KARACHI:

The adoption of digital payments in Pakistan’s retail sector, which began to gain traction a decade ago in India, requires a clear roadmap and coordinated efforts among all stakeholders. This will help promote a culture of cashless transactions and improve financial inclusion in the economy.

The government and the banking regulator have taken various initiatives to develop a supportive policy framework, including the introduction of Person-to-Merchant (P2M) QR payments through the Raast system and the allocation of Rs3.5 billion in subsidies to encourage wider adoption of digital payments by both merchants and consumers. However, the desired results cannot be achieved unless the private sector including the collaboration among financial institutions and trade bodies, is involved.

Commercial banks, microfinance institutions, payment gateway operators, and fintech firms are increasingly collaborating to develop scalable solutions aimed at rapidly onboarding merchants nationwide. These efforts are critical to building a sustainable digital payments ecosystem that meets the operational and commercial needs of small and medium-sized businesses.

The person-to-merchant (P2M) QR-based digital payment initiative is the solution to address one of the key challenges faced by small merchants: access to easy and low-cost digital payment acceptance, said Chief Commercial Officer (CCO) ABHI Microfinance Bank Mariam Pervaiz. By enabling QR-based payments, financial institutions will help merchants reduce cash handling, maintain better transaction records, and improve cash-flow visibility, said CCO ABHI, which in collaboration with 1Link, is set to provide a platform for shopkeepers, small businesses, and service providers to accept digital payments directly into their bank accounts without the need for expensive hardware or complex setups, she said and added. .

She mentioned that faster settlement of funds and transparent transaction trails are also expected to help merchants build stronger financial profiles over time, enabling them to apply for bank financing to expand their businesses. On the consumer side, the P2M QR payment system allows customers to make instant payments using Raast-supported mobile banking apps and wallets, creating a simple and interoperable payment experience.

According to the Digital Economic Census conducted by the Pakistan Bureau of Statistics (PBS), by 2025, there are over 2.7 million retail units, 188,000 wholesale trade units, and 825,000 service shops operating across the country.

Najeeb Agrawalla, CEO of 1Link, said that partnerships among financial institutions are key enablers for the expansion of Raast-based merchant payments and support Pakistan’s ongoing shift toward digital transactions and a broader financial ecosystem.

He added that the collaborations between financial institutions such as 1Link and ABHI Microfinance Bank will prove to be the catalyst for merchants’ onboarding to adopt advanced financial services, creating a practical pathway for everyday businesses to participate in the digital economy, and enabling financial inclusion. According to the State Bank of Pakistan (SBP), Raast P2M transactions rose to 4.3 million, amounting to Rs17.0 billion, in the first quarter of FY2025-26, which are expected to witness accelerated growth in the coming quarters.

However, trade representatives stress that adoption challenges persist at the market level. The practical roadmap comes down to disciplined execution, mainly in the areas of high-frequency payments such as merchant checkout, utilities, education fees and salary flows, said Hamayun Sajjad, CEO Mashreq Bank Pakistan Muhammad, which recently launched a digital cross-border banking service for Pakistani nationals in the UAE, allowing them to remotely open and manage accounts in Pakistan directly through the mobile app.

He suggested that merchant acceptance must expand through interoperable QR infrastructure supported by fast onboarding and predictable settlement cycles.

Chairman All Karachi Tajir Ittehad Atiq Mir, representing over 500 markets and bazaars, said that government-led digital payment initiatives require greater policy clarity, structured awareness campaigns, and tangible incentives to build merchant confidence. Merchants, shopkeepers, and customers remain hesitant about the P2M QR code system; therefore, adoption is not yet visible in major wholesale and retail markets, he added. The financial institutions and relevant regulators should educate merchants about the benefits of the new system for their businesses and address their concerns related to income security and confidentiality, he added.