Despite rapid growth in fintech adoption and rising consumer usage of digital wallets and cards, Pakistan’s digital payments ecosystem continues to face persistent reliability challenges that are undermining user confidence and slowing broader acceptance. Sector experts say that frequent card transaction failures, restrictions on international payments, and uneven merchant acceptance are creating friction for both consumers and businesses, even as digital channels gain popularity.
Pakistan has seen meaningful progress in digital payments over recent years, driven by fintech innovation, regulatory initiatives, and increased smartphone penetration. However, industry observers argue that adoption alone is no longer the core issue. Instead, execution gaps, fragmented payment infrastructure, and cautious risk frameworks are preventing the ecosystem from reaching its full potential.
U Microfinance Bank President and CEO Tooran Asif said that while consumer adoption and fintech activity have grown, the system remains vulnerable to operational inefficiencies. According to him, users frequently encounter card declines, limited access to international payments, and inconsistent acceptance across online platforms. Businesses, meanwhile, struggle with multiple payment gateways, lengthy onboarding requirements, and regulatory uncertainty that complicates expansion.
Asif noted that the current challenges stem more from fragmented coordination between issuers, networks, and merchants rather than a lack of infrastructure. He said transaction failures could be reduced through stronger issuer-network collaboration and the adoption of risk-based 3DS authentication, which would apply additional verification only to higher-risk transactions instead of blanket checks that disrupt legitimate payments.
He also highlighted the need for more targeted foreign exchange controls. Rather than imposing broad restrictions on international payments, he suggested use-case-based limits for e-commerce, subscriptions, education, and freelancing. Such an approach, he said, would allow legitimate activity to continue while maintaining regulatory oversight through automated reporting systems.
Merchant acceptance remains another weak point. Asif said expanding merchant enablement across local gateways and introducing smart routing between cards, wallets, and bank transfers could help ensure transactions are completed even when a preferred payment rail is unavailable. On the consumer side, he emphasized faster dispute resolution, clearer chargeback rights, real-time transaction alerts, and wider public awareness of fraud protection as critical steps to rebuild trust.
Importantly, he argued that many of these improvements could be achieved through policy alignment and operational refinement rather than heavy new infrastructure investments. If addressed collectively, these measures could significantly improve the digital payments experience within the next 6 to 12 months.
Offering a broader ecosystem perspective, analyst Jamil Arif said Pakistan needs a “grand bargain” among regulators, banks, and fintechs to unlock seamless digital payments. He stressed that tax rationalisation is essential to boost person-to-merchant transactions. According to him, a digital tax shelter for small merchants, based on fixed turnover taxes instead of complex audits, would reduce fears around documentation and encourage wider digital acceptance.
Arif also called on the State Bank of Pakistan to mandate open banking APIs, enabling fintechs to innovate on user experience while banks continue managing core ledgers. He added that industry-wide collaboration is urgently needed to establish a centralized fraud management system to restore eroding consumer trust.
While Pakistan’s digital channels accounted for 88 percent of retail transaction volume in FY25, Arif warned that the ecosystem remains fragile. Internet disruptions alone are estimated to have cost the economy $1.62 billion in 2024, while legacy banking software struggles to handle rising transaction volumes and real-time demands from the gig economy. He said true scalability will require cloud-native banking cores and reliable connectivity to support sustained growth.
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