Cashless Pakistan’s Blind Spot

The cashless push is working. That is precisely why its blind spot deserves attention now, before the numbers grow large enough to hide it.

According to the State Bank of Pakistan’s quarterly payments report for January to March 2026, 3.7 billion retail payments worth Rs 168.8 trillion moved through formal channels in those three months, and 92 per cent of them were digital. Raast alone processed 742.1 million transactions valued at Rs 23.3 trillion. App-based payments offered by banks, branchless banking players and electronic money institutions (EMIs) accounted for 2.9 billion transactions, or 78 per cent of everything digital. Ten years ago those figures would have read like a planning target.

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On 30 September, HBL Microfinance Bank, 1LINK and Euronet signed an agreement to launch the first PayPak credit card, carrying the domestic scheme into consumer credit. Raast person-to-merchant transactions rose to 55.9 million in the quarter, up from 36.3 million in the one before. For a country that once settled almost everything in cash, this is a domestic payments system built at real speed.

The trouble sits at the far end of the transaction. A wallet transfer settles at home: the money leaves a Pakistani account, passes through a Pakistani switch and is recorded under a Pakistani regulator. What the system does not reliably see is who receives it. A merchant account, an agent wallet or a payment aggregator can sit in Karachi on paper while the business it actually serves is registered abroad, or nowhere at all. The SBP is candid about the limits of its own data. Its report covers transactions conducted through formal banking and payment channels and states plainly that it does not include those conducted outside them. The harder case is money that travels through formal channels and ends up with merchants the system cannot see.

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Foreign businesses have worked out that the quickest route to a Pakistani customer runs through the wallet already installed on that customer’s phone. They price in rupees, accept local rails and pay money back into the same accounts.

Some of the clearest evidence comes from outside the banking system. Comparison guides written for Pakistani users of offshore betting and casino sites show that many of these platforms now list JazzCash and Easypaisa among accepted payment methods, alongside SadaPay and NayaPay, with wallet withdrawals said to clear within a day. Whatever one makes of the activity, the payments point stands: Pakistani wallets already function as international payment instruments, in both directions, on a domestic system the state has spent years promoting.

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That makes cross-border wallet use a question for the people who designed Cashless Pakistan, and not only for the police.

Start with the tax base. The whole case for digitisation rests on documentation: money that moves electronically can be seen, and money that can be seen can be taxed. Rupees that leave through a wallet for a foreign merchant are visible as an outflow but invisible as economic activity. The Federal Board of Revenue (FBR) learns nothing useful from them, and part of the documentation gain that justified the programme goes with them.

Then there is money laundering. Pakistan spent more than four years on the Financial Action Task Force grey list, from June 2018 to October 2022, and the reforms that got it off were largely about knowing who stands behind an account. A wallet ecosystem in which merchant identity stops at a local aggregator is exactly what assessors look for, and they are unlikely to care whether the gap was designed in or simply tolerated.

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Consumer protection is the third casualty. When a domestic merchant fails to deliver, a customer can complain to the bank, the wallet provider or, eventually, the SBP’s own complaint mechanisms. When the counterparty is a foreign site with no presence in the country, that chain breaks at the first link. The customer has paid through a regulated instrument but has no domestic body to take the complaint to.

The government’s review of the initiative’s first year measured success in volumes, and the volumes are impressive: active digital merchants up from half a million to more than two million, digital banking users past 135 million, financial inclusion at 69 per cent. Nobody should wave those gains away. Yet not one of the headline indicators asks where those merchants actually are.

The fixes are cheap by the standards of what has already been spent. Every merchant account on wallets and on Raast should carry a mandatory merchant category code and a verified place of business, with aggregators made responsible for the merchants they onboard. The SBP’s quarterly report, which is already more open than most, could add a line on payments routed to merchants whose ultimate beneficiary sits outside Pakistan. And the Pakistan Telecommunication Authority (PTA), which has blocked more than a million web links it considers unlawful, should coordinate with the central bank, so that policy on cross-border websites and policy on cross-border payments stop running on separate tracks.

Governor Jameel Ahmad has said the aim is not merely to digitise payments but to build an ecosystem in which people and businesses can transact “seamlessly, safely and efficiently”. Pakistan is close on the first and the third. The middle one depends on knowing where the money lands.

Inclusion without visibility is only half a policy. Pakistan has built the pipes. It now needs to see where they lead.

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