Pakistan is witnessing a rapid shift from cash-based transactions to digital banking, with online retail payments soaring to 84% in the fiscal year ending June 30, 2024, up from 76% the previous year. This transformation, highlighted in the State Bank of Pakistan's Annual Payment Systems Review, marks a significant change in consumer behavior over the past five years, where digital payments rose from 55% in FY20.
The surge in digital transactions is largely attributed to the rise of mobile app-based and internet banking, which have collectively increased by 62% in volume and 74% in value, reaching Rs69.8 trillion. Mobile banking alone has seen an impressive annual growth rate of around 70% over the last two years.
Despite this growth, traditional banking methods remain prevalent for larger transactions, indicating a lingering mistrust in technology and cybersecurity among consumers. The currency in circulation has also increased significantly, reflecting a cautious but evolving financial landscape.
A notable development in FY24 is the partnership between the State Bank of Pakistan and the Arab Monetary Fund, aimed at enhancing cross-border payments through the Raast instant payment system and the Buna payment system. This collaboration is set to facilitate remittances for the large number of Pakistanis residing in the Gulf region.
Furthermore, the rise of digital wallets and e-commerce payments through these platforms has reshaped the payment ecosystem, with 87% of digital e-commerce transactions initiated via digital wallets. The expansion of Point-of-Sale (POS) machines across the country further supports the trend towards digital transactions.