Pakistan’s retail payment ecosystem is now operating at national scale. According to state bank of Pakistan, in Q1 FY26, 2.5 billion payments were processed through digital channels, representing around 90 percent of total retail payment volume, up from 87 percent in the same quarter of the previous fiscal year (Q1 FY25). Growth is increasingly app-led. In the same quarter, about 2.0 billion payments were made via mobile banking and wallet apps, accounting for roughly 81 percent of all digital payments and processing approximately PKR 33.7 trillion.
Pakistan has laid strong foundations for a cashless economy through the rapid expansion of digital payment infrastructure and usage. What remains are challenges related to end-to-end digitization of user journey, uneven acceptance in everyday commerce, last-mile infrastructure readiness, and the trust and confidence needed for citizens and merchants to make digital payments the default. In Q1 FY26 alone, cash and other over-the-counter channels still accounted for approximately PKR 110.4 trillion in retail payment value. Until these gaps are addressed together, cash will continue to coexist alongside digital channels rather than being displaced by them.
By Rizwan Shoukat
The nature of the challenge has evolved. Pakistan’s cashless transition is no longer primarily about building payment rails or expanding access to digital accounts. Instead, it is about embedding digital payments into everyday economic life in a way that is reliable, predictable, and habitual. Progress now depends on system completeness, market coverage, operational reliability, and user trust, each addressing a different point at which cash continues to re-enter the economy.
One of the most significant constraints is that digital payments do not yet translate into complete end-to-end user journeys. In many cases, funds enter the system digitally through salaries, pensions, social protection transfers, or remittances, but are withdrawn soon after credit because limited digital familiarity and continued reliance on cash for everyday household spending prevent these payments from remaining digital through to use. While person-to-government payments such as utility bills and challans are increasingly available through digital channels, adoption remains uneven and many citizens still revert to cash or over-the-counter methods, limiting the ability of these journeys to stay fully digital from start to finish.
A second constraint lies at the point of commerce. Digital payment acceptance is not yet universal in everyday transactions. Consumers and merchants cannot always rely on digital payments working consistently across small retail, services, transport, and fuel. Acceptance may vary by location, by payment type, or by merchant capability. As a result, cash continues to serve as a safety net. Even digitally capable consumers often carry cash because they cannot be certain that a digital option will be available or accepted when needed.
Last-mile operational readiness further reinforces this dependence on cash. Cashless payments depend on reliable connectivity, power, devices, system uptime, and the availability of multiple modes of transaction such as QR codes. In addition, transaction processing and settlement buffers, where confirmations are delayed or funds are not immediately usable, reduce practicality for merchants and consumers alike. Where infrastructure, uptime, or transaction finality is inconsistent, especially outside core urban areas, digital payments become unreliable and cash remains the fallback.
Trust and usage habits are still forming. Even where digital options are available and accepted, many users continue to cash out immediately after receiving funds. Concerns around failed transactions, delayed settlements, unclear reversals, limited transparency, and perceived risk discourage users from keeping value digital. For digital payments to become the default, they must feel safe, simple, predictable, and timely.
At the same time, there is clear momentum to build upon. Policy direction is aligned, payment rails are scaling, merchant onboarding is expanding, and public-sector digitization initiatives are underway. The ecosystem is moving decisively from policy intent to execution. The focus now must be on translating this momentum into durable behavioural outcomes, where digital payments are not only received digitally but also retained and used digitally in everyday life. 
Priority should shift to completely digitizing end-to-end user journeys, particularly for high-frequency flows such as pensions, salaries, social protection transfers, remittances, and routine person-to-government payments. The objective is to ensure that digital inflows translate into digital spending rather than immediate cash withdrawal. Digital acceptance must also become predictable at the point of commerce. A focused push is needed in routine categories such as small retail, transport, fuel, and services, combining low-cost acceptance tools, particularly QR codes, with practical merchant enablement so that digital payment availability is no longer uncertain at checkout. In parallel, last-mile readiness should be strengthened by improving connectivity, uptime, interoperability across providers, and reducing settlement buffers so that digital payments are immediately usable for both consumers and merchants.
Finally, incentives and enforcement must work together. Positive incentives such as rewards, fee discounts, loyalty points, or bundled digital service packages can encourage merchants and users to stay digital, while calibrated disincentives for excessive cash reliance can gradually shift behaviour. Clear consumer protections, faster dispute resolution, transparent charges, and predictable settlement timelines are essential to build trust and reduce the instinct to cash out. If pursued together, these measures can move Pakistan’s cashless agenda from strong foundations to everyday default, where digital is the normal choice and cash becomes the exception. Opinions expressed in this article are the author’s own and do not necessarily reflect the editorial policy of WNAM.
The author is: CEO and Managing Partner at VTT Global, a management consulting firm operating across Pakistan, the MENA region, and the United States. He can be reached at [email protected]
