By Moaaz Manzoor

Pakistan's shift towards a digital economy gathered further pace during the third quarter of FY2025-26, with digital channels accounting for 92% of all retail payment transactions by volume as consumers increasingly relied on mobile apps, digital wallets, internet banking and electronic payment platforms, according to the State Bank of Pakistan's latest Payment Systems Quarterly Review.

The report shows that retail payments conducted through formal banking and payment channels reached 3.7 billion transactions during January-March 2026, registering a 9% quarter-on-quarter increase. The total value of these transactions stood at Rs168.8 trillion, up 1% from the previous quarter. Of the total retail transactions, 3.4 billion were processed through digital payment channels, with their value rising to Rs68.3 trillion from Rs64.4 trillion in the preceding quarter.

The continued expansion reflects the growing preference of consumers and businesses for convenient and secure payment methods over traditional cash-based transactions. Mobile banking applications, e-money wallets, internet banking portals, ATMs, point-of-sale terminals, e-commerce platforms and other digital channels continued to dominate retail payment activity across the country.

Mobile banking apps and digital wallets remained the primary engines of this growth. During the quarter, these platforms processed 2.89 billion transactions worth Rs41.67 trillion. The transactions mainly comprised fund transfers, utility bill payments, merchant payments and other routine financial services, highlighting the increasing role of smartphones in day-to-day financial transactions.

The State Bank's data also indicate that Pakistan's digital payment user base continued to expand steadily. By the end of March 2026, branchless banking mobile app users had reached 95.8 million, while bank mobile banking app users had increased to 28.9 million. Electronic Money Institution (EMI) wallet users rose to 7.3 million, whereas internet banking users climbed to 16.2 million.

Combined, more than 132 million mobile banking and digital wallet registrations were recorded by the end of the quarter, representing a 37% increase compared with March 2025. The report notes that nearly half of Pakistan's approximately 268 million bank accounts are now linked with a mobile banking application or digital wallet, underscoring the growing penetration of digital financial services across the country.

The composition of digital payments further illustrates changing consumer behaviour. During the quarter, fund transfers remained the largest category with 1.51 billion transactions. Bill payments and mobile top-ups accounted for 349.9 million transactions, while online e-commerce purchases reached 434.7 million. QR and Till merchant payments rose to 87.3 million, and miscellaneous digital payments totalled 594.6 million transactions.

Although digital payments continued to dominate transaction volumes, traditional banking channels remained important for handling high-value transactions. Bank branches processed 127.9 million transactions amounting to Rs99.5 trillion during the quarter, while branchless banking agents facilitated 154.7 million transactions worth Rs1.1 trillion. This indicates that physical banking infrastructure continues to play a significant role alongside the rapid expansion of digital channels, particularly for large-value financial transactions.

According to the SBP, the continued growth in digital payments has been supported by sustained policy initiatives, regulatory reforms and technological advancements aimed at promoting digital financial services. Rising smartphone penetration, expanding internet access, greater merchant acceptance of digital payments and increasing consumer confidence in formal payment systems have all contributed to the country's ongoing transition towards a more digitally integrated financial ecosystem.

Credit: INP-WealthPk