Palestinian banking sector shifts toward digital payments amid liquidity pressures

The Palestinian financial sector is undergoing a significant shift toward financial inclusion and electronic payment systems. This transition is driven by global trends, technological advancements, and the need to reduce reliance on physical cash. According to data from the Palestinian Monetary Authority, financial inclusion rose to 73% by mid-2026, with the number of digital wallets reaching two million.

Despite this digital growth, the banking sector faces complex challenges. While core indicators show stability—with customer deposits exceeding $23 billion and credit facilities surpassing $13 billion—banks are navigating high liquidity pressures. Key risks include the accumulation of Shekel surpluses, the government's financial crisis, and potential disruptions in payment channels with Israeli banks.

In regions like Gaza, the difficulty of handling physical cash has accelerated the adoption of digital financial services, helping to keep liquidity within the formal banking system. Experts suggest that while the banking system remains solvent and capable of profitability, the increasing shift of credit toward the public sector and the geopolitical environment remain primary concerns.