Pakistan’s journey toward a digital economy is advancing rapidly, yet the widespread reliance on cash continues to present a unique challenge for banks, fintechs, and regulators. The adoption of digital payments and online banking channels is rising steadily, but a significant portion of the population remains hesitant to shift away from cash. Factors such as unfamiliarity with digital tools, fear of fraud, and cultural preferences contribute to this ongoing cash dominance, even as the government and the State Bank of Pakistan (SBP) push for greater financial digitization.
Recent surveys indicate that 30 to 40 percent of customers at major retailers in Karachi now use debit cards, credit cards, or banking apps for transactions. However, at smaller retail outlets, the adoption rate remains around five percent. Retailers acknowledge the security and convenience of digital payments, but many customers continue to favor cash. A shop owner noted that despite offering QR code payments for convenience and safety during late hours, most clients still prefer cash. Similarly, Muhammad Junaid, another retailer, highlighted that limited awareness and lack of familiarity with digital apps remain significant barriers, especially among customers over 50, while younger generations readily embrace QR codes and card payments.
The digital finance sector, however, has witnessed significant growth. JazzCash now serves over 54 million users and 650,000 merchants, with QR transactions exceeding Rs60 billion. Easypaisa reports 55 million registered users and over 400,000 merchants, facilitating 2.7 billion transactions worth Rs9.5 trillion by the end of 2024—representing roughly 9 percent of Pakistan’s GDP. Both providers emphasize that further digitization of retail and merchant payments is essential to reducing cash-intensive practices and fostering a more transparent economy.
Security remains a top concern for digital payments. Former Pakistan Software Houses Association chairman Muhammad Zohaib Khan stressed that QR codes carry unique identifiers, and fintech applications approved by the SBP ensure compliance, cybersecurity, and governance standards. While credit card fraud is typically insured globally, Pakistan still lacks instant reimbursement mechanisms, requiring banks to block compromised cards and reissue new ones after investigation. Experts recommend that banks insure card transactions and encourage users to follow security protocols, including safeguarding OTPs, passwords, and using authorized payment gateways like PayFast and PayPro.
The SBP’s latest digital payments report highlights that, in the third quarter of fiscal year 2024-25, digital transactions exceeded 2 billion, accounting for 89 percent of retail payments by volume, though cash still dominated in terms of value at 71 percent of transactions (Rs117 trillion). Mobile banking and branchless banking contributed significantly, processing Rs27 trillion worth of payments across 1.68 billion transactions, showing quarterly growth of 16 percent by volume and 22 percent by value. Raast, Pakistan’s instant payment system, also saw strong adoption: Person-to-Person (P2P) transactions increased to 368 million worth Rs8 trillion, while Person-to-Merchant (P2M) transactions doubled to 1.5 million, totaling Rs4.5 billion.
In addition, the SBP has launched the ‘InvestPak’ digital investment platform, aimed at simplifying and digitizing government securities investment for both individual and corporate investors, further supporting the transition toward a cashless economy. Analysts note that incentives such as lower fees for digital transactions and higher taxes on cash payments could accelerate adoption and help overcome cultural resistance to digital finance.
Despite significant growth, Pakistan’s digital payment ecosystem continues to face structural and behavioral challenges. Bridging the knowledge gap, ensuring robust cybersecurity, and incentivizing businesses and consumers remain key to fully realizing the potential of a cashless economy.
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