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 organizations pan-Pakistan, onboarding each business, from distributor to retailer, and managing all those relationships becomes a problem. Currently in Pakistan, 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 – which is necessary for many purposes identified and elaborated in section 6 below) – resulting in manual reconciliation processes done by both the sender and receiver.

Due to the largely paper-based transactions existing in the B2B space today, realization 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 payment mode is via cheque. For small to medium sized enterprises, this is a huge roadblock for managing liquidity and funds.

If a dealer has the intent to make a purchase, they would have to wait for anywhere between 3 to 5 days before the products / goods are delivered since the payment cycle alone takes a long time. This payment cycle itself directly effects the order efficiency since businesses are willing to work with corporations who have a smoother payment cycle



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 making payments, and therefore the entire payment process gets delayed.


The digital channels that exist today for corporations are not sufficient enough to cater to all their requirements. B2B transactions are complicated and require reconciling the payment with the invoice or contract governing the payment. In other words, reconciling the payment with the context. Currently paper-based mechanisms, although costly and time-consuming, are the preferred method of payment since it satisfies most of the corporates requirements.


Regressive behavior in opening up services for corporate and contextual banking has stunted the growth of cash management digitization in the entire value-chain. Banks prefer Onus based operations rather than participating in interoperable environments due to reliance on traditional business models such as

  1. Close Loop cash management
  2. Reliance on Branch Banking
  • Realization/Settlement delays to optimize treasury liquidity


When talking about cheque payments, it’s true that a small rectangular piece of paper doesn’t cost much on its own, but all the associated costs that come with issuing a cheque are significant. Distribution and payment costs such as account administration, reconciliation and storage costs (filing and processing after the fact) add up. Postage is another cost that is significantly higher when issuing cheques – cheques are paper and are entirely reliant on the snail-mail system. Factor in materials and handling expenses associated with buying envelopes and paying employees to stuff and mail them, and the final cost can become expensive.

Other challenges related to B2B Payments and Corporate Governance include:

  • Limited corporate participation in the FinTech ecosystem
  • Regulatory barriers and associated costs of compliance (FBR, SEC and SBP Oversight)
  • No preferential tax treatment for digital payment
  • Current infrastructure not “open” for integration. Non-availability of unified platform for Corporate & Government receipts or payments



Fintech industry needs to interact with regulatory authorities of Pakistan to develop a mechanism which provides innovations in digital payments specifically for the corporate industry. Currently the payments made through the banking network are blind and only carry the payment data, i.e. sending and receiver account number along with the amount. Tax authorities and government agencies that are relying on banks data never get nearly the clear picture that they would get in the case of context driven payments – resulting in time-consuming manual investigation processes. For regulatory authorities, there are a number of procedural gaps that can be addressed through a context driven payment mechanism. Such a mechanism can facilitate all the key players involved in the economy, from corporates who will get automated reconciliation reports, to tax authorities and government agencies who require more transparency.

With the participation of regulatory authorities collaborating with FinTech, an enabling environment can be created in Pakistan for innovation that would provide better compliance, usability and regulatory oversight in the B2B payments space.

4. THE NEW STANDARD (Context Driven Payment)

Currently Corporate payments are processed through two services

Manual Clearing

Online Payments – Bill payment for B2C, Bank specific IBFT
  • Time consuming method which creates delay in funds realization
  • Requires human intervention to process payments
  •  Corporates needs     to    do    manual reconciliation of each transaction in their accounting/ERP system
  • Digital Payments focused on consumers not Corporate/Government
  • Available solutions are not bank agnostic, and are only available in a closed-loop network
  •  Non-availability of unified platform for Corporate & Government payments


Corporate Payments require a new standardization that allows the system to read and understand the context behind each payment, for example the invoice, the agreement, whether it’s a partial payment or full payment, whether it’s a payment made for a service or delivery of goods etc. These messaging formats will address the issue of trust, security, regulatory monitoring since they will be developed in collaboration with the regulatory authorities. A contextual transaction engine that sits between all regulatory authorities connected with multiple payment service providers  (PSPs) providing corporates the flexibility to transact instantly with any other corporation in an open- loop environment while having the transparency required for regulatory oversight.




  1. Real time transparency of corporate transactions with data concerning why a particular payment was made
  2. Confluence of Secure/trusted transactional information and payments information through Contextual Payment System
  3. Greater access to data and functions through digitization, improved reporting, and the ability to monitor and analyze more information
  4. The ability to make, and receive payments in real-time has major supply chain and working capital implications for corporate treasurers and chief financial officers
  1. Managing cash-flow and liquidity is of utmost importance when it comes to businesses, especially SMEs. With an automated enabling environment, they get a chance to issue invoices, manage orders and send / receive payments instantly. Not only do they get to realize funds much quickly but also reduce operating cost and save time in the


  1. Real-time access of data enabling regulatorily authorities to act decisively and in a timely manner. Contextual driven banking promotes stability of the financial sector by providing transparency at a transactional level due to contextual data. This provides better transactional and operational risk
  2. Contextual payments leap frogs corporate economic activity to get organized and documented.
  3. Unified Contextual payment platform will create payment and revenue collection efficiency that fuels the national supply chain
  4. Enabling regulatory regime on contextual payment platform shall transmit inclusion through institutional vehicles particularly agro-based industry in order to digitize the grass root value chain and bring them in the bankable


Currently, an overwhelming majority of the B2B payments is paper-based. According to SBP’s quarterly payment systems review report (2nd Quarter of 2017 – 18), Real Time Online Banking (RTOB) processed 41.7 million transactions of worth Rs. 9.8 trillion, of which online cash deposits transactions alone had the highest share of 47% – and this channel is mostly used for B2B transactions.

If we only look at the SME sector within the B2B space, according to State Bank of Pakistan & Economic Survey of Pakistan, the SME sector alone contributes 30% in the GDP, along with 80% of the non-agricultural workforce, making 35% value addition in the manufacturing industry and adds 25% exports earnings in the national exchequer [up to US$ 2.5 billion]. All transactions amongst businesses, especially SMEs, is done either through cheque or cash.

A contextual transaction engine provides an opportunity to digitize the value chain for different industry verticals whether it’s the services industry, pharma, agri, manufacturing etc. The proposed solution aims not only at introducing cashless payments in the B2B space but also at greater financial inclusion by being more affordable and easily available to everyone. The solution increases transparency and improves operational efficiency of trade and commerce since payment along with the entire context of the payment is being digitized and recorded.

With a considerable userbase – the solution can act as the backbone for financing SMEs and businesses since now lending institutions would have easy access and a complete holistic picture of the businesses current financial position through which customized loan and lending products can be provided tailored for each individual business.



  1. Study on the subject needs to conducted by an independent consultant (or firm) providing a detailed analysis of the existing banking infrastructure and operations along with the challenges – concerned specifically with cash management, supply chain financing and corporate facilitation in general. Participation of government bodies, banks and FinTech would be necessary for a nationwide
  2. A working group needs to be setup in which all concerned regulatory authorities. Namely; FIA, SEC, SBP, FBR & NAB sits together along with representaions from Banking Association, Audit Firms and leading PSP/PSO and FinTech to discuss, highlight and finalize the need of new format, structural design, regulatory environment, implementation strategy for unified contextual payment
  3. Contextual Banking Framework to be developed by independent consultants or firm based on the outcome of the gap analysis. This framework will be approved by FIA, FBR, SEC, NAB and driven/owned by State Bank. The deliverables of the framework shall be as follows;
    • Regulatory enabling environment actions to be taken by all government agencies. Primarily SBP, FBR, Provincial Tax Authorities and
    • Solution design and architecture
    • Implementation Guidelines and Strategy
      • SBP Owned
      • License issued to private parties
      • Joint Ownership of SBP, FBR and Private parties (Ops)
  1. Design, procurement and implementation of Contextual Transaction Systems (CTS)
  2. Integration of CTS with banking industry and regulators
  3. Passing regulations that would mandate all banks to follow the new messaging format and all corporates to integrate CTS with their business applications (ERPs ).

Regulation should mandate use of the newly developed transaction engine by corporates for making and receiving digital payments.