Accelerating Corporate Payment Digitization in Pakistan

1. Background

In Pakistan, the mechanism for transferring funds digitally is largely focused towards person-to-person payments and consumer-to-business payments. Whenever we talk about business-to-business payments, there are a number of complexities that need to be addressed — specifically in terms of the size of the transaction, security considerations, and reconciliation processes. Whenever two institutions are transacting amongst one another, there is a contract governing the payment schedule along with invoicing and order management mechanisms at the backend.

When corporations are working with multiple organisations pan-Pakistan, onboarding each business — from distributor to retailer — and managing all those relationships becomes a problem. Currently in Pakistan, the majority of business-to-business transactions are paper-based, with a small minority done through closed-loop, online solutions — meaning the entire supply or vendor chain is brought within a single banking network. Even with that, transactions are done in isolation (without the context of the payment), resulting in manual reconciliation processes done by both sender and receiver.

Due to the largely paper-based transactions existing in the B2B space today, realisation of funds takes a long time (in the case of cheque payments) with a lot of manual processes involved and unforeseen expenses such as the cost of handling cash payments. Even if the intent of the payment exists, it can't be made in real-time if the payment mode is via cheque. For small to medium sized enterprises, this is a huge roadblock for managing liquidity and funds.

2. Challenges in B2B Payment & Corporate Governance

2.1 Payment Delays

Cheque-based payments usually take anywhere between 3–5 days to settle, meaning even if a corporate client is willing to make the payment, the actual money will land in the account after 3 to 5 days. With manual processes existing today, it's the corporate itself whose slow manual accounts-receivable processes are gumming up the efficiency in managing liquidity and funds.

2.2 Reconciliation Overhead

Even when transactions are digital, the context of the payment is often missing — invoice numbers, line items, and references — forcing both sender and receiver to do manual reconciliation. Multiply this across thousands of dealers and you have a non-trivial cost center.

3. The Path Forward

PFA recommends a multi-stakeholder approach: regulators enabling open APIs, banks adopting ISO 20022 messaging for context-rich corporate payments, Fintechs building reconciliation and supply-chain finance products, and corporates committing to digitise their accounts payable and receivable processes.

This is an abridged version of the original white paper migrated from the previous site. The full PDF will be republished after re-review by the publications committee.