Pakistan’s digital payments system experienced a significant drop of almost 50% in point-of-sale transactions after the arrest of former Prime Minister Imran Khan triggered widespread protests and led authorities to suspend mobile internet services. Data released by payments system operator 1LINK revealed that the slump was primarily caused by the mobile broadband suspension, coupled with a lower footfall at the limited number of stores that were open due to the political turmoil.
Effects of the Protest Violence on Commercial Activities
The violent protests that ensued after Imran Khan’s arrest have had a severe impact on commercial activity in Pakistan. Mobile data services have remained shut down since Tuesday night on the orders of the interior ministry, resulting in the longest continuous shutdown of communication services in the country’s history. Additionally, many major roads and businesses have remained shut, particularly in Lahore, which is Pakistan’s second-largest city.
Impact on Point-of-Sale (POS) Transactions
According to 1LINK, which is Pakistan’s major facilitator of POS digital payment transactions for international platforms such as Visa and Mastercard, international payment card transactions were down by 45% in volume on Wednesday. This figure represents a significant decline from the daily average of 127,000 transactions recorded during the week of May 1 to 7. The value of transactions using international payment cards also saw a decline of 46%, dropping from 606 million rupees ($2.14 million) to 330 million rupees ($1.16 million) on May 10.
PayPak, Pakistan’s only domestic payment scheme, was not spared either, as transactions on the platform were down 52% in volume to 18,000 transactions on Wednesday. The value of transactions also declined by 56% to approximately 62 million rupees ($218,775).
Response from the State Bank of Pakistan
The State Bank of Pakistan has yet to respond to inquiries from Reuters about the situation.
Impact on Pakistan’s Economy
Although cash transactions still dominate Pakistan’s commercial dealings, digital payments have been growing fast in the country of 220 million. However, the protests have slowed down the progress of the digital payments sector. Many retailers and industrialists across Pakistan have reported a halt in their activities since the protests started on Tuesday.
Impact on Social Media Platforms
In addition to the suspension of mobile broadband services, social media platforms such as Facebook, YouTube, and Twitter were also down, resulting in a surge in demand for virtual private networks. According to Simon Migliano, Head of Research at Top10VPN, demand for virtual private networks increased by 1,329% on Wednesday compared to the average. Migliano estimates that the suspension of mobile broadband and social media platforms has cost nearly $100 million so far.
Conclusion
The suspension of mobile data services and social media platforms has had a severe impact on Pakistan’s economy, particularly the digital payments sector. It is hoped that the situation will improve soon, and the government will find a way to restore communication services to enable businesses to resume their activities.
