Pakistan has spent more than Rs. 3.5 billion to build the infrastructure for QR-based digital payments, yet fewer than 5 per cent of citizens have ever used a digital method to pay a merchant, according to industry estimates. On paper, the country possesses the essential rails. The instant payment system launched by the State Bank of Pakistan, known as Raast, connects banks and wallets in real time. QR codes are plastered on fuel pumps, pharmacy counters, and neighbourhood grocery stores. The infrastructure exists. But in Karachi’s Saddar market, shopkeeper Imran Ahmed gestures toward the laminated QR code beside his cash register and sighs. “No one uses it,” he says. “And honestly, I’m not sure I want them to.” His hesitation captures the paradox at the heart of Pakistan’s digital payments push: the technology functions, yet behaviour has not shifted.
Much of the explanation lies in how the reform was framed. When Raast was rolled out, officials emphasised its ability to document transactions and curb tax evasion. In a country where roughly two-thirds of retail commerce operates informally, that message travelled quickly. For many small merchants, digitisation became synonymous with surveillance. The state’s objective may have been to broaden the tax base, but the market interpreted the initiative as an enforcement tool rather than a convenience upgrade. In informal economies, sequencing is decisive: if digital adoption is perceived to increase visibility before it increases value, resistance becomes rational. The result is not ideological opposition to technology but a quiet retreat to cash.
Coordination failures compound the problem. Surveys indicate that around 42 per cent of merchants believe customers prefer cash, while 18 per cent of customers perceive merchants as resistant to digital payments. Each side waits for the other to move first. Digital ecosystems depend on density. Without confidence that acceptance will be widespread, consumers do not form habits. Temporary cashback campaigns and subsidies briefly inflate transaction volumes, but usage often collapses once incentives end. Behaviour is rented, not internalised. Cash, by contrast, is universal, instantly settled, and carries no perceived compliance risk. For digital payments to replace it, they must match these attributes while adding measurable value – speed, safety, access to credit, or cost efficiency.
Structural barriers are also significant, particularly in e-commerce. Payment providers estimate that nearly 90 per cent of online retail transactions are still conducted through cash on delivery, a system built around trust and immediate physical settlement. When a courier arrives at a customer’s doorstep, the exchange of currency closes the loop instantly. Introducing QR scanning at delivery often hits an invisible wall: integration. A customer may scan a dynamic QR code and see funds deducted immediately, yet the rider’s handheld device may still display “cash pending.” Third-party logistics platforms do not always receive synchronised confirmation from banking systems in a way that satisfies operational reconciliation. Riders, accountable for daily cash tallies, understandably default to physical currency. In this context, digital rails are technically instant, but the ecosystem perceives them as unreliable. Without full API integration across banks, wallets, and logistics software, QR adoption in Pakistan’s dominant e-commerce segment will remain constrained.
Pakistan has already built the rails through Raast. The question now is whether policymakers can align incentives, integrate systems, and recalibrate the narrative so that digital payments become economically superior rather than administratively imposed.
Comparisons with India are instructive but nuanced. After the 2016 demonetisation shock, India saw explosive growth in transactions via the Unified Payments Interface, an interoperable platform enabling real-time transfers at scale. Removal of merchant discount rates for many transactions lowered cost resistance, while intense competition among fintech firms improved user experience. Structural factors amplified adoption: rapid expansion of biometric identification infrastructure, dramatic declines in mobile data prices, and a temporary cash shortage forced consumers to experiment digitally. India’s scale also generated network effects once a critical mass was reached. Pakistan shares some institutional similarities, but not all these structural advantages. Smartphone penetration gaps, gender disparities in financial access, patchy rural connectivity, and lower formal employment rates complicate the equation. The lesson is not replication but alignment: incentives, infrastructure, and narrative must move together. Consumer behaviour adds another layer. Even middle-class urban users often prefer cash for online orders or retail transactions, citing distrust of product quality, opaque return processes, and weak dispute resolution. For low-income customers, mobile wallets carry perceived risks: system outages, mistaken transfers, and complex reversal processes. Cash is tangible, instantly settled, and socially accepted. Convincing consumers to switch requires reliability and convenience that clearly surpass cash, not just parity.
Critics of Pakistan’s digital push argue that adoption may simply require more time. Mobile wallet registrations and bank account ownership have increased steadily, and behaviour change in financial systems is often gradual. Others highlight cybersecurity concerns, low digital literacy among older consumers, and the risk of fraud. These factors cannot be dismissed. Banks themselves operate within regulatory and compliance constraints that can limit real-time settlement visibility across all platforms. Friction is therefore not purely psychological; it is institutional as well.
Incentives remain central – and redesigning them is not costless. Eliminating or subsidising merchant discount rates for micro-retailers would shift the burden to banks or the state at a time when fiscal space is constrained. Pakistan’s commercial banks derive significant fee income from payments, and policymakers must weigh financial inclusion goals against balance-sheet realities. Trader associations and informal business lobbies are politically influential, wary that digitisation could become a precursor to aggressive tax enforcement. Payment reform is therefore not just technical; it redistributes risk, revenue, and visibility across the economy.
For a small retailer operating on thin margins, even minor uncertainty about liquidity timing can outweigh theoretical efficiency gains. If digital payments increase accounting complexity, heighten scrutiny, or introduce reconciliation disputes without increasing sales, the rational response is to remain with cash. Conversely, if digital acceptance accelerates settlement reliably, reduces shrinkage, lowers working-capital costs, and provides access to formal credit scoring, behaviour will shift. Achieving this requires deeper integration between banks, fintech firms, and logistics providers, as well as predictable tax treatment for low-value transactions. It also requires the state to lead by example. When citizens pay utility bills, taxes, licences, and public fees digitally by default, repetition builds habit and legitimacy simultaneously.
The stakes extend beyond convenience. Pakistan’s tax-to-GDP ratio remains among the lowest in emerging markets at around 11 per cent, constraining public investment and increasing reliance on external financing. A functioning digital payments ecosystem can expand documentation organically – but only if adoption precedes enforcement. If reform is perceived primarily as extraction rather than enablement, resistance will harden, and cash will entrench itself further. Investors watch these signals closely; payment depth often serves as a proxy for institutional coherence and regulatory predictability.
Pakistan has already built the rails through Raast. The question now is whether policymakers can align incentives, integrate systems, and recalibrate the narrative so that digital payments become economically superior rather than administratively imposed. In the political economy of payments, trust compounds more slowly than technology. Without it, even the most sophisticated infrastructure remains underused. The next phase of reform will determine whether Pakistan’s digital architecture becomes a foundation for financial deepening – or another example of capacity built faster than confidence. In payments, infrastructure can be built in years; trust takes decades. Pakistan has completed the first task. The second remains unfinished.
The writer is a political economist and policy strategist shaping discourse on principled leadership, economic sovereignty, and long-term governance.