Digitisation and cashless economy: Major hurdles impede govt’s push

ISLAMABAD: Lack of infrastructure, affordability, legislation and cyber threats are among the major hindrances in realizing government’s digitisation and cashless economy vision.

This was the crux of background discussion with government officials, sector experts and international organizations report.

Parvez Iftikhar, international consultant on Information & Communication Technology (ICT) Policy and Regulation told Business Recorder that many rural and underserved areas still lack reliable internet, electricity, and mobile connectivity. Without these basics, digital payment systems cannot function effectively.

He further said that high cost of smartphones, data plans, and digital devices make it difficult for low-income groups to participate. Even point-of-sale (POS) machines are scarce among small retailers.

Iftikhar said the legal framework is still catching up. While the government is pushing QR code payments and digital mandates, enforcement and clarity around digital taxation and compliance remain weak, he added.

He said that trust, awareness and data protections are also among the major challenges to digitization.

The Ministry of Information Technology and Telecommunications is working on the Personal Data Protection Bill, envisaging to regulate the collection, processing, use, disclosure, and transfer of personal data and additionally provides a data protection mechanism including the offences concerning the violation of data privacy rights of an individual for the last five years. However, the required legislation is yet to be completed, he added.

Government officials said that many people still perceive cash as safer and more convenient. Fear of fraud, lack of awareness, and limited tech skills discourage adoption, adding that merchants worry that digital payments will expose them to tax scrutiny.

Further, officials said that online banking as well as fraud with BISP beneficiaries resulted in trust deficit, which needs to be overcome through proper legislation and awareness.

Chief Executive Officer (CEO) Jazz Aamir Ibrahim told Business Recorder that despite strong growth in digital payments, Pakistan’s transition to a cashless economy still faces structural challenges—particularly low smartphone penetration, usage gaps among women and rural populations, and deep-rooted reliance on cash in retail.

He said many merchants are hesitant to adopt digital channels due to compliance concerns, while consumers often lack the trust or incentive to move away from cash. “I’m encouraged to see the government’s recent action plan moving in this direction, with a balanced focus on enablement, awareness, and accountability. With coordinated execution and a strong push for financial literacy, we have a real opportunity to drive meaningful progress toward a more inclusive and future-ready digital economy,” Ibrahim added.

McKinsey Global Institute reports that Pakistan can experience an increase in its GDP by a cumulative seven percentage points (roughly $36 billion) and create around four million new jobs by increasing the use of digital financial services alone.

Pakistan has made some progress in digitalizing its public services, especially in the online service delivery domain, but it still lags behind many of its peers in the region and globally, noted in a report of the Asian Development Bank (ADB).

Copyright Business Recorder, 2025