Since many people have debit cards but not credit cards, is there or could there be a debit-based online payment option in Pakistan?

Banks are hesitant to allow Debit cards to be used online as this is direct debit and chances of fraudulent transactions remains high.

Online transactions are essentially CNP (Card Not Present) transactions, and risks associated with CNP are high. Whilst it makes perfect sense to use Debit cards online, almost all the banks have switched this off.

Couple of reasons are:

• Many banks are now slowly launching their own pre-paid cards, and existing debit cards would eat away into that market.
• 2FA (Two Factor Authentication) is the preferred method for Debit cards, with a confirmation code to complete the transaction, being received on your phone, the problem is most merchants do not have the appropriate shopping carts in place to allow 2FA to be incorporated into the sales cycle.
• MDR (Merchant Discount Rate) is still relatively low, yet, people (buyers and merchants) discourage paying it so. They would still prefer a cash transaction.
• If Merchants are making say 4% on the total sale, Pakistan being the cut-throat, price-sensitive market that we are, paying an MDR of 2.5% then becomes a huge issue.
• Interest (or Riba) based transactions are still not preferred by a large populous of the society.
• Taxation is another issue. Debit card based transactions essentially become part and parcel of the online sales reporting, and many merchant would prefer not to have it, and this includes Buyers as well. If you buy a Printer online for say Rs. 10,000, there is GST applicable on it. Both the Merchant and the Buyer would prefer the deal goes through at Rs. 10,000 with no reporting as opposed to Rs. 10,000+GST (where now both parties are reported).
• Transfer Fees / Loading Fees are still too high for such cards.
• SBP is leaning towards EMV (Chip+PIN) solutions later on this year, so your traditional plastic would now need to have an EMV chip and a PIN pad to approve the transactions (how will this be enabled online?). The entire world is moving towards EMV and Pakistan will soon follow.
• So many people find it a hassle to enroll in Secure by MasterCard or Verified by Visa program, which would enable the online sales cycle to be extremely smooth and safe.