SBP to use Raast for govt payments

The State Bank of Pakistan (SBP) revealed on Thursday that the government has allocated a Rs3.5 billion subsidy programme to encourage merchants to adopt Raast, the country's official instant digital payment system, and reduce the cost of digital transactions. At the same time, the central bank has set an ambitious target of routing all government payments through Raast by the end of the fiscal year 2025-26.

Speaking at the launch of a study titled "Merchant Payments on RAAST: Responsible Pricing for Impact and Inclusion", SBP Deputy Governor Saleem Ullah said, "We have plans that with the close of this fiscal year, we will be having all government payments go to Raast. We are working very aggressively."

The subsidy programme, introduced last week, covers the period from September 2025 to June 2026 and will continue for three years. Under the scheme, merchants will be reimbursed at a rate of 0.5% of the value of each person-to-merchant (P2M) QR code-based transaction or Rs100, whichever is lower, effectively ensuring minimal to zero cost for digital adoption.

Saleem Ullah pointed out that more than Rs11.2-11.3 trillion is currently circulating in cash outside the banking system. If Rs2.5-3 trillion of this is brought back into the financial system, it will benefit everyone — banks, fintechs, and all stakeholders — while helping curb the huge undocumented and informal economy, he noted.

He underlined that "the ultimate goal is to win the war against cash," which requires collaboration among banks, fintechs, electronic money institutions, and technology providers to accelerate financial inclusion and digitalisation.

The study stressed that while RAAST has achieved remarkable success in person-to-person (P2P) and government-to-person transactions, merchant adoption remains low and unsustainable without reforms. The report argues that unless a responsible pricing framework is put in place, RAAST's person-to-merchant (P2M) use case will continue to struggle against Pakistan's deep-rooted cash culture.

Currently, over 85% of the country's transactions are conducted in cash, costing Pakistan trillions of rupees each year in lost taxes, cash-handling costs, and idle liquidity. Despite RAAST processing more than a trillion rupees in P2P payments every nine days, merchant usage accounts for only a fraction of the volume. Micro and small businesses remain hesitant to adopt digital payments due to transaction fees, limited awareness, and fear of tax exposure. Recognising this gap, the government has stepped in with a Rs3.5 billion subsidy for the current fiscal year. The subsidy, part of a three-year support package, is intended to ease merchant adoption of QR-based payments and create digital habits among small vendors, rickshaw drivers, and shopkeepers.

"These institutions... should be able to have those partnerships so that the overall ecosystem would work in an efficient manner," said Muhammad Imaduddin, an expert in payment systems and financial inclusion, during a panel discussion. He stressed that fintechs, banks, EMIs, PSOs, and PSPs each bring unique strengths to the table, calling RAAST "the pivot of our digitisation efforts."

The study identifies multiple challenges in merchant adoption. Small retailers, often operating with thin profit margins, resist transaction charges even as low as 0.25%. Many merchants prefer encouraging customers to use P2P transfers, which remain free, rather than P2M payments, raising the risk of cannibalisation. There are also widespread trust deficits, as informal businesses fear visibility to tax authorities, while infrastructure gaps in rural and peri-urban areas limit the reach of digital payments. Without addressing these barriers, the report warns, RAAST cannot achieve national-scale adoption.

To overcome these challenges, the Better Than Cash Alliance (BTCA) proposes a tiered, cost-plus pricing framework. At its core, the model recommends a 0.35% merchant discount rate (MDR) floor, which balances affordability for merchants with commercial viability for service providers. Highly price-sensitive sectors such as utilities, education, and fuel would be exempted, while interchange fees would be eliminated altogether to ease the burden on merchants. Providers would only be allowed to charge higher rates if they offered clear value-added services such as instant settlements, merchant analytics, or embedded credit.

"With responsible RAAST pricing and fully transparent communication — particularly on pricing — your people can turn everyday transactions into confidence, growth, and inclusion," said L Nshuti Mbabazi, Managing Director of the Better Than Cash Alliance.