With Raast, context is Key Omer

OPINION

Omer bin Ahsan

With Raast, context is key has to come after it for audit/reconciliation. A practical issue that occurs in most business transactions. Reconciling bank statements against invoices in a way that the bank statement narration points to the under lying invoice/ trade. Things get trickier in case of advance payment (no invoice), Raast by the State Bank of Pakistan (SBP) has received a lot of excitement and interest from the financial payments industry, particularly from the young-guns over on the fintech side of things. The SBP backed gateway is a savior in providing confirmation of instant payments and access to debit accounts and low cost of transaction. However, one partial payments, multiple payments for a single invoice and single payments for multiple invoices. In these scenarios the correlation between invoice, payment and banking statement requires an army of receivable managers to institute audit controls and then update their financial ledgers. Bank systems are not designed to capture these complex scenarios and have too much inertia to innovate in distinctive feature of Raast has been overlooked and going forward will set Raast this direction. Payment infrastructure such as cheque and digital apart from all the contemporary payment rails available in Pakistan. That distinctive payment infrastructure such as IBFT also do not address these feature is Raast’s ability to capture the context of the payment. issues effectively and throw the burden of managing contextual To make things simple, payment rails such as Local Fund Transfer (within synchronization to the business users themselves.same bank), Credit/Debit Card Transaction, IBFT, ePay Gateway (NIFT/APPS) Nowhere does this issue get further exasperated than in the or BPS are different vehicles to transmit payment information and authorizations handling of taxation. In 2016, FBR and SBP embarked on a program between two Financial Institutions using a technology intermediary. This trans- to digitize Duties and Tax collections. A single goods-declaration mission has always been restricted to the flow of payment information. To make submitted to Pakistan Customs Clearance System carries as many it simpler; imagine if the railway line between Karachi and Lahore was only used as 16 various tax heads that have to be settled in multiple Treafor moving passengers and not containerized or liquid cargo. That means the other sury accounts held by SBP. Federal Treasury Rules required SBP transportation infrastructure would be required to move the cargo and that creates Treasury systems to issue CPR (Computerized Payment Receipt) further inefficiencies and wastage of resources. separately for each Tax Head. The taxpayer had to pay a single Getting two nodes connected, whether cities by means of road, rail or airways amount through check over the counter or digital payment, but it or banks by means of technology intermediation is a great infrastructure piece for had to be split into multiple tax heads based on the Customs Tariff. the financial efficiency in any economy. But restricting it to just the movement of This means that once the payment is initiated, SBP has to know that payment flows is sheer underutilization. Unfortunately, such design elements were this single payment carries multiple tax heads that have to be settled either not foreseen or restricted to the optionality of narration or purpose in an IBFT in different accounts and their respective CPR to be issued and comtransaction (which was never used or enforced effectively). municated back to the sender for the finalization of his tax returns. In 2016, I penned an article “The Context is Missing” and wrote a whitepaper Through the brilliant effort of the Payment System Department for the industry and SBP on “Accelerating Corporate Digital Payments in Pakistan” (SBP) and 1link a solution was designed that was then followed where I explained my personal realization that the payment infrastructure does not through by GoPB and other P2G use cases by SBP/1link. The same support the movement of non-payment data i.e. context of the payment, between determination and agility that the Payment System Department two financial intermediaries and the sender/receiver. The key question that needs to (SBP) exhibited in this case cannot be matched by the new age be addressed before diving into the importance of the marriage between context and private sector processors in handling contextual payments. payments, is what Contextual Payments is. Since 2017, the whitepaper has been studied by SBP Payment Payment is not the end, but the means to an end, the end being a business System Department and in my deliberations with them I was told transaction or exchange of goods/services. The trade or exchange is what the con- that Raast will provide the infrastructure where context can be captext captures. The context may include multiple data elements or documents such tured and moved between Banks/Merchants. In the recent industry as the contract elements, invoice, sender profile, history, credit score, credit limits, engagements on Raast, it is very clear that the SBP Payment System SKU/Service information, tax incident(s), transactional reference(s) and any other Department, now a cluster within SBP called Digital Financial corresponding data that is either a prelude to the payments, has to accompany it or Services Group has delivered on its promise to make sure the payment rails can capture the context of the payments and then move it across the ecosystem. This opens a world of opportunities for Banks and Fintechs who can use the easy access of The writer is CEO of Raast to move credit related data, analytical insights, reconciliation, tax treatment and vanilla invoice data. Fintechs fintech company Haball are eagerly waiting for the disruptive power of Raast and are excited about how Raast brings about inclusion, and Head of Regulatory efficiency, quicker time to market and reduction in cost. But what everyone is missing is the impact that Contextual Affairs, Pakistan Fintech Payments will make in the digitization of the economy and effectiveness of payment use cases by moving context Association within the payment flow. The latest phase of RAAST incorporates Request to Pay (RTP) functionality through which a business/merchant can initiate a Request for Payment and in doing so pass on structured and unstructured contextual data which will be delivered to the paying customer’s financial institution. Financial institutions can use the rich data to perform data analytics and build further insights about their customer’s profile to offer them other products and services. n