Raast to reform: Digitizing Pakistan's economy
Digital payment systems are rapidly transforming economies across the globe by enhancing transparency, reducing informality, accelerating the velocity of money, and spurring inclusive economic growth. In this context, Pakistan's digital payment platform, Raast, has rapidly emerged as a cornerstone of the country's digital financial infrastructure.
With over 43 million consumers, 841,000 merchants, and 36 banks onboarded, Raast now processes more than 4.5 million daily transactions. Its adoption has seen exponential growth, with transaction volumes surging to 371 million and values reaching PKR 8.5 trillion in Q1 FY25 alone. Unlike costly international card networks, Raast offers zero-cost, QR-code, and IBAN/mobile-based transactions backed by national scalability and full government integration. Since its inception, Raast has processed over PKR 34 trillion, significantly reducing reliance on cash and foreign payment networks.
However, despite Raast's technical success, Pakistan continues to lag in overall digital payment adoption. This gap stems from a combination of structural and behavioural barriers. Structurally, the country suffers from low levels of digital and financial literacy, weak incentives for merchants, and fragmented onboarding processes.
Behaviourally, Pakistan's heavy reliance on cash transactions presents a significant obstacle to economic progress—perpetuating informality, limiting tax revenues, and stifling investment potential. Currently, 25 percent of the country's total money supply—over PKR 9 trillion—is in cash circulation, far above the regional average of approximately 6.5 percent.
This cash dominance contributes to one of the lowest tax-to-GDP ratios (10 percent) and one of the largest informal sectors (57 percent) among peer economies like India and Brazil. These challenges are further compounded by policy inertia and institutional hesitation, primarily driven by IMF-imposed revenue targets.
India's remarkable success with its Unified Payments Interface (UPI) offers valuable lessons and actionable frameworks that Pakistan can adapt by leveraging Raast. Since its launch in 2016, UPI has reshaped India's financial landscape—processing an astounding USD 5.8 trillion by 2024, generating estimated savings of USD 109 billion and accounting for 83 percent of all digital payments in the country. This transformation was driven by strategic government spending, regulatory incentives, and tax benefits targeted at merchants, consumers, and financial institutions. As a result, cash transactions in India declined significantly, with the cash-to-GDP ratio falling from 14 percent to 11.5 percent, signaling a significant shift toward formal and traceable economic activity.
Likewise, Pakistan can take targeted steps such as enforcing digital payment thresholds, offering tax liability reductions for merchants using digital platforms, and reducing withholding tax on digital transactions between suppliers and retailers. A Raast-based payment ecosystem offers zero-cost transactions, nationwide scalability, universal interoperability, and full government integration—unlike traditional card-based systems, which are costly, urban-centric, and result in significant foreign exchange outflows. By localizing payment infrastructure, Raast helps conserve foreign exchange, expand financial inclusion, and foster sustainable digital infrastructure.
Pakistan must also consider disincentivizing cash usage to accelerate adoption by introducing incremental withholding taxes on cash payments. Furthermore, promoting widespread integration of merchants with the FBR's e-invoicing and digital POS systems could create a strong multiplier effect, enhancing transparency and fiscal accountability.
Significantly, the revenue streams targeted for relaxation contribute minimally to overall tax collections. Thus, offering these incentives would not substantially impact fiscal revenues nor violate IMF conditionalities. On the contrary, such reforms could expand the economic pie by reducing informality and increasing the volume of digital transactions.
Estimates suggest Raast could generate over PKR 1.1 trillion in annual economic benefits—partly through tax savings for the government but primarily through broader multiplier effects and reductions in transaction costs across the economy.
The economic rationale is compelling: transitioning toward a cashless economy, as demonstrated by India's experience, significantly boosts the velocity of money. Faster circulation enhances consumption, stimulates business expansion, and strengthens economic dynamism—ultimately increasing tax revenue and supporting long-term growth.
In essence, Raast—supported by innovative policy interventions and strategic incentives—has the potential to reshape Pakistan's economic landscape. Pakistan can unlock the true promise of digital financial inclusion by enabling businesses and consumers to shift away from cash, reducing informality, and enhancing transparency. With a clear understanding that short-term tax relaxations can yield long-term economic dividends, the country is well-positioned to negotiate pragmatic reforms and fully realize Raast's transformative potential.
Copyright Business Recorder, 2025
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It starts, often, with someone else's phone. A woman in a small town outside Lahore wants to send money to her son in Karachi, but she doesn't own a mobile wallet. Her brother does, so she asks him to do it. In Karachi, a fruit seller keeps a basic bank account, not to save, but because he needs it to receive welfare payments. He rarely logs in, never checks the balance himself, only his nephew knows how to use the app. Another elderly man is told he's been registered for something called Raast, but he still walks to the local shop every week to collect cash from his cousin. But sometimes, it starts with your own. A tailor in a two Tando Adam, near Hyderabad now takes digital payments through his mobile wallet, no more waiting for change, no more handwritten ledgers. A housemaid in Karachi uses Raast to send part of her salary home instantly, something that once meant hours in line at a branch she never felt comfortable entering. These are not outliers. 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With expanding digital infrastructure and growing consumer awareness, Islamic digital banking is set to become the new standard, offering ethical and accessible financial solutions to a broader population,' Sikandar adds. Fast, cheap, connected A few years ago, sending money in Pakistan meant choosing between a queue at the bank or a trip to a money transfer agent. Today, a growing number of Pakistanis are using their phones to transfer funds within seconds, thanks largely to the rise of Raast. According to K-FIS 2024, the share of adults making digital transactions has grown by 11 percentage points in the past three years, driven by higher smartphone penetration and simplified user journeys. But the question remains, has Raast become the great equalizer? Or is it still finding its feet among the underserved? The banking sector believes the potential is just beginning to unfold, and the PBA has been right at the center of this transition. 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Knowing how, and why, to use it is another. In Pakistan, financial inclusion often stalls at the point of access. People may have accounts, but many are left inactive. While over 64% of adults now hold bank deposit accounts (SBP, 2024), Kamal notes that, 'The quality of inclusion remains low. In fact, more than half, 54 million deposit accounts, hold less than Rs5,000, underscoring low savings capacity and even lower activity.' They prefer borrowing from family or saving in cash, not necessarily because banks are out of reach, but because they don't always feel right. According to K-FIS 2024, 85% of borrowers still rely on informal sources, and over half of the country's deposit accounts sit idle with minimal balances. The trust deficit is real, especially when banking feels like it conflicts with religious values. That's where Islamic finance has a unique role. 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