- SMEs and informal economy benefit as electronic transactions integrate Pakistan’s economy towards 2026
Pakistan’s financial landscape is undergoing a remarkable transition as digital payment systems and financial technology solutions expand rapidly across the economy. While macroeconomic challenges persist, the ongoing growth in fintech adoption presents a significant opportunity to deepen financial inclusion, integrate small and medium enterprises, and bring the large informal sector into the formal economy. The evidence from recent data suggests that this transformation could be one of the defining features of Pakistan’s economic outlook toward 2026.
The State Bank of Pakistan’s most recent Payment Systems Review reports that digital payments have become the dominant mode of retail transactions. In the second quarter of the fiscal year 2025, 88 percent of all retail transactions were processed through digital channels, including mobile banking applications, branchless banking wallets, and e-money platforms. These channels processed about 1.45 billion transactions worth over Rs 24 trillion, representing significant increases in both volume and value compared with earlier periods. Mobile banking users reached approximately 21 million, while branchless wallet users exceeded 64 million, demonstrating rapid adoption of digital financial services across population segments.
The momentum continued into the third quarter of FY25, with total digital retail transactions rising to 2.4 billion, amounting to Rs 164 trillion in value. Digital channels accounted for 89 percent of transaction volume, reflecting sustained engagement with fintech services. Mobile apps contributed the largest share, processing around 1.7 billion transactions worth Rs 27 trillion in that quarter alone. Growth in digital payment use was also evident among merchants, with 99 million point-of-sale transactions valued at Rs 550 billion processed through digital means.
These figures indicate that Pakistan is not merely experimenting with digital finance; it is rapidly integrating it into everyday economic activity. The development of the National Instant Payment System “Raast” has played a central role, processing hundreds of millions of real-time payments and enabling low-cost, efficient transfers between individuals and businesses. Such infrastructure reduces transaction costs, enhances transparency, and ultimately fosters confidence in digital finance.
For small and medium enterprises (SMEs), this rise in digital payments could be transformative. Historically, SMEs have faced barriers to formal financial services due to lack of credit histories and limited engagement with traditional banks. Digital transactions create electronic records of business activity, enabling lenders and financial institutions to assess creditworthiness without reliance on collateral. This can facilitate broader access to working capital, encourage investment in business expansion, and reduce dependency on informal credit channels.
Moreover, the informal economy in Pakistan remains expansive, with a large share of economic activity occurring outside formal financial systems. Expanding digital access—especially through mobile wallets and fintech platforms—can bring these workers and micro entrepreneurs into the formal financial fold. As users transact digitally, they build financial footprints that make them eligible for savings products, micro-credit, insurance, and other essential financial services. Over time, this can enhance resilience to economic shocks and increase productive participation in the broader economy.
Despite these gains, challenges remain. Digital financial inclusion is not uniform across regions or populations, and internet and digital literacy gaps limit adoption in rural and underserved areas. Trust and cybersecurity concerns also persist; while digital access has expanded, converting access into regular everyday usage requires sustained efforts in financial education and consumer protection. Additionally, while digital payments have surged, cash usage still persists in many daily transactions, especially where awareness and infrastructure are weaker.
Policy frameworks and regulatory support will be crucial in ensuring that fintech’s growth translates into inclusive outcomes. Continued efforts by the central bank and collaboration with private sector partners can enhance interoperability, promote innovation, and maintain consumer safeguards. Equally important will be incentives for SMEs to adopt digital payment systems, including affordable point-of-sale solutions, tax benefits for digital transactions, and integration with supply chain finance.
Looking toward 2026, the trajectory of Pakistan’s digital finance ecosystem suggests significant opportunities. If policymakers and industry stakeholders can address the remaining structural and regulatory challenges, digital payments and fintech solutions can serve as catalysts for broader financial inclusion, economic formalization, and productivity improvement. These developments have implications far beyond technology; they touch on job creation, small business growth, labor market participation, and the resilience of low-income households.
In many ways, fintech’s expansion reflects a shift in how Pakistan’s economy functions. What was once a largely cash-based environment is gradually giving way to electronic transactions, real-time payments, and digital financial identities. With robust growth in user engagement and transaction volumes, fintech is no longer a niche sector but a foundational component of Pakistan’s economic future.
By embedding digital financial services more deeply across economic activity, Pakistan can overcome bottlenecks in financial access, enhance the efficiency of payments, and empower previously excluded populations. Fintech and digital payments are not a panacea for all economic challenges, but they represent a realistic and impactful opportunity to accelerate financial inclusion and support economic growth as Pakistan approaches 2026.
The author is a dedicated PhD candidate at Sindh Madressatul Islam University, Karachi, actively engaged in advanced research in her field of expertise. She is committed to contributing to academic knowledge and practical solutions through her scholarly work.