The State Bank of Pakistan is gearing up to give approval to 5 digital banks. The news came earlier this week when it was revealed that some new financial companies will be able to set up Digital Banks in Pakistan. This is a huge leap forward to digitalizing banking in Pakistan.
The applicants are:
- Easy Paisa DB (Telenor Pakistan B V & Ali Pay Holding Ltd)
- Hugo Bank (Getz Bros & Co, Atlas Consolidated Pte Ltd, and M & P Pakistan Pvt Ltd)
- KT Bank (Kuda Technologies Ltd, Fatima Fertiliser Ltd, and City School Pvt Ltd)
- Mashreq Bank (Mashreq Bank UAE)
- Raqami (Kuwait Investment Authority through PKIC and Enertech Holding Co)
In January 2022, the State Bank of Pakistan (SBP) introduced a groundbreaking licensing and regulatory framework for digital banks, aligning with international best practices. This framework aimed to issue a maximum of five digital bank licenses.
Transition to Full-Fledged Digital Banking
This regulatory framework marked the initial step in Pakistan’s journey towards establishing fully operational digital banks. These digital banks are envisioned to offer a comprehensive range of banking services exclusively through digital channels. This eliminates the necessity for customers to physically visit bank branches.
Diverse Applications Received
In response to the SBP’s digital banking framework, the SBP received an impressive twenty applications by March 31, 2022. Moreover, these applications came from a diverse array of interested entities, including commercial banks, microfinance banks, electronic money institutions, and Fintech firms.
#SBP hosts a ceremony to award in-principle approval (IPA) to 5 Digital Retail Banks. Watch the event Live on September 20, 2023 at 3:00PM @ https://t.co/hUPxQJDMUD#DigitalBanks pic.twitter.com/IEPOma7GoQ
— SBP (@StateBank_Pak) September 20, 2023
Notably, several foreign players, including venture capital firms already involved in the digital banking sector, expressed their keen interest in entering the Pakistani market, either independently or in partnership with local entities.
Rigorous Assessment Process
The selection of applicants involved a rigorous and comprehensive assessment process in accordance with the framework’s stipulations. This evaluation encompassed various parameters, such as fitness and propriety, experience, financial strength, business and implementation plans, funding and capital strategies, IT and cyber security strategies, and outsourcing arrangements. Additionally, all applicants were given the opportunity to present their business cases to SBP.
Read more: OPay Pakistan: A Mobile Money and Digital Payment Platform Transforming Pakistan
Operational Phases
Moving forward, each of the five chosen applicants will establish a public limited company with the Securities and Exchange Commission of Pakistan. Subsequently, they will seek In-Principle Approval from SBP, demonstrating their operational readiness for the pilot phase. Following SBP’s approval, they will launch their operations on a commercial scale.
SBP anticipates that these digital banks will play a pivotal role in advancing financial inclusion by offering affordable and cost effective digital financial services. This will include extending credit access to traditionally underserved and unserved segments of society.
