21st map convention speech by deputy governor, sbp on “ monetary policy and digitization of payment systems ” 28 august 2019 بسم هللا الرحمن الرحيم mr. amir jamil abbasi, president map distinguished speakers ladies and gentlemen! assalam o alaikum and a very good morning! it is a privilege for me to be here to deliver a keynote address on “ monetary policy and digitization of payment systems ”. these areas are the key policy pillars of every forward - looking central bank in the world today and has therefore attracted a lot of interest of the academia, business community and the public in our country as well. in my talk today, i would first like to draw your attention to the challenges our economy is facing and how the recent structural and policy changes by sbp, especially through monetary policy, will help stabilize it. then, i will share my thoughts on the issue of digitization and technological developments, which is massively changing the payment and banking industry around the globe as well as in pakistan. finally, i will talk about the strategy of sbp on digitization and use of technology to not only bring efficiency in the payment but help in documentation of economy while also supporting our efforts of financial inclusion. page 1 of 10 ladies and gentlemen! 1. as most of you may be aware that pakistan ’ s economy is passing through a stabilization phase, as structural deficiencies have accentuated the twin deficits during fy17 and fy18. the situation was further complicated by the uncertainty prevalent in the global economy mostly due to trade disputes among major economies. these trade wars are unsettling the capital and commodities markets and affecting the export performance of emerging markets. 2. to effectively tackle domestic structural bottlenecks and enhance our economy ’ s resilience in line with the evolving global dynamics, pakistan has made some tough but necessary adjustments in the monetary and exchange rate policies. these measures have already helped contain domestic demand pressures and led to a progressive improvement in the country ’ s external account. supported by a healthy growth in workers ’ remittances and external financing from multilateral and bilateral sources, the country ’ s foreign exchange reserves have now stabilized. 3. encouragingly, the current account deficit decreased by a substantial 32. 1 percent during fy19 and the july 2019 figures of a 72. 8 percent decline are also encouraging. however, inflation has been on an upward trajectory mainly due to the pass

to briefly mention some of the most prevalent trends : first is the rise of open platforms, such as e - commerce marketplaces, which allows anyone to buy, sell, and share in real time without considerable investments in infrastructure ; second : cloud based hosting enables quick deployment of complex systems using tools that are open source and easily available to anyone ; third is the pervasive adoption of mobile devices where everyone regardless of their social or financial stature owns a mobile phone ; fourth : advancements in big data analytics that provides deep insights about customer behavior, needs and wants ; fifth : advancements in artificial intelligence using big data and complex algorithms are being put to use in ways that were unimaginable a few years ago ; finally, the emergence of distributed ledger technologies like the block chain is set to transform entire industries by removing the need for intermediaries. ladies and gentlemen! page 6 of 10 10. these technologies are now threatening to disrupt the financial sector by creating new forms of money and removing the need to intermediate, which has traditionally been the forte of banks. since this has implications for central banks especially with regard to monetary policy execution and transmission, sbp has adopted a comprehensive strategy to further its agenda of digitizing payments in the country. this includes promoting and developing interoperable payments infrastructure, issuing enabling regulations especially for retail payment providers, ensuring the trust and security of digital payment channels in the country and finally promoting and experimenting with new fintechs players. let me now talk about each of these areas one by one : 11. as most of you may be aware that payment systems are usually categorized as wholesale and retail payment systems. like the rest of the world, sbp upgraded its wholesale payments infrastructure to a real time gross settlement system, over a decade ago. the rtgs system has made our monetary policy operations more effective and efficient. 12. now with the emergence of new enabling technologies, the retail payment systems are being transformed into the so - called “ faster payments ” that enables the public to pay and receive money in almost real time. consumers accustomed to instant communication via email and social media expect to be able to make payments instantly. therefore it is not surprising that these faster payments are rapidly gaining acceptance and popularity. page 7 of 10 13. to remain abreast with these trends, sbp has already started work on the implementation of a micro payment gateway in partnership with bill & melinda gates foundation and its representatives in pakistan. this gateway will offer faster retail payments with advanced application programming interfaces