DefinePK

Abstract

To assess the importance of payments system related innovations in Pakistan,this paper attempts to address two questions: First, has the moderntechnology diminished the importance of paper based financial transactions?Second, does the increased use of electronic financial infra structure andeconomic factors affect the transactions demand for cash payments.Although data analysis clearly shows that the share of paper basedtransactions has declined during the period 2003-2012, retail payments inPakistan happen to be largely paper based. Results of the cointegration teststatistics based on quarterly data show that among the two most acceptedelectronic financial transactions, automated teller machines increase thedemand for cash withdrawals while the online bank branches reduce it. It isalso found that deposit rate and low financial inclusion influence the demandfor cash payments negatively.