Why Pakistan has less than 1% of merchants digitized

A childhood frustration that became a conversation

The episode opens with Muzamil recounting a memory from fifth grade. His father was a banker, and young Muzamil would visit shops hoping to use a credit card — only to be told, again and again, that the machine wasn’t working. “Cash kar dein,” they’d say. Decades later, Muzamil tells his guest, the problem has barely moved. That frustration is what brought Fawad Abdul Kader onto the show.

Fawad is the Country Head of Paymob Pakistan, and before that spent sixteen years moving through some of the most consequential corners of Pakistan’s banking and fintech landscape — Bank Alfalah, MCB, ABN AMRO Dubai, NEFT, and National Savings. He is, in the most literal sense, someone who has watched this problem from the inside for the better part of two decades.

From computer science teacher to call center executive

Fawad was born in Karachi in 1976, graduated in computer science from Petroman Institute in 2001, and then did something unusual: he taught for four years. Tuitions, school classes, graduation-level IT instruction. He was good at it, and by his own account, it paid better than the entry-level corporate jobs available to him at the time.

The switch came after marriage. “When you make mistakes early, you become fearless,” Fawad says, “because you’ve already made mistakes.” He walked into a Cybernet walk-in interview alongside 500 other candidates, got one of five spots, and lasted four months before a customer he had served at the call center called him the next day and offered him a job at Bank Alfalah. He took it partly because his father had always wanted to be a banker. “It was a proud moment for his son to work for a bank.”

From there: ABN AMRO in Dubai, a return to Pakistan after his mother passed away, MCB, and eventually the pivot that changed everything.

The moment digital payments entered the picture

At MCB, Fawad ran the call center, became training manager, and then — during a union-driven shutdown in 2008 — set up a disaster recovery call center in Lahore in four days. That project revealed something to him: he could manage programs, not just people.

MCB was simultaneously building what Fawad describes as probably the first data-based mobile banking application in Pakistan. When the bank decided to launch its branchless banking wallet, they asked him to lead it. He became head of product for MCB Lite — a digital wallet with a Visa debit card attached, launched in 2011, years before the term “fintech” entered common usage in Pakistan.

“We probably missed a trick by not marketing it,” Fawad says. The product worked. People used it as an e-commerce wallet, moving funds away from their main debit card to avoid putting their primary account details online. But without distribution, it faded. “I started to believe that there is a right time for everything. When you do things even before their time, they sort of fade away.”

The difference between financial inclusion and digitization

Later in the discussion, Muzamil asks Fawad to define terms that get used interchangeably but mean very different things. Fawad draws a clean line.

Pakistan has three categories of people: banked, underbanked, and unbanked. Banked means you have a bank account or a wallet. Underbanked means you have access to financial services through someone else — a supplementary card from a parent, for instance. Unbanked means no formal financial access at all.

“Converting people who do not have a bank account into a bank customer — that’s financial inclusion,” Fawad explains. “Once they’re financially included, you can have a checkbook. You can go to the branch and withdraw cash. That does not mean you’re digitized. Digitized is when you’re able to use those funds digitally whenever you want.”

Pakistan today sits at roughly 25% banked population. That is, by Fawad’s account, one of the lowest in South Asia and among the lowest in the world — behind several African countries where M-Pesa and similar products have driven mass adoption.

Muzamil pushes on why. Progressive regulation came in 2008. Branchless banking players launched. Digital wallets multiplied. And yet the numbers barely moved. Fawad’s answer is disarmingly simple: “You open an account only when you need it. Nobody goes, ‘let me open an account today.’ People open accounts because their salary is coming in, or they need to make payments, or they need a loan. We haven’t created those use cases.”

The machine problem: less than 1% of merchants digitized

The conversation turns to the physical infrastructure of payments — the POS machines that Muzamil spent his childhood hoping would work.

Fawad lays out a number that stops the conversation cold. Pakistan has approximately 96,000 POS machines deployed across roughly 34,000 merchants. Against an estimated 5 million SMEs in the country, that is less than 1% of merchants with any digital payment capability.

For context, he offers Iran — a country under international sanctions, disconnected from the global financial system. Population: 80 million. POS machines: 8 million. One machine for every ten people.

The reason Pakistan’s number is so low is structural. A POS machine costs roughly $200. An acquirer — the bank or institution deploying it — will only place a machine where transaction volumes justify recovering that cost. Low-end retailers, kirana stores, small vendors: they don’t clock enough traffic. “It’s not a choice that the merchant is making not to put a POS machine. He cannot get one.”

Before 2020, the situation was worse. Pricing in the acquiring business was unregulated, making it a loss-making line for most banks. The State Bank intervened, capping interchange fees for issuers and setting a floor for acquirer MDR — merchant discount rate. That created a commercially viable space, and new players entered. “Very smart move by the regulators,” Fawad says.

How Paymob is trying to solve it

Paymob was founded in Egypt in 2015 by three Cairo University students — Islam Shaki, Alan, and Mustafa Menisi — who tried to get a payment gateway for an e-commerce business, were handed a thick integration guide and a large licensing fee, and decided the problem itself was the opportunity. Pakistan is the first country they expanded to outside Egypt.

Muzamil describes his own experience trying to set up digital payments for a small e-commerce business: reaching out to banks, getting no response, feeling gaslit into thinking the problem was his own technical ignorance. “She is a businesswoman. She doesn’t need to have the technical understanding of APIs. In the modern world, she doesn’t require a technology team to integrate so that 3% of her sales can start getting digitized.”

Fawad’s answer to the online side is a self-serve onboarding flow. A merchant creates an account on Paymob’s website, gets access to a sandbox environment, downloads a plugin for Shopify or WordPress, tests it with dummy credentials, and contacts Paymob only when ready to go live. For a sole proprietor — the 19-year-old running a clothing business from Facebook that Muzamil sketches as a persona — the documentation required is a CNIC and an account certificate. That is it.

For the offline side, the answer is SoftPOS. Any NFC-enabled smartphone — and Fawad says 80% of new phones above Rs 10,000–15,000 in Pakistan now qualify — can be converted into a payment terminal through an app. No hardware investment. No machine to justify. “The barrier to entry was a POS machine, and that’s how you solve it.”

The revenue model is the merchant discount rate: a percentage of each transaction split between Paymob, the acquiring bank (currently Bank Alfalah), the card scheme (Mastercard, Visa, or others), and the issuing bank. On a thousand-rupee transaction at 2% MDR, twenty rupees is divided across all four parties. Every stakeholder has an incentive to make the system work.

QR codes, unified rails, and why they are a different market

Muzamil raises QR codes and India’s UPI as a potential path to making POS machines irrelevant. Fawad is measured in his response.

QR adoption in Pakistan stalled for a specific reason: multiple incompatible QR standards meant a customer never knew whether their bank’s app would read a given merchant’s QR code. “I don’t have the confidence that I’ll be able to pay digitally. And if you’re carrying cash as a backup, you might as well pay through cash.” The State Bank has since issued a unified QR specification under the RAAST rails, which Fawad says will resolve one problem — but not the behavioral one.

“In QR, you have to do all the work. You have to log in to your app. It’s a simple experience, but it’s about building that behavior.” And QR payments are account-based, not credit-based, which means credit cards remain a separate market.

His conclusion: “If QR is targeted to the same POS market, it will never succeed. QR has to be introduced in markets which do not have POS measures” — the street vendor, the cobbler, the roadside stall. Cards and QR are not competitors. They serve different segments.

Egypt’s trajectory and why Pakistan is at the same inflection point

One of Paymob’s founders, while visiting Karachi, reportedly thought the plane had turned around and gone back to Cairo. The cultural and commercial similarities between Egypt and Pakistan are that close.

Four years ago, Egypt had roughly 70,000 POS machines — about the same as Pakistan today. In four years, that number grew to 750,000. Ten times. Fawad is direct about what drove it: not better products, but better distribution. “A lot of good products have been created which have not been promoted or distributed in a way where the masses could have benefited from them. Paymob calls itself a payments distribution company, powered by technology.”

By the end of the conversation, Muzamil asks Fawad for a thirty-year outlook on Pakistan. Fawad’s answer is grounded in something he observed during his consulting work at National Savings — that the people inside government institutions are willing and capable, but chronically under-invested in. “It’s not the people. People are willing to work. It’s just that we don’t invest into those people.”

His vision for 2050: a documented economy, a financially included population with real reasons to hold and use accounts, and a digitized supply chain that connects manufacturer to distributor to wholesaler to retailer to customer. “The digitization is something that happens across verticals. If only the front end is digitized, how do you expect the rest of it to happen?”

Muzamil closes by saying this was one of his most personally meaningful episodes — not because the subject is glamorous, but because it is not. “In a very non-glamorous way, it impacts all of us.”