As the war intensified in Gaza, through much of 2025, a quiet transformation was underway. A low-tech solution enabled residents to make tens of thousands of purchases of essential goods, even as banks and cash dispensers were destroyed, creating the foundations for long-term financial infrastructure advances.
Findings of an initiative led by the United Nations Capital Development Fund (UNCDF) show that digital payments are steadily gaining ground in Gaza, offering a more resilient alternative to cash in one of the world’s most fragile environments. And, with most banks and ATM facilities still out of action, a way for Palestinians in Gaza to access their money without resorting to informal money changers who charge large fees.
“The fee rate can exceed 50 or 60 percent,” said Mahmoud Al Bassyoni, a Gaza resident speaking to Aljazeera News in October 2025, explaining how, in absences of working banks and cash dispensers, he might pay more than half of his income to turn his banked funds into cash.
In times of instability and conflict, it’s not unusual for infrastructure – including banking and financial services – to be damaged or destroyed entirely. The bombs that fell on Gaza in 2025 affected about 98% of banking infrastructure, according to the World Bank leaving only two ATMs semi-operational across the entire territory. For the lucky few who are still able to receive a salary into their banks, or perhaps those who receive remittances from family and friends overseas, accessing those funds proved incredibly difficult or costly. And every dollar paid in charges to informal money changers is a dollar less for vital supplies like food, clothing, heating or even healthcare.
A 2025 UNCDF project implemented by PalPay, a subsidiary of the Bank of Palestine not to be confused with PayPal, focused on a deceptively simple premise: build a functioning digital payments ecosystem from the ground up that works on even the most basic technology, is accessible to all and builds confidence in digital financial solutions. UNCDF provided a targeted grant of US$ 205,000 to PalPay, which they matched with their own contribution equal to 40% of the grant. The funds financed the core activities underpinning this transformation, including merchant onboarding incentives, public awareness campaigns, and consumer cashback rewards that would otherwise have been unviable in a conflict-affected market with minimal commercial returns.
This initiative helped accelerate the shift from vouchers and banking channels with limited reach across Gaza to regulated e-wallets. That digital infrastructure is what enabled UN agencies, NGOs, and their partners to disburse humanitarian and emergency cash transfers in 2025. By bringing merchants into the digital ecosystem, it created the acceptance network that makes those transfers genuinely useful, turning cash assistance into a functioning payments economy.
Local food stall using PalPay in Gaza. Photo: PalPay.
Quitting cash dependency
At the heart of the initiative was a push from the Palestinian Monetary Authority (PMA) to expand acceptance of digital payments across Gaza’s fragmented economy. Nearly 1,000 merchants, many of them small vendors and informal businesses, were onboarded into the system through 2025 with over 90% actively using digital tools for transactions.
A critical enabler of this expansion was a regulatory reform secured by UNCDF in coordination with the PMA. Prior to the intervention, merchants were required to submit formal business registration documents and chamber-of-commerce certificates to open merchant accounts — requirements that were effectively impossible to meet amid active conflict and mass displacement.
Following UNCDF's engagement, the PMA issued a circular allowing merchants in Gaza to register using only a national identity card. This single policy change unlocked access to digital finance for the vast majority of Gaza's informal businesses (street vendors, bakeries, and small traders) who would otherwise have been excluded entirely.
This shift to digital is significant in a context where cash has long dominated, often constrained by liquidity shortages and physical access challenges. By introducing QR-based payments and mobile wallet solutions, the project enabled even street vendors to participate in the formal financial ecosystem.
The impact extended beyond access. Newly onboarded merchants collectively conducted more than 39,000 digital transactions, surpassing initial targets and signalling real behavioural change, beyond registration metrics.
Low tech, high impact
Of the nearly 1,000 newly onboarded merchants, over 100 were equipped with SoftPOS (Software Point of Sale) solutions that enabled them to receive card-based payments linked to smart phones. These worked well for larger vendors, who perhaps sold at big volume. But for street traders, who make up the bulk of the market in Gaza, operating costs were too high. For them, QR-code payment tools provided a cheaper low-tech alternative and were taken up by nearly 900 merchants as part of the pilot.
UNCDF's grant funding directly subsidised the cost of bringing merchants into the system. It covered device costs for SoftPOS-enabled vendors and absorbed the onboarding friction for small businesses with little capacity or incentive to invest in new payment infrastructure amid active conflict.
Local food shop using PalPay in Gaza. Photo: PalPay.
Incentivising change
A key driver of adoption was a carefully designed incentive structure within the programme by UNCDF. Merchants were rewarded for sustained transaction activity, while customers received cashback and daily rewards tied directly to usage. Any merchant who received 10 or more electronic payments through the PalPay “Mahfazati” wallet during the campaign period qualified to enter a draw to win $200. In total, 37 merchants won and $7,800 was disbursed in prizes to merchants.
Customers also stood a chance to win a daily draw to have their purchases reimbursed to their Mahfazati wallet, with a cap of about $30 (100 ILS). Over the course of the campaign, nearly 2,000 users benefited from incentives totalling more than $44,000, encouraging repeat transactions and embedding digital habits into daily life.
Such incentives provided a structured means to nudge long-term behavioural shifts, turning first-time users into regular adopters.
Building confidence
The project also tackled one of the most persistent barriers to digital finance in conflict zones: trust.
Through awareness campaigns spanning social media, SMS, in-app messaging and direct outreach to merchants, PalPay reached hundreds of thousands of users, explaining how digital payments work and addressing concerns around fraud and usability.
Awareness campaign ran on Facebook by PalPay. Credit: PalPay.
Crucially, solutions were adapted to Gaza’s constraints. An Unstructured Supplementary Service Data-based service, set up by the PMA, used messaging based services rather than smart or web-reliant systems and allowed transactions without internet access or smartphones, ensuring payments could be made even when internet services were knocked out.
De-risking for recovery
UNCDF's grant was designed to build the data infrastructure that makes future financial products viable. The digital transaction records generated by the 39,000+ transactions now represent a nascent credit footprint for many merchants who have not had access to formal lending. This data layer is foundational to the guarantee mechanisms and MSME finance instruments that UNCDF together with the United Nations Development Programme (UNDP) and their partners are designing for Palestine's recovery — enabling risk-sharing instruments to function where traditional credit assessment is impossible.
Systems, not stopgaps
In fragile and conflict-affected settings, financial inclusion is often treated as secondary to humanitarian needs. But the Gaza experience suggests that building financial infrastructure can be a form of resilience in itself.
Merchants reported improved sales opportunities and reduced risks associated with cash handling, while consumers gained safer and more convenient ways to transact. For UNCDF, the project offers a replicable model and demonstrates that even in highly constrained environments, targeted financing and digital innovation can lay the groundwork for sustainable economic participation.
As crises continue to dominate headlines, the quiet expansion of digital payments with PalPay in Gaza illustrates that long-term financial solutions are possible, even in the riskiest contexts.
