ISLAMABAD: The government and regulatory authorities must move quickly to establish frameworks for digital financial services that address cost barriers, promote trust, incentivise adoption, and ensure interoperability while protecting consumers and businesses, says the Asian Development Bank (ADB).
The bank in an insight “From Cash to Digital: Advancing Financial Inclusion in Pakistan” recommended that the authorities should also encourage merchants to adopt digital payments by offering working capital loans based on steady, digitally documented financial performance.
Over a billion people in developing Asia are unbanked, including a significant number in Pakistan, where only 21percent of adults have access to a bank account or mobile money provider. Many depend on informal networks for financial transactions.
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Financial exclusion hits women worse than men, who are only half as likely as men to have access to banking services. Digital finance presents a major opportunity to bridge this gap, offering faster, safer, and more accessible transactions.
Encouraging merchant adoption, investing in financial innovation, strengthening consumer protection policies, and promoting inclusion efforts are essential to building trust, boosting adoption, and unlocking the country’s potential for digital finance.
Mobile money offers huge potential to improve lives by enabling low-cost, fast, safe, and easy transactions. It addresses access barriers by eliminating the need to go to physical bank branches. In 2022, Pakistan had only 10.8 commercial bank branches per 100,000 adults—one of the lowest ratios in the region.
Over the past 15 years, financial services in Pakistan have evolved rapidly. Financial institution accounts grew by about 127percent between fiscal year 2019 and fiscal year 2024. Of Pakistan’s 241 million people, 60percent are adults. With 91 million unique financial institution accounts, two-fifths of the adult population still lack access to formal financial services.
Deregulation in the sector led to new branchless banking regulations. This enabled kiryana convenience stores across the country to offer financial services. The coronavirus (COVID-19) pandemic shifted consumer behavior and further accelerated mobile and cashless banking adoption.
Mobile and online transactions rose from 17percent in early 2020 to 75percent by September 2024, per the State Bank of Pakistan (SBP).
Raast, the country’s first instant payment system launched in 2021, has also simplified person-to-person (P2P) and person-to-merchant (P2M) transactions. This system offers instant, reliable, and free digital payments for individuals and businesses within Pakistan.
Users can send or receive money using their mobile numbers and bank accounts. This has extended financial services to the poor and the unbanked.
Adoption has surged, with Raast processing over 102 million P2P payments in 2023, up from 7.9 million in 2022. By the end of September, daily transactions had reached three million, and there were 39.5 million registered Raast IDs, according to public data from the State Bank of Pakistan.
Raast also revolutionized businesses, especially small and medium enterprises and the retail sector, with P2M transactions introduced in February 2022. This reduced fees and settlement times, enhancing efficiency and boosting economic activity.
Pakistan’s robust retail sector, which makes up almost 18percent of GDP and is spread across a network of an estimated 2.5 million retail and wholesale outlets, offers an immense opportunity for growth. Traditionally, this sector has remained largely untaxed, contributing an estimated four percent of tax revenue.
But recent pressure from the International Monetary Fund (IMF) has renewed the government’s drive to get the retail sector to pay more through taxation. To that end, several measures have already been taken, including the implementation of point-of-sale registers and the Tajir Dost scheme, where retailers are subject to a fixed monthly tax.
The tax assessment is based on the market value and regular turnover of the enterprise. In 2024, the scheme was extended to 42 cities in Pakistan from the original six. Under the scheme, businesses can declare their assets and income and potentially receive benefits like reduced tax rates and simplified tax compliance procedures, the Bank added.
The report noted that digital financial services in Pakistan are growing, but full adoption is still a work in progress. A supportive policy and regulatory environment are important to growing the digital financial sector and extending it, particularly to rural and under-banked regions.
The government and regulatory authorities must move quickly to establish frameworks that address cost barriers, promote trust, incentivize adoption, and ensure interoperability while protecting consumers and businesses.
Authorities should also encourage merchants to adopt digital payments by offering working capital loans based on steady, digitally documented financial performance. Financial institutions must step up with innovative products and solutions, such as tap-and-pay or buy-now-pay-later (BNPL) schemes, to promote retailer adoption.
Moreover, the government can lead by example, using digital methods for tax payments, pensions, and other services. Digital ID systems can also facilitate account access. More policies that promote trust in the digital economy, such as those on data privacy, cybersecurity, and consumer protection, must be prioritized.
Currently, fewer than half of developing Asian countries have robust data protection laws. Regional coordination is also limited, making it hard for individuals and businesses alike to know what regulations apply when their data moves across borders.
Efforts to improve women’s financial inclusion must be strengthened as well. With over half the population still underserved by formal financial systems, targeted efforts are essential to bridge this gap, it added.
Copyright Business Recorder, 2025
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