Infrastructure
State Bank of Pakistan (SBP) houses Payment systems in Pakistan that have evolved significantly over the last decade, driven by the development of new payment instruments, electronic payment infrastructure and changing consumer needs. This development has resulted in rapid shift from the use of traditional paper instruments to a diverse range of electronic payment instruments, supported by efficient and reliable clearing and settlement infrastructure.
Pakistan now has payment systems with the following main features:
 | Large value real time fund transfers system known as PRISM (Pakistan Real-time Inter-bank Settlement Mechanism) equipped with the modern liquidity saving and risk mitigation features. |
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Government securities settlement system fully integrated with the RTGS System, providing electronic settlement on DvP (Delivery versus Payment) Model 1 basis. |
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Real time retail payment system operated by 1Link, capable of providing P2P transfers on 24/7 basis from different Alternate Delivery Channels i.e. ATMs, Internet Banking and Mobile Banking. |
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Paper instrument clearing facilities on T+1 basis, backed by a network of more than 27 clearing/satellite centers around the country |
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Domestic payment scheme known as PayPak for providing low cost payment solution to consumers and financial institutions. |
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Pakistan’s very own Faster Payment Systems (Micro Payments Gateway). |
An RTGS system is defined as a gross settlement system in which both processing and final settlement of funds transfer instructions can take place continuously (i.e. in real time). As it is a real-time settlement system, the system effects final settlement continuously rather than periodically at pre-specified times if a sending bank has sufficient covering balances or credit. Moreover, this settlement process is based on the real-time transfer of central bank money. An RTGS system can thus be characterized as a funds transfer system that is able to provide continuous intraday finality for individual transfers.
The need for RTGS system in Pakistan was recognized as a response to the growing awareness of the need for sound risk management in large-value funds transfer systems. RTGS systems offers a powerful mechanism for limiting settlement and systemic risks in the interbank settlement process, because these risks effect final settlement of individual funds transfers on a continuous basis during the processing day. Further, RTGS can also contribute to the reduction of settlement risk in securities transactions by providing a basis for delivery-versus-payment (DVP) mechanisms. Therefore, RTGS is very much essential while considering risk management in payment and settlement systems.
The RTGS in Pakistan has been named as Pakistan Real-time Interbank Settlement Mechanism (PRISM). Pakistan Real-time Interbank Settlement Mechanism (PRISM) System is Pakistan’s is the only Large Value Payment System. It is a Real Time Gross Settlement System (RTGS) which provides a central platform for the settlement of large-value interbank funds transfers, Government Securities, retail clearing and customer transfers (over a certain minimum amount limit). It was launched in July 2008 and has expanded its operation significantly. At present there are 42 Direct Participants of PRISM comprising of Commercial Banks, Development Financial Institutions, Micro-Finance Banks and Central Depository Company (CDC). PRISM system Operating Rules (2009) were issued to provide a level-playing file to the participants.
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The participant banks have the facility of online monitoring of their interbank payments via one settlement account and their fate (like settled, queued, or rejected). They would also be able to change their payment priority (if transaction is queued) giving them more control over their funds; |
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SBP departments have the ability to monitor the inter-bank transactions and take immediate action as and when required; |
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Intraday Liquidity Facility (ILF) would be offered to banks collateralized against Government Securities so that the payments may be cleared immediately; |
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The system also has queue management features and mechanisms for Grid Lock resolution; |
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The system also holds government securities portfolios and enables securities trade matching for Delivery Vs Payment and intra-day liquidity management; |
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The IT security component of the system provides PKI infrastructure, transactional and link encryptions for data security; and |
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“Centralized Multilateral Netting” of retail clearing was a mandatory pre-launch requirement for smooth functioning of the PRISM System. Previously the countrywide retail clearing operations were settled in the sixteen field offices of SBP across the country. |
Retail payments involve transactions between consumers and businesses where it generally have higher transaction volumes and lower average values than wholesale payments. The retail payments in Pakistan comprise of various paper-based and electronic instruments from conventional cheques to modern plastic cards. The system handles high volume and low value transactions through paper based (such as cheque) and non-paper based transactions (such as e-Banking). Over the years, and important trend has been the shift from paper to electronic payments. The statistics show that consumer use of electronic payments in Pakistan has grown significantly in recent years, and the trend will accelerate in coming years due to Vision of SBP on provision of Digital Financial Services (DFS) especially to financially excluded segment of population.
In Pakistan, the retail payment channels can be broadly categorized as:
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Paper Based Instruments |
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Electronic Instruments |
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Automated Teller Machines (ATMs) |
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Internet Banking |
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POS Network |
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Mobile Banking |
Raast project is an on-going collaboration between Karandaaz and the State Bank of Pakistan (SBP). The project aims to improve payment infrastructure, with the objectives of further developing digital financial services, reducing reliance on cash, and driving financial inclusion in Pakistan. Raast will become a core component of Pakistan’s payment infrastructure that will enable individuals, businesses, and government entities to make any payment digitally in a simple, fast, low-cost, and secure manner.