🇵🇰 Payments in Pakistan

A market of public rails, telecom wallets, and cash

Pakistan’s retail payments market covers transactions by individuals and merchants, whether they go through a digital channel or are made in cash. In five years, the country has built an instant payment infrastructure that few emerging markets can match. Yet cash has not retreated. In the January–March 2026 quarter, formal channels processed 3.7 billion retail transactions worth PKR 168.8 trillion (SBP, Quarterly Payment Systems Review Q3 FY26). That is a 9% rise in volume in a single quarter. Digital channels account for 92% of transactions by number, but only PKR 68.3 trillion by value, or about 40% of the total. A 92% share of the count against 40% of the value means the average digital transaction is far smaller than a transaction settled through any other channel. Large payments still move outside digital channels.

The stock of notes in circulation kept growing as digital volumes rose, from about PKR 10.9 trillion in mid-2025 to nearly PKR 12 trillion a year later. The two curves are rising together. Digital payments have therefore grown on new use cases, without cutting existing cash use by the same amount. A collection plan that assumes cash will be replaced quickly is betting on a shift the 2025 and 2026 data do not show.

Five types of players share the market. Commercial banks come first, and a handful of them dominate merchant acquiring. The two microfinance banks backed by telecom operators, JazzCash and Easypaisa, have the largest user base. The interbank switch 1LINK, owned by a consortium of banks, also runs PayPak, the domestic card scheme. E-money institutions (EMIs), licensed since 2019, remain very few. The fifth player is the central bank itself, which operates Raast.

PRISM+, 1LINK, and NIFT: the interbank plumbing

PRISM+ (Pakistan Real-time Interbank Settlement Mechanism), launched by the SBP in 2008, is the country’s real-time gross settlement (RTGS) system. It is also Pakistan’s only point of settlement in central bank money, so every other rail described here ends up there. It combines functions in an unusual way, since it also serves as the central securities depository. Delivery versus payment for government debt and the settlement of retail payments therefore run on the same platform, which is migrating to ISO 20022. Only banks and institutions authorized by the SBP can connect directly. Everyone else goes through a settlement bank.

Two private infrastructures feed net positions into PRISM+. 1LINK (Pvt) Ltd, owned by a consortium of banks since 1999, runs the national switch. It covers the shared ATM network, terminal acquiring, IBFT interbank transfers, bill payment, and government collections. NIFT (Pvt) Ltd, a joint venture set up in 1995, clears checks in three daily batches, called normal, intercity, and same-day. Handing check clearing to a private company supervised by the central bank remains a rare setup in the region.

Raast: the central bank runs its own rail

Raast, launched by the SBP in 2021, is an instant payment rail that is free for consumers and addressable by alias. The Raast ID is the user’s mobile number, linked to an IBAN. A Raast transfer bypasses 1LINK’s private switch and settles directly in PRISM+, whereas a conventional interbank transfer goes through that fee-charging switch. Raast charges no interchange. Without interchange, the usual acquiring model loses a revenue source, since in that model the merchant’s fee also pays the issuer.

A second driver of volume growth also comes from the state. In October 2025, the SBP announced its plan to route all government payments through Raast by the end of FY26. That covers public sector salaries, pensions, social transfers, and government collections. These flows land in accounts that then become active, and the resulting user base makes the rail usable for private-sector acceptance. Brazil and India used the same bootstrapping mechanism, with the state acting first as the anchor customer, then as the driver of adoption.

• The number of active QR merchants rose from about 1.17 million in September 2025 to 2.5 million in March 2026 (SBP data reported in 2026). Enrollment is growing much faster than usage.
• A Raast ID is not mandatory: the IBAN remains a valid address. Payment flows that require the alias exclude some payees.
• Raast settles in central bank money, with no clearing window: Raast receipts are reconciled continuously, not against a daily settlement file.
• No interchange is charged: apart from the public subsidy, there is no revenue stream shared between issuer and acquirer on this rail.

PayPak: a domestic card that stops at the border

PayPak, launched by 1LINK in April 2016, is the country’s only domestic card scheme. It claims 16.1 million cards in circulation, or about 28% of Pakistan’s card market (1LINK, 2025–2026). Its advantage is cost: domestic scheme fees and settlement in rupees, with no foreign currency flowing out to Visa or Mastercard. The case does not rest on features, which are the same as those of an international debit card used inside the country. In a country with tight foreign exchange reserves, keeping currency at home also matters to the monetary authorities, beyond the savings banks and merchants get from it.

The domestic scheme is now expanding into credit, a product that had been the preserve of the international brands. In June 2026, 1LINK announced the country’s first domestic credit card, run with Euronet Pakistan under a managed service model. Issuing and processing are fully outsourced, hosted on Euronet’s PCI-compliant infrastructure, and open to every SBP-licensed issuer. The setup targets mid-sized banks. They cannot justify the cost of their own credit platform, so this lets them launch the product without building one.

The physical acceptance network remains thin for the size of the population: the country has about 248,000 payment terminals for some 217,000 registered merchants (SBP, Q3 FY26). The 2.5 million merchants that accept QR payments are more than ten times that number. The two setups do not cost the same to deploy. A terminal has to be bought, installed, and maintained, while a QR code is just an identifier displayed at the merchant. Public acceptance policy is built on that asymmetry.

JazzCash, Easypaisa, and the agent economy

Pakistan’s two dominant wallets are banks, not mere e-money issuers like their European counterparts. JazzCash (2012) is run by Mobilink Microfinance Bank, a subsidiary of the VEON/Jazz group. Easypaisa (2009), Pakistan’s mobile money pioneer, became the country’s first fully digital retail bank in 2025, with SBP approval. A microfinance bank license is the hallmark of the Pakistani model. Commercial negotiations are therefore held with a licensed bank, subject to prudential requirements and to the decision timelines that come with that status.

The network pays agents per transaction, mainly for cash deposits and withdrawals, a different business model from a Western acquirer’s. As long as the recipient of a transfer withdraws the money at the counter, the margin is made on cash-out, and the digital rail only carries the funds. An operator that eliminates that withdrawal cuts into the income of its own distribution channel. This structural conflict explains why last-mile digitization is moving more slowly than aggregate volumes suggest.

Accepting payments in Pakistan: channels, costs, and breaking points

Payment acceptance covers all the channels through which a merchant gets paid by its customers. In Pakistan, online commerce is overwhelmingly paid account to account. In the October–December 2025 quarter, the SBP recorded 305 million online purchases worth PKR 422 billion (SBP, Q2 FY26). 95% were paid directly from a bank account or wallet, and only 5% by card. A payment setup limited to card integration and the 3-D Secure flow therefore covers one transaction in 20. The other 19 require a connection to account-to-account transfers, via Raast or the wallets.

The central bank regulates interbank transfer pricing. Circular PSD No. 02 of 2021 requires banks to offer free digital transfers up to PKR 25,000 per account or wallet per month. Above that aggregate threshold, the fee cannot exceed 0.1% or PKR 200. Transfers within the same bank and incoming transfers remain free. Banks must notify customers of every transaction and show the free amount separately from the amount charged. The cap of 0.1% or PKR 200 sets the most a provider can earn from the transfer itself, whatever the amount.

• Convertibility. The rupee is subject to exchange controls. Moving funds out of a Pakistani merchant account is a documented transaction handled through an authorized dealer. The main risk in a local project is treasury, not technology.
• No chargebacks on Raast. Disputes are resolved through commercial refunds. Customer service procedures must be written before go-live.
• Continuous reconciliation. Raast settles in real time, with no daily clearing file; tools built for a D+1 cycle do not work as is.
• 1LINK certification. A foreign processor or PSP must certify separately with the national switch. This is not a variant of a scheme specification.
• Two licensing regimes. Accepting payments requires PSO/PSP status; holding customer funds requires EMI status or a banking license. The two are distinct.

A small number of providers shape online acceptance. NIFT ePay, NIFT’s domestic gateway, runs on the TPS platform with Bank Alfalah as its settlement bank. PayFast, run by Avanza Premier Payment System, is one of the most widely used licensed gateways and supports Raast P2M. Safepay focuses on fast integration with standard e-commerce platforms. Keenu, a wallet and acceptance provider present in more than 150 cities, processes more than $1 billion in annual volume and was acquired by Bazaar Technologies in July 2025, a deal approved by the SBP. Among banks, HBL, Bank Alfalah, and MCB account for a large share of merchant acquiring.

Gulf remittances: the country’s largest external inflow

Remittances are the transfers Pakistani workers living abroad send to recipients back home. They are Pakistan’s largest external inflow and reached $41.6 billion in FY26, up 8.6% (SBP, July 2026), after a 26.6% jump the previous year to $38.3 billion. The central bank governor linked the prospect of a small current account surplus in FY26 to this inflow. The Gulf corridor supplies half of it. This dependence is a balance-of-payments issue, which explains the regulatory attention paid to the channel.

The SBP tightened the rules for exchange companies from 2023 onward to move remittances from informal to formal channels. Starting in September 2023, it raised the minimum capital of exchange companies from PKR 200 million to PKR 500 million, due by December 31, 2023. It abolished Category B and franchises in favor of a single category. Banks active in that market had to set up their own exchange subsidiaries. The threshold was then doubled to PKR 1 billion in December 2024, alongside a crackdown on currency smuggling and hawala-hundi networks. The 26.6% increase recorded in FY25 therefore partly reflects this shift of flows to formal channels, not just migration trends.

The Roshan Digital Account (RDA) is an account opened remotely, without traveling to Pakistan. This second program captures diaspora savings rather than everyday transfers. It had drawn $13.365 billion in gross inflows by the end of June 2026, of which $2.09 billion was repatriated and $8.44 billion used locally, across 917,400 accounts opened by the end of March 2026 (SBP). April 2026 set a monthly record at $321 million. The account was opened to foreign nationals and companies in March 2026. On the international front, the SBP and the Arab Monetary Fund signed a memorandum of understanding in Abu Dhabi in November 2023 to link Raast with Buna, the Arab region’s cross-border payment system.

SBP licenses: four doors, one regulator

The legal foundation is the Payment Systems and Electronic Fund Transfers Act, 2007, supplemented by the Rules for Payment System Operators and Payment Service Providers and the SBP’s sector regulations. The central bank’s Payment Systems Department reviews applications, grants authorizations, and supervises licensed firms. The process is sequential: approval in principle, then pilot operations for a period set in the approval letter, then authorization for commercial operations once that phase has been assessed. No step can be skipped. “Licensed” can therefore mean different things, since an institution still in its pilot phase cannot serve the public at scale.

The capital requirement for e-money institutions scales with the e-money outstanding. Starting capital of PKR 200 million allows issuance up to PKR 4 billion in float. Between PKR 4 billion and PKR 10 billion of float, the requirement becomes PKR 200 million plus 5% of the amount above PKR 4 billion. Between PKR 10 billion and PKR 20 billion, it rises to PKR 500 million plus 7.5% of the amount above PKR 10 billion. Above PKR 20 billion, it reaches PKR 1.25 billion plus 10% of the excess. Capital therefore tracks the float, not revenue. Fast growth in the wallet base automatically triggers a capital call.

The digital bank regime opened in stages over three years. In January 2023, the SBP issued no-objection letters to five applicants: HugoBank, KT Bank Pakistan, Mashreq Bank Pakistan, Raqami Islamic Digital Bank, and Easypaisa. Approvals in principle followed in September 2023, and Easypaisa Bank Limited received the first Digital Retail Bank license in January 2025. Mashreq Bank Pakistan obtained the first restricted license for pilot operations. Raqami Islamic Digital Bank was declared a scheduled bank on February 6, 2026. Three years therefore separate the five no-objection letters from three banks going live, which gives a sense of how long licensing takes in Pakistan.

• Check each counterparty’s license phase in the SBP’s official register, not in its marketing.
• Identify the setup’s settlement bank: a PSO/PSP does not hold customer funds, so you need to know where the money sits.
• Map currency flows from the design stage: moving funds out of a Pakistani account falls under the exchange control regime, not the commercial contract.
• Include the tax withholding function (1% / 2%) in the project scope if the flow involves online commerce.
• Include a change-of-control clause in wallet partnerships, given the ownership deals under way.

Financial inclusion: what the volumes don’t show

Financial inclusion, measured here as account ownership, is the share of adults with an account at a financial institution. In Pakistan, it is growing more slowly than the number of transactions on the payment rails. The country is one of eight economies that together account for most of the world’s unbanked adults (Global Findex 2025, World Bank). The barriers are practical before they are cultural: distance to a branch, hard-to-gather documents, fees, and no income to deposit. A collection strategy that assumes everyone has a bank account runs into this reality in rural areas, where most of the population lives.

The weakest P-FII sub-index is quality, at 43.9, against 72.3 for access. The gap between the two shows that opening accounts has worked better than getting people to use them. An account opened over USSD, credited with a social transfer, and then emptied at the first withdrawal counts toward access without leading to ongoing use. Improving the quality sub-index requires services that make the account useful between payments, and those come from financial institutions rather than from the public settlement infrastructure.

• Identity is the foundation: account opening depends on the CNIC issued by NADRA (the national registration authority), and biometric verification doubles an EMI wallet’s monthly limit.
• Domestic credit is still in its infancy: the card base is almost entirely debit, and the first PayPak credit card was announced only in June 2026.
• Physical acceptance tops out at about 248,000 terminals, against 2.5 million merchants accepting QR codes: two infrastructures on entirely different scales.
• Network coverage shapes everything: the very existence of the Asaan Mobile Account USSD channel shows that a significant share of the population still has no connected smartphone.
• Value stays in cash: 92% of transactions are digital, but only about 40% of the value exchanged.