IN Pakistan’s economy, two forces that should, in theory, move in opposite directions are advancing paradoxically together: ubiquitous digital payments and a growing stock of cash. The State Bank of Pakistan reported in November 2025 that nearly 88 per cent of retail transactions are now conducted digitally. This includes ATM use, where an overwhelming majority of transactions are cash withdrawals.

Despite this, one continues to be puzzled by the currency in circulation, which has climbed to Rs10.9 trillion, accounting for more than a quarter of broad money. What appears as resistance to change or a failure of consumers to embrace technology is, in fact, reflective of a structural imbalance.

Pakistan, in the recent past, has expanded its digital payments ecosystem faster than it has improved the conditions that make digital money reliable everywhere; stable internet connectivity, adequate spectrum, device capability, and consumer confidence in reversals and dispute resolution. As a result, digital payments are widely used for transactions, while cash remains the preferred store of value and fallback mechanism.

One manifestation of this imbalance is the continued expansion of the country’s ATM network. To compensate for the large volumes of cash outside the banking system, banks must physically distribute and manage enormous quantities of banknotes, particularly in higher denominations. ATMs are the most efficient mechanism for doing so at scale.

Until cash volumes fall and digital payments become true substitutes rather than polite add-ons, Pakistan will keep building ATMs for an economy that insists on withdrawing cash 'just in case'

Inflated cash stocks increase demand for withdrawals and for the expansion of ATM networks to cover new geographies.

In this sense, ATM growth looks more like a logistical response to balance-sheet reality than a behavioural anomaly. While digital payments reduce how often cash is exchanged in transactions, they do not affect the absolute quantity of banknotes that must be stored or circulated.

A comparison with India helps to give this argument more relevance. In Pakistan, the number of ATMs rose from around 18,900 in 2024 to more than 20,300 in FY25, even as digital transactions expanded rapidly. In India, by contrast, ATM numbers declined from about 253,000 in FY24 to roughly 251,000 by March 2025, despite far higher volumes of digital payments. This difference reflects underlying differences in cash demand.

Digital payments in India increasingly substitute for cash at the point-of-sale and at checkout, reducing withdrawal frequency and flattening the growth of currency logistics. In Pakistan, digital payments coexist with sustained demand for physical cash withdrawals, compelling banks to add distribution capacity rather than retire it. The ATM network, in other words, simply responds to how much cash households and businesses still choose to hold and circulate.

E-commerce further helps to explain why cash demand, and consequently ATM usage, remains significant. By FY25, Pakistan’s online retail had grown into a multi-billion-dollar industry, with estimates placing annual sales in the range of $7–8 billion. Yet despite this growth and the availability of digital payment options, roughly 70–80 per cent of online transactions continue to be settled through cash-on-delivery. There are numerous reasons for this. Limited trust in prepaid checkout, unreliable connectivity, refund friction, and uneven device capability mean that cash remains the preferred settlement medium at the final stage of the transaction.

Interestingly, every cash-on-delivery order, therefore, triggers a physical cash cycle: cash is withdrawn by consumers, collected by delivery networks, deposited back into the banking system, and withdrawn again by households or small merchants. Each such cycle necessarily involves at least one ATM interaction.

At scale, this translates into millions of withdrawals and deposits that sustain high transaction volumes per machine and justify continued investment in ATM capacity. Cash-on-delivery does not automatically create new stock of cash in the economy, but it materially increases its circulation turnover, helping explain why ATM networks continue to expand even as digital payments grow elsewhere.

In the West, Europe offers an example of the other extreme. In countries such as Sweden, Norway, and Denmark, digital payments have become so dominant that cash has essentially collapsed. This caused the scaling back of ATM networks, with businesses increasingly refusing to accept notes and coins altogether. This apparent endpoint of modernity has, however, prompted a reassessment.

Power outages and system disruptions have exposed the fragility of an entirely digital payments environment. In response, European courts and governments moved to reaffirm cash as a universally accepted means of payment, limiting the ability of businesses to refuse it outright. Europe’s cashless example serves as an important lesson; dismantling physical payment infrastructure too aggressively can introduce vulnerabilities that are costly to reverse.

Pakistan’s challenge sits between these two extremes. It has neither rendered cash obsolete nor made digital payments reliable enough to replace it fully. Instead, both systems operate side by side. The consequences of operating a cash-heavy system are tangible and measurable. High transaction volumes per ATM compel banks to maintain and expand an expensive physical infrastructure; machines that must be powered, cooled, secured, replenished with cash, and serviced daily.

These costs are not borne by the banks or the government. They are passed on to the ordinary man by charging higher lending spreads, lower returns on deposits, and higher service costs. Even consumers who rarely withdraw cash end up paying for its availability.

The expanding ATM network is proof that Pakistan’s transition towards digitisation has been uneven. Until cash volumes fall and digital payments become true substitutes rather than polite add-ons, Pakistan will keep building ATMs for an economy that insists on tapping screens, and withdrawing cash ‘just in case’.

The writer is an economist and an educationist.

Published in Dawn, The Business and Finance Weekly, February 16th, 2026