Pakistan’s formal payments ecosystem is undergoing a profound transformation, rapidly shifting from branch- and cash-dependent behaviour towards a mobile-first, digitally connected financial system. The State Bank of Pakistan’s Payment Systems Quarterly Review Q3 FY26 highlights this transformation: during January–March 2026, Pakistan processed 3.7 billion retail payment transactions worth Rs168.8 trillion, with transaction volume growing 9 per cent quarter-on-quarter. Remarkably, 3.4bn transactions, or 92pc of retail payment volume, were conducted through digital channels.
Mobile banking and digital wallets are at the heart of this transformation. By March 2026, registrations for mobile banking and digital wallet applications had exceeded 132 million, growing 37pc year-on-year, while internet banking users reached 16.2m. During Q3 FY26, mobile banking applications, branchless banking platforms and e-money wallets processed approximately 2.89bn transactions worth Rs41.67tr.
Yet the data reveals a significant opportunity. While digital channels account for 92pc of retail payment volume, they represent only around 40pc of total retail payment value. This suggests that Pakistan has made remarkable progress in digitising the frequency of payments, but substantial headroom remains to digitise higher-value financial activity.
The next phase of digital transformation must therefore move beyond transaction digitisation towards end-to-end digital financial journeys, encompassing payments, savings, investments, financing and insurance.
Digital platforms can facilitate Zakat while mobile-based access to Islamic funds can broaden savings
Pakistan’s national payment infrastructure is gaining significant momentum. Raast, the State Bank of Pakistan’s instant payment system, is emerging as a critical foundation for a real-time digital economy. During Q3 FY26, Raast processed approximately 742m transactions worth Rs23.27tr. Person-to-person payments accounted for around 664m transactions worth Rs18.88tr.
The next opportunity is to accelerate Raast’s transition from a predominantly person-to-person payment rail into a ubiquitous person-to-merchant infrastructure. By the end of the quarter, more than 2.6m merchants had been onboarded or registered for Raast person-to-merchant services.
Expanding QR payments, digital invoicing, online collections and interoperable merchant acceptance can bring millions of small businesses further into the formal financial ecosystem. This is particularly important for Pakistan, where small retailers, Kiryana stores, freelancers, home-based businesses and informal enterprises represent a significant share of economic activity.
The emergence of millions of digitally enabled merchants creates an opportunity to transform payment data into productive financial inclusion. With responsible data governance, verified digital transaction histories can help financial institutions better understand business cash flows and extend suitable financing to previously underserved merchants. This is where Islamic banking can make a particularly meaningful contribution.
Pakistan’s digital transformation presents an unprecedented opportunity to develop a Shariah-compliant digital financial ecosystem, rather than simply digitising conventional financial products. Islamic banks can leverage Raast, QR payments, digital onboarding, alternative data and AI to create faster and more accessible financial solutions while maintaining Shariah principles.
For example, merchants with demonstrable digital sales could potentially access Shariah-compliant working-capital solutions structured through Murabaha, Musawamah or other appropriate Shariah contracts. Digital asset financing could support equipment, solar systems, vehicles and other productive assets. Such solutions can connect digital payment activity with real economic activity and entrepreneurship. The opportunity extends beyond financing. Digital platforms can facilitate Zakat, Waqf and Sadaqah, while mobile-based access to Sukuk and Islamic funds can broaden participation in Shariah-compliant savings and investment opportunities.
The objective should not be to create an Islamic version of every conventional product merely by changing its structure. Instead, technology should enable Islamic finance to deliver its broader objectives: transparency, fairness, financial inclusion, asset-backed economic activity and responsible financial intermediation.
Digitalisation alone does not guarantee financial inclusion. Pakistan must continue addressing digital literacy, affordability, internet connectivity, cybersecurity, fraud, consumer protection and trust. AI can strengthen the ecosystem through fraud detection, personalised financial education, alternative credit assessment and automated customer support. However, innovation must be accompanied by strong governance, data protection, cybersecurity and responsible use of customer information.
For Islamic banking, the opportunity is significant. Rather than merely digitising existing products, Islamic financial institutions can help shape a new model of banking that combines technology, financial inclusion, ethical finance and Shariah principles. The ultimate destination should not simply be a cashless Pakistan. It should be a digitally inclusive, financially empowered and Shariah-compliant Pakistan, where technology makes financial services accessible to every citizen.
Ahmed Ali Siddiqui was the founding director of IBA CEIF and can be reached at aasiddqui@iba.edu.pk. Rabia Manahil is an executive coordinator at Meezan Bank.
Published in Dawn, The Business and Finance Weekly, September 14th, 2026
