SBP deploys game changing strategy to kill cash economy

October 03, 2025 (MLN): Pakistan has unveiled a comprehensive strategy to accelerate digital payment adoption through its instant payment system RAAST, with a new report from the Better Than Cash Alliance providing a roadmap for sustainable merchant payment growth.

The newly released blueprint introduces a responsible pricing framework designed to scale person-to-merchant (P2M) payments while maintaining affordability for micro and small businesses.

The report recommends a 0.35% Merchant Discount Rate (MDR) floor with sector-specific adjustments, eliminating issuer interchange fees to keep costs low for merchants.

"RAAST is a national digital public infrastructure and the pivot of our digitization efforts," said Saleem Ullah, Deputy Governor of the State Bank of Pakistan. "The ultimate goal is to win the war against cash and that can only be achieved through partnerships and collaborations."

Cash transactions currently dominate Pakistan's economy, costing the country trillions of rupees annually through lost tax revenue, cash handling expenses and idle liquidity.

The RAAST pricing blueprint seeks to address these inefficiencies by creating a sustainable model that encourages digital financial inclusion.

The comprehensive framework includes several critical components designed to ensure sustainable growth of digital payments across Pakistan.

The responsible pricing policy establishes a 0.35% MDR floor that ensures provider viability while preventing a "race to the bottom" that could undermine service quality and reliability.

This approach balances affordability for merchants with the need for payment service providers to maintain robust infrastructure.

To encourage initial adoption, the blueprint introduces time-bound incentives such as zero fees for micro-transactions and cashback offers that will drive acceptance, particularly among micro and women-led businesses.

These early-stage incentives are designed to build payment habits while clearly distinguishing merchant payments from person-to-person transfers.

Enhanced trust mechanisms form another pillar of the strategy, with the blueprint emphasizing 24/7 dispute resolution, instant confirmations, and reliable recourse systems to build merchant confidence in digital transactions.

These features address a critical barrier to adoption by ensuring merchants have reliable support when issues arise.

Recognizing Pakistan's diverse connectivity landscape, the framework prioritizes inclusive technology options.

Low-bandwidth solutions including USSD and NFC capabilities ensure accessibility in areas with limited connectivity, allowing merchants in rural and underserved areas to participate in the digital economy.

To ensure long term success, the report recommends establishing a National Merchant Payments Working Group to coordinate data-driven reviews, financial literacy initiatives and merchant education programs across Pakistan's payment ecosystem.

L. Nshuti Mbabazi, Managing Director of the Better Than Cash Alliance, praised the initiative: "By building end-to-end digital payment experiences that benefit every citizen and resident of Pakistan, and ensuring you make recourse clear, quick, and responsive, the ambition you have set out to be an economy where digital payments are better than cash can be attained."

The RAAST pricing strategy aligns with Pakistan's National Financial Inclusion Strategy (NFIS) and the State Bank of Pakistan's National Payment Systems Strategy (NPSS), recognizing the instant payment system as core national digital public infrastructure.

The report, titled "Merchant Payments on RAAST: Responsible Pricing for Impact and Inclusion," was released by the UNDP-hosted Better Than Cash Alliance in support of the Government of Pakistan and the State Bank of Pakistan.

The framework follows UN Principles for Responsible Digital Payments, particularly emphasizing solutions tailored to micro and women-led businesses.

Financial experts believe the responsible pricing approach will enable banks, fintechs, electronic money institutions (EMIs), payment system operators (PSOs) and payment service providers (PSPs) to continue investing in Pakistan's digital payment ecosystem while maintaining strong consumer protection and fair competition.

The blueprint represents a significant step toward reducing Pakistan's dependency on cash transactions and building a more inclusive digital economy that serves small businesses and underserved populations.

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