Every morning in Allama Iqbal Town, Lahore, Abdul Rehman opens his small grocery store early. For years, he would keep change in cash, worried that customers might walk away if he couldn’t offer them change. Every night, his mother worried about him getting home safely as he carried the day’s earnings in cash.
Today, most of his regular customers scan a QR code and pay him within seconds. He makes payments to his staff and suppliers digitally for the first time and even saves digitally. His story is a sign of hope for a cashless future in Pakistan.
Unfortunately, Abdul is not representative of the larger communities in Pakistan. His story reflects what the future could look like if we progress towards a truly cashless economy. Yet, there are multiple challenges on that path.
Despite significant efforts to digitize Pakistan’s economy, the country’s merchant and retail landscape remains largely dependent on cash. Only last year, Pakistan had over PKR 9.5 trillion cash-in-circulation.
In the recent past, Pakistan’s financial inclusion has risen to over 60 percent and now accounts for 4 percent of the world’s unbanked adult population, down from 9 percent in 2021. However, this includes only 15 percent rural inclusion, which reflects inequity in terms of digital finance penetration, limited to urban areas.
With the PM’s Cashless Economy initiative, focused on raising the number of active digital merchants to 2 million by the end of 2025-26, increasing mobile and internet banking users from the current 95 million to 120 million within a year, and doubling annual digital payment transactions to 15 billion. The State Bank of Pakistan (SBP) has simplified the account opening process for both individuals and businesses. It offers digital payment acceptance solutions to merchants operating both in-store and online, enabling them to achieve this ambition.
These efforts are bearing fruit, with retail payment volumes rising by 12 percent year-over-year to 2,408 million transactions in the third quarter of FY25. In contrast, the overall transaction value increased by 8pc to Rs164 trillion, as per SBP’s quarterly payment review, with digital channels accounting for 89pc of all retail transactions, reflecting the ongoing shift towards a more cashless economy.
These efforts represent a greater emphasis on broadening access to digital financial services, including branchless banking, Asaan digital accounts, digital on boarding, and specialised accounts for freelancers, overseas Pakistanis, and remittance recipients, encouraging capital into the market and increasing work opportunities for Pakistan’s youth without leaving their country.
As the country’s first digital retail bank, easypaisa is actively collaborating with the SBP and the government to expand access to digital finance in unbanked and under banked regions, thereby aiding financial inclusion nationwide. Its extensive retail network of over 230,000 retailers nationwide has facilitated access to financial services, especially in remote rural areas that are otherwise untouched, while also working to ensure the availability of digital payment acceptance infrastructure, such as Raast QR codes, at all retail and merchant locations. These efforts enable us to play an active role in supporting the government’s cashless economy initiative and powering financial inclusion and prosperity in the country.
Pakistan’s strong retail sector, contributing nearly 18 percent of GDP through over 2.5 million retail and wholesale outlets, is both the country’s largest marketplace and most underleveraged asset. Despite its size, it remains undocumented and untaxed, adding only about 4 percent to tax revenues. With renewed pressure from the IMF, the government is pushing harder to bring this sector into the formal economy - a shift that could unlock unprecedented growth, especially if powered by digital payments and banking.
Yet, the road to digitizing merchant payments is not without hurdles, and working on them is the only way forward. Low financial literacy undermines trust in formal services, especially in rural communities with little awareness and limited resources. Poor infrastructure, from patchy internet and network outages to unreliable electricity in rural communities, adds further friction.
And fragile customer trust, eroded by scams, phishing, and weak dispute resolution, makes adoption harder. While these challenges may seem daunting, they are not insurmountable. Overcoming them requires collective action that integrates policy reform, technological innovation and advancements, and grassroots awareness and education to build confidence, empower communities, and bring millions into the fold of financial inclusion. Financial inclusion will be realized in its true essence once Pakistanis can unlock and reap the full benefits of digital financial tools, beyond just peer-to-peer fund transfers.
As the finance minister put it, “moving towards a cashless economy is not simply a policy aspiration but a practical necessity for long-term fiscal resilience, competitiveness, and inclusive growth.”. Still, multiple parameters need to be addressed before we become a truly “cashless economy,” and this requires concentrated efforts from stakeholders, both public and private, to achieve this goal.
Copyright Business Recorder, 2025
The writer currently serves as the Chief Business Officer at easypaisa digital bank. He can be reached at [email protected]
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