Mobile payments are easy, so why do Pakistanis still keep cash?
Despite a rapid increase in digital payments, including mobile banking and QR codes, cash transactions are also rising in Pakistan. Many Pakistanis still prefer cash due to trust issues, digital illiteracy, and poor internet connectivity, hindering the full adoption of di…
Intelligence analysis by Gemini 2.5 Flash
Pakistan is experiencing a dual trend where digital payment adoption, driven by mobile apps and the RAAST system, is surging, yet the volume of cash transactions continues to climb. This paradox is attributed to a combination of factors including a lack of trust in digital systems, low digital literacy among segments of the population, and persistent internet connectivity challenges, …
Imagine you have a magic wallet on your phone that lets you pay for things super fast, like buying candy or paying bills. Lots of grown-ups in Pakistan are starting to use these magic wallets, but even more are still using regular paper money. That's because some don't trust the magic wallet, some have old phones, and sometimes the internet doesn't work, making it tricky to use. So, even with new ways to pay, many still like the old way best.
Analysis
Pakistan's journey towards a digital economy presents a fascinating paradox: while digital payment methods are rapidly gaining traction, the use of physical cash continues to grow. Official statistics reveal a significant surge in mobile banking application users, climbing from 95 million to 137 million within a single year, alongside a 300 percent increase in active merchants accepting QR code payments. This expansion is partly attributed to government initiatives like the RAAST system, designed to facilitate seamless, fee-free digital transactions between banks and digital wallets. However, this digital momentum is juxtaposed with a notable rise in currency in circulation, indicating a persistent reliance on traditional payment methods among a large segment of the population.
RAAST System's Role
The RAAST system, introduced by the Pakistani government, stands as a pivotal component in the nation's drive towards digitalizing its financial landscape. This system enables users of various banks and digital wallets to transfer funds and make payments effortlessly, without incurring additional fees. Its implementation has played a significant role in the observed increase in mobile banking adoption and the proliferation of QR code-enabled merchants across the country, signaling a clear governmental push towards a less-cash economy.
Despite these advancements, the article underscores that the RAAST system's success in expanding digital access has not fully translated into a reduction in cash dependency. The convenience offered by such platforms is evident to many, including students and business professionals who appreciate the ease of online transactions for everything from bill payments to food deliveries. Yet, the underlying challenges prevent a complete shift, suggesting that while the infrastructure for digital payments is improving, the societal and practical barriers remain substantial.
Muhammad Ramzan's Experience
The narrative of Muhammad Ramzan, a daily wage vegetable vendor in an Islamabad market, vividly illustrates one of the primary deterrents to digital payment adoption: the fear of fraud and lack of trust. Ramzan recounts a distressing incident where a customer made a QR code payment for PKR 2,000, only for the money to never appear in his account, leaving him defrauded. This personal experience has severely eroded his confidence in digital systems, leading him to revert to cash-only transactions.
Ramzan's story is not isolated; it reflects a broader sentiment among small vendors and customers who perceive digital payments as less reliable than tangible cash. Such incidents, coupled with a general lack of understanding of digital financial mechanisms, particularly among older generations or those with basic mobile phones, reinforce the preference for physical currency. The article highlights that for many, the perceived security and simplicity of cash outweigh the convenience offered by digital alternatives, especially when negative experiences like fraud are involved.
1.294 Trillion Rupees in Circulation
The Pakistan Economic Survey 2025-2026 presents a striking statistic: the amount of cash in circulation has increased from PKR 1.108 trillion last year to PKR 1.294 trillion this year. This significant rise in physical currency, occurring concurrently with the expansion of digital payment infrastructure, underscores the complex dynamics at play in Pakistan's financial ecosystem. It suggests that while digital transactions are growing, they are not necessarily replacing cash but rather coexisting with it, indicating that a substantial portion of the population continues to rely heavily on physical money for their daily economic activities.
This paradox can be attributed to several factors beyond fraud concerns, including persistent issues with internet connectivity and digital literacy. Shopkeepers like Atiq-ur-Rehman lament slow or non-existent internet, which makes QR code transactions cumbersome and time-consuming, often leading customers to opt for cash. Furthermore, many individuals, particularly those using basic feature phones or lacking familiarity with smartphone applications, find digital payment methods inaccessible or intimidating. These systemic and individual barriers collectively contribute to the sustained demand for cash, highlighting the need for comprehensive strategies that address not just technological access but also trust, education, and infrastructure reliability to truly foster a digital economy.
Key points
- Pakistan sees a rapid increase in mobile banking users (95M to 137M) and QR code-accepting merchants (300% increase) in one year.
- Despite digital growth, cash in circulation rose from PKR 1.108 trillion to PKR 1.294 trillion, according to the Pakistan Economic Survey 2025-2026.
- Reasons for cash preference include fraud concerns, lack of digital literacy, and poor internet connectivity, as highlighted by vendors and customers.
- Government initiatives like the RAAST system aim to promote digital payments by offering fee-free transactions between banks and digital wallets.
- Retailers are now mandated to provide digital payment options to customers, reflecting a policy push towards digitalization.
The rapid increase in mobile banking users and QR code-accepting merchants demonstrates a strong underlying potential for digital transformation in Pakistan. Continued government initiatives like RAAST, coupled with efforts to improve digital literacy and internet infrastructure, could eventually overcome current barriers, leading to a more financially inclusive and efficient economy.
The persistent rise in cash circulation alongside digital growth indicates significant hurdles in achieving a truly cashless society. If issues like digital fraud, poor internet connectivity, and a lack of trust are not effectively addressed, a large segment of the population will remain excluded from the formal digital economy, hindering economic modernization and financial inclusion efforts.
