Why Pakistan’s Urban Poor Still Can’t Access Digital Banking

Pakistan’s financial sector has advanced quickly due to accelerated digital progress over the last several years. Mobile wallets, branchless banking and modern digital payment methods have opened up new doors for reaching people with limited access to finance. Governments, startups and banks all see digital banking as a way to give the world’s people accessible, convenient and easy-to-use financial services. Even so, this vision is not yet a reality for many urban poor people in the country. Although the city infrastructure and internet services are modern, many people who live on low earnings such as rickshaw drivers, domestic helpers, daily wage earners and street vendors, still do not access the digital financial systems.

The main reason for this is not a lack of infrastructure or access to service, but much more serious social and economic problems. Many urban poor are barred from using digital banking by limited available education, poor digital skills, not having formal ID cards and fearing banks. Even if a service is technically working, it’s often unusable for people who don’t have the right knowledge or equipment.

These areas have not experienced the convenience, control or economic freedom promised by new technologies. To address this problem, we need more than innovation—we need clear policies, education about money that considers culture and designs that support all those living in the city. As long as these basic issues are not solved, digital banking in Pakistan will miss out the country’s poorest.

The Apparent Solution: Access Isn’t Always Sufficient

Many don’t realize that not every person with a smartphone or SIM card is truly included in financial services. Many people in the urban poor do have mobile phones and the downloadable mobile banking apps provide a useful option. Just because technology is there doesn’t mean it will be used effectively. A lot of people are either unfamiliar with computers or have problems reading, meaning they struggle to work their way around apps related to banking. A smartphone is not enough for these people—it’s a reminder that certain doors are always closed to them. Whenever they try to use digital services, it’s usually hard, uncomfortable and they get little support.

As well, the urban poor have very little confidence in mainstream financial institutions. Exclusion, unfair treatment and difficult bureaucracy during many years have caused people to doubt and fear anything that seems like banking. The problem is made worse by previous examples of financial scams that mostly target those least able to deal with them. That’s why many in urban poverty often pick traditional methods such as local gatherings or cash payments instead of trying out untrusted digital platforms. Therefore, becoming digitally included in fintech means having trust, being literate and being at the center of the design—none of which has been covered well by current providers.

Difficulties related to documentation constitute an unseen obstacle

For people in cities living in poverty, one of the biggest challenges to using digital banking is that they need certain types of official ID and documents. Although Pakistan has a complete national ID process managed by NADRA, a lot of the urban poor struggle to have their documents updated because they are displaced, live in informal areas or meet various bureaucratic challenges. Katchi abadis which house many migrants from rural areas, lack formal address, causing problems for them when financial institutions enforce KYC (Know Your Customer) requirements. For financial institutions, these people are practically never recognized.

Mistakes such as different spellings, lack of key details or old addresses found on an ID can still prevent someone from being approved. There are even bigger challenges for women to succeed. Quite a number of urban poor women do not have a CNIC in their own name and are often uncomfortable going to places run mostly by men, like banks or credit unions.

If a platform needs facial verification, biometric connection or a SIM number tied to someone’s ID, people who do not own or share a device registered with their own identification are unlikely to succeed. The problem of needing documentation isn’t only related to policy failures—it systematically leaves the most vulnerable groups out. Until banks and regulatory bodies adapt new verification methods, like those based in the community, simple e-KYC or similar, digital banking will remain unavailable to the poor in big cities.

Cost of Connectivity: When ‘Free’ Isn’t Really Free

First appearances make digital banking look like a smart choice for saving costs. Using many mobile wallets means no lines, no fares for transport and no money for service. But this misunderstands the extra expenses that urban poor people must face to get involved in digital financial services. The very first challenge people face is getting onto the internet.

While mobile broadband has become more available in Pakistan, many low-income city households still cannot get access to reliable and inexpensive internet service. Since data bundles are expensive for most incomes and coverage is limited in crowded or overlooked regions, the difficulty increases. Given that some people earn just Rs. 800 a day, spending extra money on data to check their balance can add serious expense for them.

Some difficulties also involve the equipment. Most people can’t afford entry-level smartphones with digital banking apps and they quickly become outdated. Using the same device for everyone in a large family can cause problems with privacy and security which is why people may avoid making financial transactions online. Few low-income users get digital literacy training, customer support or help with troubleshooting, so they end up using mobile shop agents who charge them each time they make a transaction. Similarly, issues like secret fees, limits when moving money or system problems lead some to feel digital banking isn’t stable or worth using.

Being connected can hurt you emotionally and mentally, as well as financially. Many urban poor are unable to get solutions when something goes wrong with a transaction. No call center is available in the language or literacy level people need and resolving complaints requires documentation. Such frictions in the system lead to less use and increase the likelihood of continued exclusion. If digital banking isn’t supported by special subsidies, improved infrastructure and help for the poor, it will only be useful for the middle classes.

Differences in gender and the digital gap

Simply put, digital banking exclusion in Pakistan is even greater based on gender. There are many roadblocks that keep women in these areas from having financial independence and being involved online. Because culture places limits on moving, controlling how much you make and getting an education, using digital financial tools is considered irrelevant or out of reach. Often, men decide when women in the same household can use the phone and internet and women’s personal mobile phones are sometimes taken away. Financial privacy is almost unheard of among many urban poor women.

It is rare for fintechs marketed as inclusive to pay much attention to women’s needs. Many mobile shop kiosks and bank branches are run by men, driving away many women because it feels intimidating or unwelcoming. You usually don’t see regional languages offered in digital interfaces, nor do many low-literacy users benefit from inclusive design. In addition, traditional banks are still finding it a challenge to design services for women that create trust and recognize their special habits of saving and spending.

There is a greater chance for women to become targets of fraud and digital abuse. Being digitally illiterate or not aware of their rights makes them more likely to be victimized financially. As a result, discussions about financial inclusion need to address all relevant issues at once. Having a single platform for all students isn’t enough to ensure it works for everyone. Reality shows that solutions to gendered barriers depend on having female agents, automated services that use speech, community awareness and special financial products for women entrepreneurs. A lack of a gender-focused strategy will make digital banking maintain existing unfairness rather than promote equality.

The Informal Economy: Living Outside the System

Pakistan’s urban poor are strongly connected with the informal economy. Cash is the only form of payment for street vendors, domestic workers, construction laborers and gig workers—because they rarely have any written employment contracts. Since people’s financial behavior is usually irregular in informal sectors, it presents a major obstacle for digital banks that work with expectations of regular and consistent use. The main ideas about the poor are not true for those living in cities. What they make and where it comes from changes every day and they usually spend it just as immediately.

Most digital banking services fail to keep up with what people want. They supply savings tools that must be funded by a fixed deposit, credit products depending on credit information and a platform that incentives continuous and traceable activity. For the informal worker, things areˈpaycheck-by-ˈpaycheck, with liquidity and quickness being their priority. Additionally, digital banking services rarely connect well to informal ways of doing business. For instance, many customers at a street vendor’s stand say they pay with cash, since the vendor may not have QR codes or POS systems. Until the environment around it changes, digital banking is limited in a society ruled by cash.

There is also a gap in policies about tying digital financial systems to work done informally. The lack of official papers or employment proof keeps many informal workers from accessing government welfare payments and digital IDs as well as fintech offerings. To close the gap, digital banks have to reimagine how they can cater to informal earning. Only if these options are anchored in the daily experiences of urban informality can they work well. Any measures for financial inclusion should fit the way the poor live, instead of asking them to become formal customers.

Policy Gaps and Institutional Apathy

Even though digital tools are widespread in Pakistan’s financial services, the policy framework has not adapted fully to the increased needs of city dwellers who are poor. Things like the State Bank of Pakistan’s financial inclusion strategy or the spread of branchless banking have certainly made it easier for innovation to happen. Unfortunately, the policies frequently fail to recognize what low-income groups in cities are really facing. Regulations are intended for markets with clear rules, people´s actions can be anticipated and details of users are available for verification. Most economists have not studied the informal, undocumented and uncertain world typical for those in urban poverty.

There is a big gap in policy because social protection programs are often not connected to digital financial services. Such cash assistance frequently does not fully help people become part of the digital world. People who receive these deposits can cash out and no longer use the system. Few attempts are made to use these accounts as entry points into broader financial tools. A chance to get more individuals involved in important financial activities has been neglected.

What’s more, government bodies have failed to protect consumers when it comes to digital financial services. Urban poor people are commonly deceived or cheated by agents, secret costs or predatory financial options designed to help them. For many people, making a complaint and getting a response is difficult because the process is both bureaucratic and complicated. A lack of transparency in collecting, storing or using information further increases people’s distrust.

The problem is made worse because government agencies do not cooperate enough. One section of the government may encourage registering with digital ID, though another may overlook it in welfare applications because of matching problems. Because of this, a complete approach is avoided. Both a strong policy framework and a democracy that includes the poor are required to support development efforts. Till digital financial policies are based on people’s experiences, not just theories, true inclusion will not be achieved.

The value of financial literacy and what people think and believe about money

Often, those who miss out on digital opportunities are advised to learn about finance, though Pakistan’s challenge is larger than this. Urban poor people do not lack awareness of digital banking; many have been brought up to see banks as complicated, harsh or irrelevant. A lack of money in poorer communities often means that it’s tied to relationships, people’s reputations and what they owe each other. On the other hand, digital banking works in a way that is impersonal, unclear and based on systems that don’t reflect how people interact.

For someone living in poverty in a city, “trust the system” means more than just downloading an app—it’s about starting to understand everything differently. Learning this new skill is tough, mostly because there are not many resources to guide people through it. Digital banking tutorials are developed with users who are confident, knowledgeable and have enough money assumed. For many of the urban poor, it is different. People might be uncomfortable with mistakes, suspicious of rob calls and challenged by terms written in strange languages. Such barriers should be confronted through community work, not by passing out pamphlets or establishing helplines.

In addition, there are strong perceptions about what banking involves. There are places where establishing a bank account is seen with suspicion by some. Your spending habits are formed both by what you have and by the expectations in your social group. For some women, the thought of having a bank account can frighten them, since it might make men in their lives check up on them. It’s possible that youth can see digital banking as related to surveillance or taxes. These views are mostly ignored in standard financial inclusion activities, as they view literacy in a single, limited way.

It’s important that financial inclusion starts with understanding cultures. It needs to reach people by sharing information with nearby friends, using local content and providing a caring experience. Equally important as infrastructure, building confidence is critical in a community. Until we accept the social psychology of money, digital banking will seem like an attractive yet unfamiliar thing to everyone who uses it. It’s important to address technology issues, but also culture and emotions when looking for solutions.

Conclusion

What keeps urban poor people from accessing digital banks is not a flaw in the technology—it’s due to a lack of sensitivity, sound policies and well-considered designs. Despite the promise of digital tools to broaden access to financial services, the methods being applied now only help a middle-class group, leaving millions out. For those living in poverty in towns and cities, the problems go beyond technology and include language, culture, economy and the system as a whole.

To make this happen, Pakistan needs to do more than promise inclusion and make it real by acting justly, equitably and with respect. As a result, digital banking should be viewed as a service for everyone, always responding and improving for the benefit of the most at-risk. For now, the rift between those with and without access to digital technology in Pakistan’s cities will get worse and the chance for many to gain financial independence will still be out of their reach.

Also Read: A Systematic Review of Digital Technology Adoption in Off-Site Construction