Pakistan’s accelerating shift to digital payments faces mounting risks from cybersecurity vulnerabilities, uneven infrastructure, and weak institutional capacity, the State Bank of Pakistan (SBP) warned in its Annual Payment Systems Review for FY2024–25. The report highlights record expansion in the digital ecosystem, with retail payment transactions rising 38% to 9.1 billion—valued at PKR 612 trillion—during FY25. Digital channels accounted for 88% of all transactions, up from 78% two years ago. Yet, the SBP cautioned that the pace of adoption is outstripping the sector’s ability to manage operational and cyber risks effectively. “While digital transformation has gained remarkable traction, gaps in resilience, interoperability, and cyber readiness pose emerging challenges,” the central bank observed. Weak Cyber Defenses With mobile and internet banking volumes growing over 50% in a year, the review warned that banks and fintechs face increasing exposure to cyberattacks and fraud. Social engineering, phishing, and identity theft attempts have intensified, exploiting weaknesses in customer awareness and authentication systems. Although the SBP has issued detailed cybersecurity guidelines, implementation remains uneven—particularly among smaller financial institutions and Electronic Money Institutions (EMIs). The report stresses the need for a sector-wide fraud response mechanism and stronger investment in cybersecurity training and monitoring systems. Uneven Infrastructure, Persistent Cash Reliance Despite a 56% rise in POS terminals to 195,849 and the doubling of QR-enabled merchants to 1.1 million, access gaps persist in semi-urban and rural areas. The SBP acknowledged that “limited connectivity and low digital literacy continue to impede widespread adoption,” with many branchless banking agents still dependent on manual cash transactions. ATMs—now numbering more than 20,000—remain dominated by withdrawals, reflecting Pakistan’s enduring cash dependency. “The infrastructure expansion is encouraging but insufficient to displace cash without behavioral change and trust-building,” the review noted. Integration and Compliance Challenges The rollout of PRISM+, the new RTGS system, and the expansion of the Raast instant payment network have improved efficiency but created new compliance demands. Many microfinance and smaller banks struggle with the cost and complexity of system integration under ISO 20022 standards, the SBP said. The report concludes that sustaining the country’s digital payments growth “requires a coordinated approach to cybersecurity, interoperability, and capacity-building.” Without stronger resilience and user trust, it warns, Pakistan’s progress toward a cash-light economy could stall despite historic transaction growth.
