Across Pakistan’s major cities and smaller district centers, digital finance is growing rapidly. According to State Bank of Pakistan (SBP) payment data, digital channels accounted for 92% of all formal retail payment volume in Q3 FY26, driven by billions of transactions through mobile apps, banking portals, and instant payment rails. SBP’s instant payment infrastructure, Raast, alone processes hundreds of millions of transactions every quarter.
Yet step onto the street, whether to purchase a Rs 60 cup of tea at a local chai dhaba, pay a rickshaw fare or settle a weekly bill with a neighborhood grocer, and cash remains a common default.
Even as digital adoption surges on paper, currency in circulation across Pakistan stands very high. This highlights a compelling economic paradox: If Pakistan possesses increasingly accessible digital payment infrastructure, why does physical paper money remain so deeply embedded in everyday life? The answer extends far beyond a simplistic narrative that Pakistan is “behind” digitally. Rather, a citizen’s choice to use cash is governed by a rational mix of habit, informal business structures, trust, infrastructure, and tax incentives.
For generations, transactions across Pakistan have been physical and immediate. For routine micro-purchases, cash can still feel more convenient. The act of handing over and receiving cash change requires no smartphone, no internet connection, and no memorized PINs. For older demographics and lower-income segments, cash provides a stronger sense of financial clarity. For some consumers, a digital balance also feels less tangible than physically seeing money leave their hands.
A large share of Pakistan’s economic activity takes place within the informal sector. In urban areas, around 69 percent of workers are in the informal sector. Adopting digital payment channels can introduce friction through onboarding requirements, transaction costs, record-keeping and the need to integrate digital receipts into an otherwise cash-based supply chain. Digital transactions also create a financial record, potentially bringing previously informal businesses into greater contact with the formal financial and tax system. For small merchants unfamiliar with these requirements, that can create an additional incentive to remain cash-based.
Infrastructure access creates another dividing line. While mobile data covers major cities smoothly, broadband and network reliability vary across smaller towns and rural districts. A digital transaction is only as dependable as its weakest link: both the buyer’s phone and the vendor’s terminal must have active network coverage and charged batteries. In areas facing load-shedding or inconsistent cellular signals, relying exclusively on digital payments for basic necessities introduces unnecessary daily risk.
Despite these structural hurdles, economic habits are evolving. Person-to-Person (P2P) transfers via platforms like JazzCash, Easypaisa, and Raast have normalized peer transfers for millions. The primary hurdle that remains is Person-to-Merchant (P2M) adoption at the grassroots level.
Moving Pakistan toward a less-cash society requires addressing the reasons people continue to choose cash in the first place: reducing friction for consumers, making digital payments easier for micro-vendors, and building greater trust in the system. Cash is not necessarily surviving because Pakistanis are resistant to change. It remains deeply embedded because, for many everyday transactions, it is still familiar, accessible and relatively frictionless. The challenge for digital payments is therefore not simply to offer another way to pay, but to make that alternative more convenient for both consumers and the small merchants who serve them.
