan is undoubtedly being shaped by the rapid rise of payment gateways. As traditional banking models evolve, it’s clear that payment gateways offer the agility and convenience that modern consumers demand. Banks are increasingly integrating these digital-first solutions to provide seamless, real-time payment experiences that go beyond what conventional systems can offer.

The Raast system, launched by the State Bank of Pakistan, is a perfect example of how payment gateways are paving the way for the future. By offering secure, instant, and zero-fee transactions. The trend points towards a future where payment gateways will dominate the financial landscape, offering consumers a wider range of services with unparalleled ease and efficiency.

With the continued growth of digital payments and online payment platform, it’s clear that the future is in payment gateways, redefining how we manage and move money.

Conclusion

The financial industry of Pakistan has changed quite dynamically and it has been observed that traditional banking and effective payment gateways both are enhancing their spirits. In this regard, despite relative security, reliability, and availability of all necessary services in traditional banks, modern payment gateways are incomparable in terms of availability, speed, and convenience. The establishment of these systems side by side and working hand in hand will possibly determine the subsequent developments of financial services in Pakistan where consumers are provided more options for operational flexibility. Therefore, for the stakeholders in this new generation to be fulfilled, both classical money banks and payment gateways have to perform the following; innovate and adapt to the new world.