Friction for cash, ease for digital: Pakistan's road to documenting the economy
Pakistan stands at a pivotal economic crossroads. With our national instant payment system RAAST processing 371 million transactions worth Rs8.4 trillion in first quarter of 2025 — a 164.5% increase in volume and a 146% surge in value from the previous year — it is enabling real-time digital payments, reducing cash dependency, and significantly improving transaction transparency. Yet, an estimated 37.5% of gross domestic product (GDP) remains in the shadow economy, representing a significant untapped opportunity.
Digital payments are essential for a modern economy, enabling efficient government services and expanding financial inclusion. The challenge lies not in enforcement, but in making formal systems accessible and affordable.
Global examples like Brazil and Kenya demonstrate the benefits of payment digitisation; in these countries, digital reforms not only improved convenience for citizens, but also redefined governance, expanded financial inclusion, and enhanced transparency.
These outcomes aren't outside the realm of possibility for Pakistan either.
With over 143 million broadband users the country has the potential to transform into a cashless economy. Mobile wallets now outnumber traditional bank accounts, and branchless banking infrastructure is robust, yet 90% of e-commerce is still cash-on-delivery. Even many government disbursements rely on paper-heavy, fraud-prone systems.
Pakistanis clearly will adopt digital when it's easy, trusted, and backed by institutional will.
But Pakistanis do adopt digital when given reliable and accessible solutions, and we've seen that firsthand. The country has one of the world's largest digital payments networks, with over 123 million branchless banking accounts and maintain a distribution reach 37 times greater than the traditional banking network.
Pakistan govt's budget steps may hinder cashless economy drive: TOAP
Its 704,000 agent touchpoints represent a parallel financial ecosystem that has enabled access to services in every corner of the country, especially the under-served areas.
One recent example illustrates the impact of digital intervention. During the Prime Minister's Ramazan Relief Fund programme, JazzCash disbursed funds to over 1.1 million beneficiaries, of which more than 600,000 were via wallets.
Not only were there zero leakages through this channel, but it also offered recipients, especially women in rural areas, more convenience, dignity, control, and visibility over their finances compared to the CNIC-based method where they often to wait in queues.
We've also seen how policy direction paired with existing infrastructure can drive rapid adoption. After Frontier Works Organisation (FWO) mandated digital toll payments, JazzCash M-Tag volumes grew significantly in transaction count within a year.
Pakistanis clearly will adopt digital when it's easy, trusted, and backed by institutional will.
In a significant move underscoring this commitment, Prime Minister Shehbaz Sharif has constituted a high-level steering committee, including key federal ministers, the State Bank Governor, FBR Chairman, and leaders from major banks and payment platforms, to accelerate the adoption of digital payments and realise a cashless Pakistan.
Meeting weekly, the committee is responsible for coordinated, institutionalised reforms to formalise the economy, reduce reliance on cash, and ensure greater convenience for citizens, launching a series of ambitious initiatives to expand and incentivise digital payments across the country.
We need to capitalise on this unprecedented high-level push and move Pakistan decisively toward a cashless economy through a coordinated strategy anchored in five critical interventions.
First, digital payments acceptance must be mandated nationwide. This requires strict district-level enforcement to ensure all merchants accept digital payments, alongside enhanced RAAST merchant account limits to support widespread adoption and usage.
Second, digital payments should be incentivised through targeted fiscal measures. Reducing the sales tax to 5% on all digital payments, providing Federal Excise Duty exemptions on merchant discount rates, and granting a three-year tax audit break for businesses embracing digital acceptance would make digital transactions more attractive. Additionally, exempting duties on payment acceptance devices for two years would lower the cost of entry for merchants.
Third, the government must accelerate the digitalisation of its own payments. Mandating RAAST QR codes for all citizen-to-government (C2G) payments, transitioning the Benazir Income Support Programme fully to digital wallets, and adopting digital wallets for all government disbursements—including social welfare, Zakat, and pensions—will ensure that public funds are delivered efficiently, transparently, and securely.
Fourth, cash payments should be made more expensive to discourage their use. This can be achieved by introducing a surcharge on over-the-counter government cash payments, capped at Rs100, and by limiting cash-on-delivery transactions to Rs10,000.
Furthermore, mandating digital payment acceptance across all logistics companies will help reduce the dominance of cash in e-commerce and related sectors.
The question is not whether we can become a cashless society, but whether we possess the collective will to seize this opportunity decisively.
Finally, robust data monitoring and public awareness must underpin these efforts. Live dashboards at the Prime Minister's Office should track progress in real time, while financial institutions must be assigned specific, time-bound targets. A national awareness campaign is also crucial to educate the public and drive widespread adoption of digital payments.
Above all, the objective is to create friction for cash and ease for digital. The rapid adoption of M-Tags after toll digitisation demonstrates that when digital payments are more convenient and cost-effective, Pakistanis will make the switch.
Implementing these measures decisively can unlock the country's digital potential and bring the informal economy into the formal fold.
This digital transformation will come at a price, but the cost of inaction is far greater, which we are already bearing. Due to the sheer size of our informal economy, Pakistan's tax-to-GDP ratio hovers around 10%.
Formalising the economy through digital means is our best shot at raising that without imposing new taxes.
Examples from other markets demonstrate that the government-backed digital payment initiatives have a huge multiplier effect. When citizens receive government benefits digitally, they become active participants in the digital economy, driving merchant acceptance and creating network effects benefiting the entire ecosystem. The transition to a cashless society represents more than a technological upgrade, it constitutes an economic imperative determining Pakistan's global marketplace competitiveness.
In Pakistan too, we have seen firsthand how branchless banking and fintech players have enabled digital transformation in the remotest areas by ensuring smooth access to the most basic financial services. The technology exists, the distribution infrastructure is developing rapidly, and the public has demonstrated high readiness for adoption when solutions are convenient and reliable.
The question is not whether we can become a cashless society, but whether we possess the collective will to seize this opportunity decisively.
While we welcome recent measures in the federal budget aimed at promoting formalisation and enforcement, policymakers must remain vigilant about persistent leakages through cash transactions. A gradual, well-calibrated approach is essential to ensure that digital payments do not inadvertently become more expensive than cash, which would undermine adoption.
Digital transactions offer transparency, while cash enables concealment of income—policy should therefore focus on penalising cash usage and incentivising digital payments. Otherwise, the risk is that suboptimal measures will drive transactions back into the cash economy, contradicting the government's vision for a digital Pakistan.
The writer is CEO of Jazz; Chairman of Mobilink Microfinance Bank; and member of the Prime Minister's Cashless Economy Committee.
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Friction for cash, ease for digital: Pakistan's road to documenting the economy
Pakistan stands at a pivotal economic crossroads. With our national instant payment system RAAST processing 371 million transactions worth Rs8.4 trillion in first quarter of 2025 — a 164.5% increase in volume and a 146% surge in value from the previous year — it is enabling real-time digital payments, reducing cash dependency, and significantly improving transaction transparency. Yet, an estimated 37.5% of gross domestic product (GDP) remains in the shadow economy, representing a significant untapped opportunity. Digital payments are essential for a modern economy, enabling efficient government services and expanding financial inclusion. The challenge lies not in enforcement, but in making formal systems accessible and affordable. Global examples like Brazil and Kenya demonstrate the benefits of payment digitisation; in these countries, digital reforms not only improved convenience for citizens, but also redefined governance, expanded financial inclusion, and enhanced transparency. These outcomes aren't outside the realm of possibility for Pakistan either. With over 143 million broadband users the country has the potential to transform into a cashless economy. Mobile wallets now outnumber traditional bank accounts, and branchless banking infrastructure is robust, yet 90% of e-commerce is still cash-on-delivery. Even many government disbursements rely on paper-heavy, fraud-prone systems. Pakistanis clearly will adopt digital when it's easy, trusted, and backed by institutional will. But Pakistanis do adopt digital when given reliable and accessible solutions, and we've seen that firsthand. The country has one of the world's largest digital payments networks, with over 123 million branchless banking accounts and maintain a distribution reach 37 times greater than the traditional banking network. Pakistan govt's budget steps may hinder cashless economy drive: TOAP Its 704,000 agent touchpoints represent a parallel financial ecosystem that has enabled access to services in every corner of the country, especially the under-served areas. One recent example illustrates the impact of digital intervention. During the Prime Minister's Ramazan Relief Fund programme, JazzCash disbursed funds to over 1.1 million beneficiaries, of which more than 600,000 were via wallets. Not only were there zero leakages through this channel, but it also offered recipients, especially women in rural areas, more convenience, dignity, control, and visibility over their finances compared to the CNIC-based method where they often to wait in queues. We've also seen how policy direction paired with existing infrastructure can drive rapid adoption. After Frontier Works Organisation (FWO) mandated digital toll payments, JazzCash M-Tag volumes grew significantly in transaction count within a year. Pakistanis clearly will adopt digital when it's easy, trusted, and backed by institutional will. In a significant move underscoring this commitment, Prime Minister Shehbaz Sharif has constituted a high-level steering committee, including key federal ministers, the State Bank Governor, FBR Chairman, and leaders from major banks and payment platforms, to accelerate the adoption of digital payments and realise a cashless Pakistan. Meeting weekly, the committee is responsible for coordinated, institutionalised reforms to formalise the economy, reduce reliance on cash, and ensure greater convenience for citizens, launching a series of ambitious initiatives to expand and incentivise digital payments across the country. We need to capitalise on this unprecedented high-level push and move Pakistan decisively toward a cashless economy through a coordinated strategy anchored in five critical interventions. First, digital payments acceptance must be mandated nationwide. This requires strict district-level enforcement to ensure all merchants accept digital payments, alongside enhanced RAAST merchant account limits to support widespread adoption and usage. Second, digital payments should be incentivised through targeted fiscal measures. Reducing the sales tax to 5% on all digital payments, providing Federal Excise Duty exemptions on merchant discount rates, and granting a three-year tax audit break for businesses embracing digital acceptance would make digital transactions more attractive. Additionally, exempting duties on payment acceptance devices for two years would lower the cost of entry for merchants. Third, the government must accelerate the digitalisation of its own payments. Mandating RAAST QR codes for all citizen-to-government (C2G) payments, transitioning the Benazir Income Support Programme fully to digital wallets, and adopting digital wallets for all government disbursements—including social welfare, Zakat, and pensions—will ensure that public funds are delivered efficiently, transparently, and securely. Fourth, cash payments should be made more expensive to discourage their use. This can be achieved by introducing a surcharge on over-the-counter government cash payments, capped at Rs100, and by limiting cash-on-delivery transactions to Rs10,000. Furthermore, mandating digital payment acceptance across all logistics companies will help reduce the dominance of cash in e-commerce and related sectors. The question is not whether we can become a cashless society, but whether we possess the collective will to seize this opportunity decisively. Finally, robust data monitoring and public awareness must underpin these efforts. Live dashboards at the Prime Minister's Office should track progress in real time, while financial institutions must be assigned specific, time-bound targets. A national awareness campaign is also crucial to educate the public and drive widespread adoption of digital payments. Above all, the objective is to create friction for cash and ease for digital. The rapid adoption of M-Tags after toll digitisation demonstrates that when digital payments are more convenient and cost-effective, Pakistanis will make the switch. Implementing these measures decisively can unlock the country's digital potential and bring the informal economy into the formal fold. This digital transformation will come at a price, but the cost of inaction is far greater, which we are already bearing. Due to the sheer size of our informal economy, Pakistan's tax-to-GDP ratio hovers around 10%. Formalising the economy through digital means is our best shot at raising that without imposing new taxes. Examples from other markets demonstrate that the government-backed digital payment initiatives have a huge multiplier effect. When citizens receive government benefits digitally, they become active participants in the digital economy, driving merchant acceptance and creating network effects benefiting the entire ecosystem. The transition to a cashless society represents more than a technological upgrade, it constitutes an economic imperative determining Pakistan's global marketplace competitiveness. In Pakistan too, we have seen firsthand how branchless banking and fintech players have enabled digital transformation in the remotest areas by ensuring smooth access to the most basic financial services. The technology exists, the distribution infrastructure is developing rapidly, and the public has demonstrated high readiness for adoption when solutions are convenient and reliable. The question is not whether we can become a cashless society, but whether we possess the collective will to seize this opportunity decisively. While we welcome recent measures in the federal budget aimed at promoting formalisation and enforcement, policymakers must remain vigilant about persistent leakages through cash transactions. A gradual, well-calibrated approach is essential to ensure that digital payments do not inadvertently become more expensive than cash, which would undermine adoption. Digital transactions offer transparency, while cash enables concealment of income—policy should therefore focus on penalising cash usage and incentivising digital payments. Otherwise, the risk is that suboptimal measures will drive transactions back into the cash economy, contradicting the government's vision for a digital Pakistan. The writer is CEO of Jazz; Chairman of Mobilink Microfinance Bank; and member of the Prime Minister's Cashless Economy Committee.
