Pakistan’s market, with large volume and low price, is attracting various players to enable payment acceptance at merchants. Telcos with their distribution muscle and armed with branchless banking platforms are jumping the train in a big way. ‘Merchant Payments’, a term coined by Telcos in Pakistan, now made synonymous with the Mobile Wallet based payments is being used to explain the payment model between customer and merchant. The fact is merchant payment is not something new (except the term itself) and has been around in Pakistan since the installation of the first POS machine, and it’s called “Retail Purchase”.

Branchless banking players, like Telenor microfinance Bank, UBL Omni, UPaisa, Jazzcash, and many others are trying hard to promote “merchant payment” which can accept the mobile wallet linked instrument/channels for the retail purchase.

There are two modes of enabling merchant payments that are being implemented; one is to push the payment and other is to pull the payment.

What is Push payment and what is Pull payment?

When ‘customer’ initiates the payment transaction to the merchant, either by using a merchant number or some bank identification, a cash payment or simply a wire transfer, it is called Push payment (credit transfer). And when ‘merchant’ or ‘receiver’ draws money from customer’s account with customer’s consent using the prefilled (saved) customer information, it’s called Pull Payments.
Now, the question is which model to use in Pakistan’s scenario? Which suits the best? Before deciding we should get ourselves accustomed with (yet another term) Payment Friction; the time it takes a merchant to accept a payment by the customer is called the Payment Friction. Cashless is considered a least friction generating transaction whereas friction increases if the customer pays in cash and in return merchant has to provide the change. Or, in other scenarios if customer is paying through card and merchant has to push various buttons on the POS machine to accept the payment. So what model will fit best in Pakistani market; Push or Pull payments considering the friction at the merchant counter.

In my opinion if we ask customer to push payments to the merchant account, it may lead to two main issues. Number one is wrong input by customer as acustomer is less experienced of the payment system than a merchant (because of higher frequency of accepting payments), there is always slower learning curve at the customer side. In addition this less steeper learning curve will inject errors in the transaction (wrong input amount or invalid pin) which can further increase the payment friction due to retries. In practical environment merchant will not wait for the customer to process the transaction before he can start attending the next customer, so a mollified customer seeing diverted attention of the merchant can altogether skip the payment and leave the shop premises (lost revenue for merchant).

Compae this with pull payment model which is in place in the form of payment card acceptance on POS machines, reduces the friction as merchant will do more transaction and will become savvy in using the pull payment system. Also, since merchant is responsible for the input in the system, it is less prone to errors.


So my conclusion is that promoting the pull payment rather than the push payment will help enable a less friction oriented payment acceptance environment and should be promoted by players in payment industry.


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